Former Sharemax auditors’ disciplinary hearing postponed indefinitely

The Independent Regulatory Board for Auditors (Irba) disciplinary hearing against former auditors of the failed Sharemax property syndication scheme has been postponed sine die (indefinitely).

This follows Advocate Mike Maritz, appearing for the three auditors, this week submitting an application for the recusal of two committee members of the disciplinary committee on the grounds of actual bias or perceived bias related to the proceedings.

Accusations and denials 

Advocate Kate Hofmeyr, appearing for Irba, said on Wednesday the allegations made by Maritz that she had misled the committee in her opening address are unfounded and untrue.

Hofmeyr said she made it clear at the beginning of her opening address that the source of the information she was relaying to the committee was to be found in media articles.

She added that she explained that from as early as 2006, the Sharemax companies were receiving media attention, which was before the work on The Zambezi or The Villa retail park prospectuses had even begun.

“It was already in the public domain before the respondents began their assurance work that the Sharemax schemes were being questioned.

“I also explained in my opening that in 2007 the Reserve Bank had begun investigating the Sharemax schemes.

“I referred to the articles and the role of the Reserve Bank as a precursor to the question that I said would occupy the committee over the next few weeks.

“In light of that public scrutiny, the question that would be asked is whether they [the auditors] approached their work adequately and whether they approached it with an adequate amount of professional skepticism,” she said.

Will not be cowed

Hofmeyr claimed Maritz had levelled these unfounded allegations against her in an effort to intimidate her.

“He thinks that the more he pounds the table, the more I will be cowed into retreating and not presenting the case that his clients need to answer [to],” said Hofmeyr.

Hofmeyr said her opening address has no bearing at all on the recusal applications before the committee.

If it did, it is a requirement of law that the auditors’ legal representatives ought to have sought the recusal of this entire committee that was allegedly poisoned by her opening address shortly after it was given, she said.

Hofmeyr added that if the committee regarded Brian Smith, Irba’s expert witness, as not being sufficiently independent, it will either approach his evidence with caution or reject it entirely but that did not make these proceedings irregular.

To recuse or not to recuse

She stressed that the only issue before the committee for determination now is whether Suren Sooklal or Horton Griffiths, two members of the disciplinary committee hearing the matter, should recuse themselves.

Hofmeyr said there are four legal principles that will determine that issue for the committee:

• The test for actual or perceived bias;
• The law regarding prior relationships;
• The specific approach that committees, who themselves have expertise, are required to take in regard to the evidence of expert witnesses; and
• The effect of a recusal application on the remaining proceedings when it is brought midway through the proceedings.

The recusal application followed Griffiths confirming last week that he served on the Irba investigating committee between 1995 and 2007, initially as a member and subsequently as chair.

Maritz objected to this and some of the questions and statements made by Sooklal to Professor Harvey Wainer, an expert witness for the three auditors.

He also questioned the independence of the evidence of Smith after it emerged during that hearing that Smith was chair of Irba’s investigation committee from 2004 until 2016, and chair of this committee from 2011 until 2016.

Smith further admitted he was chair of this committee when it concluded the investigations into the conduct of the three audit practitioners, reached an opinion on their conduct and passed this onto Irba’s disciplinary advisory committee with a recommendation.

Poisoned well

Maritz suggested that Sooklal and Griffiths had “poisoned the well” and “it could be an exercise in futility” to continue with the hearing.

However, Hofmeyr said on Wednesday that it does not matter whether the fact, in this case Smith and Griffiths’ chairmanship and membership of the disciplinary committee, is disclosed upfront or in the course of the proceedings.

“It is the fact that must be tested [as to] whether it gives rise to a reasonable apprehension of bias,” she said.

Maritz disagreed, stating in response that the law reports are replete with criminal matters where the entire proceedings were rendered a nullity when a presiding officer had recused him or herself.

“The reason for this is straightforward. Unbiased adjudication is fundamental to a fair hearing. It is an irreducible prerequisite. The entire proceedings are set aside,” he said.

Maritz added that their application was carefully motivated and founded on solid facts and solid legal principles.

Maritz said they were not looking at Sooklal’s utterances in a vacuum but against the backdrop and in the context of what preceded it and against which the conduct in particular of Sooklal is to be assessed.

Elephants in the room

He said there were elephants in the room:

• The scandalous and false accusations in Part A of the charge sheet, Hofmeyr’s opening address where she referred to Ponzi schemes, pyramid schemes and “too good to be true interest rates” when no charge was formulated along these lines;
• And the presentation of Smith as an independent expert witness and the failure to disclose his association with Irba that made him compromised to such an extent that he could never be perceived as independent.

Jacques Andre van der Merwe, Danie Dreyer and Petrus Johannes Jacobus Bekker are collectively facing a total of 340 charges related to limited assurance engagement work they did for Sharemax.

All three have pleaded not guilty.