‘Controlling mind’ of hedge fund fails to permanently stop his prosecution

The director and “controlling mind” of Evercrest Aggressive Fund, an investment vehicle and hedge fund that lost about R146 million in investors’ funds in 2007, has been unsuccessful in attempting to permanently stop his prosecution on various charges related to the fund’s losses.

Judge Ashley Binns-Ward last week dismissed an application to the High Court in Cape Town by Marc van Veen for a permanent stay of his prosecution in the Specialised Commercial Crime Court in Bellville.

Read: SA’s first hedge fund blow up [May 2007]

The application was founded on the alleged infringement or threatened infringement of Van Veen’s fair trial rights in terms of Section 35 of the Constitution, including:

• An unreasonable and inexplicably long delay to prosecute Van Veen;

• Van Veen suffering irreparable and insurmountable trial prejudice if the prosecution proceeds as a consequence of the prosecution delay, together with his medical condition due to the effects of a brain tumour; and

•  Evidence against Van Veen allegedly having been obtained unlawfully in breach of his right against self-incrimination.

The director of Public Prosecutions in the Western Cape, the Minister of Justice and Correctional Services, and the Financial Sector Conduct Authority (FSCA) were cited as respondents to the application.

The director of Public Prosecutions in the Western Cape was the only party to oppose the application.

Van Veen and Evercrest Capital (Pty) Ltd are facing a variety of charges, including fraud, alternatively various other common law offences involving dishonesty, and having contravened provisions of the Financial Institutions (Protection of Funds) Act, the Financial Advisory and Intermediary Services Act and the Inspection of Financial Institutions Act.

Binns-Ward said the charges are related to the R146 million in losses that were suffered in 2007 by the Evercrest Aggressive Fund and the investigation subsequently undertaken by the then Financial Services Board (FSB). The FSB has been replaced by the FSCA.

Binns-Ward said the fund’s clientele was comprised exclusively of institutional investors and it is alleged in the summons in the criminal case that Van Veen was the director and controlling mind of Evercrest Capital.

‘Investors to blame’

He said Van Veen contends that the losses incurred by the fund were not occasioned by his doing, but rather as a result of the institutional investors’ decision at an inopportune time to exercise their contractual right to sell off the stock held by it and thereafter to liquidate it.

Van Veen alleges that had they not done so, they would eventually have realised a profit.

Binns-Ward added that Van Veen points out that none of the investors subsequently pursued him or Evercrest Capital in civil proceedings.

The allegations against Van Veen in the summons involve conduct that occurred at various times between 2005 and 2008.

The summons was issued 11 years later during August 2019 and required Van Veen, in his personal capacity and also as the representative of Evercrest, to appear for trial on 27 September 2019.

However, Binns-Ward said the trial did not commence on that date and the proceedings have since been postponed from time to time, and currently await the outcome of the application to this court for a permanent stay of his prosecution.

Self-incrimination

Addressing the evidence allegedly unlawfully obtained against Van Veen in breach of his right against self-incrimination, Binns-Ward said this claim was premised on the allegation that the state’s case is reliant on self-incriminatory evidence obtained from Van Veen in the course of an inspection into the business of Evercrest Capital by the FSB in terms of the since repealed Inspection of Financial Institutions Act 80 of 1998.

It is alleged the investigation was unconstitutional because Van Veen was “forced to provide possibly incriminating evidence”.

Binns-Ward said the contention in the founding papers that the state’s case is entirely reliant on Van Veen’s self-incriminatory evidence is disputed by the Director of Public Prosecutions in the Western Cape.

“It seems to me that it is inherently improbable that objective evidence concerning the relevant subject matter would not exist and that the testimony of other witnesses would not be available to the prosecution,” he said.

Binns-Ward said matters that seem to be germane – such as the terms of the fund’s investment mandates and whether or not Van Veen’s conduct was in compliance with them, or that he misrepresented them – should be capable of proof by production of the relevant documentation and the evidence of the parties who furnished the mandates and executed the investment transactions that allegedly gave rise to the situation in which the fund suffered its losses.

Delays

In regard to the delayed prosecution, Binns-Ward said the investigation by the FSB commenced in July 2007 and the inspection report was issued in final form in August 2008.

He said Van Veen’s licence to practise as a financial services provider was withdrawn and he was prohibited from applying for a new licence for five years as a result of the investigation.

Van Veen was also required to pay for the costs of the investigation, which amounted to more than R366 000, with Van Veen alleging there was “no engagement” with him on the matter thereafter until he received the charge sheet in August 2019.

Binns-Ward said the evidence of the director of Public Prosecutions in the Western Cape is that the matter was referred to the police in 2009 and Van Veen’s attorney claimed the police docket shows that no further substantive investigation was undertaken by the police after the lodging of the criminal complaint and no reasons had been provided for the delay, which was unreasonably long.

He said the state’s explanation for the delay between 2009 and the end of 2018 in getting the case trial-ready is sadly strongly suggestive of the ineptitude and lack of diligence that media reports suggest were all too prevalent in many of the public institutions at the time.

Binns-Ward said the director of Public Prosecutions in the Western Cape ascribed the delay to “systemic failures” and the excuses offered by the director for the delay “are weak and perturbing”.

“The delay was manifestly inordinate and palpably unreasonable. The unreasonableness of the delay is not, however, by itself, enough to bring the applicant’s [Van Veen’s] case home.

“He [Van Veen] had to show that he suffered resultant material prejudice. The lack of substantiating detail concerning the nature and effect of the alleged trial-related prejudice attendant on the delay is a fatal defect in the trial-related prejudice based aspect of the applicant’s [Van Veen’s] case,” he said.

Medical condition

Binns-Ward said the uncontroverted medical evidence suggests Van Veen’s medical condition and its consequences have resulted in him being intellectually disabled to the extent of not being able to participate in the criminal trial in a way so as to be able to make a proper defence.

He said the requirements that an applicant must satisfy to obtain a final interdict are: a clear right; an injury actually committed or reasonably apprehended; and the absence of an adequate alternative remedy.

Binns-Ward said using the procedures in terms of sub-sections 77 and 79 of the Criminal Procedure Act would provide Van Veen with an adequate alternative remedy.

Van Veen has therefore failed to satisfy the requirements for final interdictory relief that is sought, he said.