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Mozambique/Global: “Most Egregious Corruption Case of the 21^st Century”

AfricaFocus Bulletin
August 26, 2021 (2021-08-26)
(Reposted from sources cited below)

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Hidden Debts: Massively Corrupt Scheme Will Be Tried As From Monday

Mozambique News Agency (AIM)
August 22, 2021

Available on Google drive

Maputo, 22 Aug (AIM) - The definitive charge sheet from the Public Prosecutor’s Office against 19 people accused of involvement in Mozambique’s largest ever financial scandal gives exhaustive details of bribes paid by the Lebanon-based company Privinvest, and of the involvement of senior Mozambican government officials, particularly from the country’s security and intelligence service (SISE).

The fraudulent scheme involved setting up three security-linked companies, Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management). The companies eventually borrowed, in 2013 and 2014, over two billion US dollars from the banks Credit Suisse and VTB of Russia.

Loans on this scale to recently formed companies with no track record, and run by SISE, were only possible because government officials, notably Finance Minister Manuel Chang, signed loan guarantees – pledging that, if the companies did not repay, the Mozambican state would be liable. All three companies are now bankrupt, and the country’s highest court, the Constitutional Council, has declared the loans and their guarantees unconstitutional. But that does not stop the creditors from demanding their money back.

The case comes to trial in Maputo on Monday, and the trial is expected to last for at least 45 days.

But not all the key figures will be in the dock – Chang himself has been under police custody in South Africa since December 2018, while the Justice Minister, Roland Lamola, decides whether to extradite him to Mozambique or to the United States.

The three corrupt bankers from Credit Suisse, who arranged the loans in exchange for huge bribes from Privinvest, are also not showing their faces in Maputo. Andrew Pearse, Detelina Subeva and Surjan Singh, when before US prosecutors, all admitted to taking bribes as part of plea bargaining. But they have not yet been sentenced.

The Privinvest official who distributed the bribes, Jean Boustani, is also avoiding Mozambican justice after he was acquitted in New York in 2019 when smart lawyers convinced a jury, quite wrongly, that the US court did not have jurisdiction in the case.

While the loans and their guarantees were ruinous for Mozambique, they were very good business for Privinvest, which became the sole contractor for the three fraudulent companies, providing them with boats and other assets at vastly inflated prices. According to the 2017 independent audit of Proindicus, Ematum and MAM, Privinvest overcharged Mozambique about 713 million dollars for equipment of dubious value.

But, initially, it was not clear that the Privinvest scheme would win Mozambican political approval. So, according to the prosecutors, one of the Mozambicans working on the project, Teofilo Nhangumele, contacted his old friend Bruno Langa, a SISE officer, to ask how to unblock matters. Langa turned to his friend and business partner, Ndambi Guebuza, the oldest son of the then President, Armando Guebuza. He agreed, provided he received adequate “thanks”. He took the project to his father, who did indeed give the green light. Then the bribes began to flow.

The largest bribe paid by Privinvest was 33 million US dollars, paid to Ndambi Guebuza, the prosecution says. The money was paid, partly into an account he had opened in the Abu Dhabi Commercial Bank, in the United Arab Emirates, and partly via various South African companies. The first major payment from Privinvest was for 14 million dollars, deposited on 26 March 2013, inThe first major payment from Privinvest was for 14 million dollars, deposited on 26 March 2013, in Guebuza Junior’s Abu Dhabi account.

In order not to alert the Mozambican financial authorities to what was going on, Ndambi Guebuza opted to use South African companies as middlemen. Hence on 18 June 2013, Privinvest transferred 2.55 million rands (about 167,000 US dollars, at current exchange rates) to the account of the law firm Jouberts Attorneys in South Africa’s First National Bank (FNB).

The money was then used to acquire real estate, automobiles and for other expenditure. Thus Guebuza Jr acquired one property in South Africa for 11.6 million rands, and 2.9 million rands were transferred to the company Imperial Collection, which trades in luxury cars.

On 17 June 2013, Privinvest transferred a further 700,000 dollars to Jouberts Attorneys, at Guebuza’s request. That money was used to buy a Ferrari luxury sports car. Privinvest then, on 23 April 2014, transferred 10.5 million rands to the South African company Pam Golding Properties. Ndambi Guebuza used this money to buy at least 15 vehicles in South Africa, some for himself and some to offer to friends. None of this had anything to do with coastal protection or tuna fishing, the supposed purposes of the Credit Suisse and VTB loans

The Mozambican prosecutors, sifting through Guebuza Jr’s financial records, drew up a long list of people and companies who received some of the Privinvest money. Among these was a transfer Guebuza Jr ordered of seven million rands from Pam Golding Properties to Apple Creek Real Estate Trust. The latter company received instructions from Ndambi to transfer three million rands to a second law firm, Nochumsoth Teper Attorneys, to buy a property for his sister, the late Valentina Guebuza.

In order not to alert the South African financial authorities, this payment was broken into three parts, each for a million rands.

Teofilo Nhangumele and Bruno Langa each received 8.5 million dollars from Privinvest. The prosecutors found that the two men used the bribe money to buy properties, luxury cars and livestock, among other expenditure, inside Mozambique and abroad.

Nhangumele will be among the first defendants to be heard on Monday. Before Nhangumele, the court will question Cipriano Mutota, the former director of the Studies and Projects Office of SISE. The prosecution says he received bribes of 980,000 dollars from Privinvest. He was the SISE officer who received the Privinvest proposal (supposedly for the protection of Mozambique’s Exclusive Economic Zone) via Nhangumele.

Both Nhangumele and Mutota face charges of corruption, abuse of trust, money laundering and membership of a criminal association.

The prosecution is asking the court, in addition to any custodial sentence, to order the defendants to pay compensation to the Mozambican state of 2.9 billion dollars.

That sum is not enough. The loans themselves were for about 2.2 billion dollars. But since they were contracted, the costs for Mozambique have spiraled upwards.

In a detailed study published in May, the anti-corruption NGO, the Centre for Public Integrity (CIP) calculated that the “hidden debts” have already cost the country at least 11 billion dollars, and have plunged an additional two million people into poverty.

The CIP report puts the direct cost of the loans so far incurred, up to and including 2019, at 674.2 million dollars, in payment of interest and capital. If Mozambique is obliged to go on servicing the debts, there will be an additional 3.93 billion dollars to pay up to 2031.

But the indirect costs of the scandal are much higher. The secrecy and corruption surrounding the loans dealt devastating blows to Mozambique’s credibility and reputation.

The report notes that “When rumours about hidden loans began to circulate, Mozambican ministers lied to the IMF and ambassadors of Mozambique’s development partners, denying the existence of any loans. When the Wall Street Journal revealed the hidden debt in April 2016, the anger was extreme. Donors and lenders had kept the country afloat, and they pulled the plug”.

The International Monetary Fund (IMF), angered that the Mozambican government had concealedThe International Monetary Fund (IMF), angered that the Mozambican government had concealed the true size of its foreign debt, suspended its programme with Mozambique in April 2016. All the 14 donors and funding agencies who had provided Mozambique with direct budget support, suspended further disbursements, and to this day, more than five years later, they have not resumed.

The loss of this foreign aid in 2016 cost Mozambique 831 million dollars, in comparison with 2015, and these losses have continued to cascade down the years.

The CIP report notes that the ensuing financial crisis meant that “the government became unable to pay its bills, there was a major currency devaluation, foreign debt became unpayable, the economy slowed down sharply, real GDP per capita fell, unemployment soared and poverty increased”. The report puts a figure on this damage. It calculates the fall in the value of Mozambique’s GDP at 10.7 billion dollars between 2015 and 2019. This is a loss that cannot be recovered, and it will continue to grow, year after year.

The report puts the total economic losses over this four year period at 11.33 billion dollars – or a loss of 403 dollars for every man, woman and child in the country.

The report noted that “the sudden rise in inflation in 2016 and rising prices drove 2.6 million people below the threshold of consumption-based poverty”. It estimates that, because of the hidden debt scandal, at least 1.9 million people had fallen below the consumption-based poverty line by 2019.

The prosecutors have been tracking all the bribes paid by Privinvest, leading to the discovery of more goods purchased with the bribe money, and more bank accounts. Although the properties can be seized, the money raised in this way comes nowhere near meeting the true costs of the scandal.

(AIM) Pf/ (1505)

******************************************************************

Hidden Debts: Intelligence Officer Admits Negotiating Huge Bribes with Privinvest

Mozambican News Agency (AIM)

August 24, 2021

Available on Google Drive

Maputo, 24 Aug (AIM) – A high-ranking Mozambican intelligence officer on Tuesday, admitted that he had negotiated bribes of millions of dollars with Lebanese businessman, Jean Boustani, a salesman for the Privinvest group.

Cipriano Mutota, the former head of the Studies and Projects Office of the Mozambican State Security and Intelligence Service (SISE), is one of 19 people on trial in Maputo for their role in the country’s largest financial scandal, the case of the so-called “hidden debts”.

This involved obtaining loans of over 2.2 billion dollars from the banks Credit Suisse and VTB of Russia for three fraudulent, security linked companies, Proindicus, Ematum (Mozambique Tuna Company) and MAM (Mozambique Asset Management).The loans were only possible because the government of the time, under the then President Armando Guebuza, issued illegal loan guarantees so that, if the companies proved unable to repay the loans, the Mozambican state would become liable.

Privinvest was the sole contractor for the three companies and, according to the investigations by both Mozambican and US prosecutors, diverted at least 200 million dollars of the loan money into bribes and kickbacks.

Mutota, the first of the defendants to testify, told the court how, at the request of SISE general director Gregorio Leao, he had drawn up a report in 2009 or 2010, on the main threats facing Mozambique – including terrorism, piracy, illegal fishing, drug trafficking and illegal migration.

A meeting was held at the Ministry of Science and Technology, where Boustani, representing the company Abu Dhabi Mar, which is part of Privinvest, put forward proposals supposedly for the protection of the Mozambican coastal waters (the Exclusive Economic Zone). This was the start of what would eventually become the first of the fraudulent companies, Proindicus.

Mutota worked on the project with a friend, businessman Teofilo Nhangumele, who came to act as a middleman between the Mozambicans and Boustani.

He said that the first estimate of the cost of Proindicus was 302 million dollars, eventually rising to 370 million. But on top of this was the “fee” (the polite term for a bribe) that was to be paid to the Mozambican fixers. Initially, said Mutota, this was to be 50 million dollars, divided among the Mozambicans involved.

But the Proindicus project stalled, with no go-head from the government. So Nhangumele contacted his old friend, Bruno Langa, who was a business partner of Ndambi Guebuza, the oldest son of President Armando Guebuza. Ndambi was persuaded to ask his father to give Proindicus the green light.Once this happened, the loan from Credit Suisse could be arranged, and the money began to flow. But initially, none of it found its way into Mutota’s pockets.

In 2013, Angela Buque, the wife of Gregorio Leao, asked Mutota if he had received his share of the money. He had received nothing, and when he turned to Boustani, the latter told him to ask Nhangumele for the money.

Mutota knew that Nhangumele, Langa and Guebuza Junior had all received some of the bribe money, but where was his part? (According to the prosecution, Privinvest paid Ndambi Guebuza 33 million dollars and Teofilo Nhangumele and Bruno Langa 8.5 million dollars each).

Mutota went to Nhangumele’s office and demanded his cut, but got nothing. When he contacted Boustani again, he said that Nhangumele, Langa and Guebuza should each give Mutota half a million dollars, so that this SISE agent would pocket 1.5 million dollars.

This too did not happen, and when Mutota complained to Boustani, the Lebanese told him to come to Abu Dhabi where Privinvest would open a bank account for him and deposit the money.

Mutota refused to travel to Abu Dhabi, and insisted the money be sent to Mozambique. When Boustani flatly refused to transfer money to Mozambique, an alternative was found whereby the money went via friends of Mutota in South Africa.

One of these friends, whom Mutota named as Russell Edmonds, sent him seven trucks in part payment, which Mutota then sold. A second friend, named as Chis Bruno, transferred 656,000 dollars, in three instalments, to Mutota’s account in the largest Mozambican commercial bank, Millennium-BIM.

When the bank wanted to know where this money came from, Mutota said it was the proceeds from the sale of his shares in a company in London. He admitted to the court that this was a lie.

When prosecuting attorney Sheila Marrengula asked Mutota how he had used the 656,000 dollars, he replied “I spent it”. He claimed there were no purchases of sizeable items, such as houses or cars – yet Marrengula noted there were several very large withdrawals from his account, including one for 155,000 dollars in 2014. Mutota said he could not remember why he had made that withdrawal.

In all, Privinvest paid Mutota the equivalent of 980,000 dollars, a far cry from the promised two million.

Marrengula asked Mutota to explain why his friend Nhangumele was so deeply involved in setting up Proindicus, even though he was not a SISE agent and seemed to have nothing to do with the defence and security forces. “I can’t answer that without authorisation”, replied Mutota.

(AIM) Pf/ (858)

****************************************************

London judge sets Mozambique Privinvest showdown for 2023

Zitamar

21 July, 2021

A London court will hold a super-trial in 2023 of claims and counter-claims between the Mozambican state, shipbuilder Privinvest and others in relation to the so-called “hidden debts” scandal, a judge ordered today.

Mr Justice Robin Knowles ordered that the trial would combine three separate sets of issues brought before the court, namely:

1) the Mozambican state’s legal action against Privinvest, bank Credit Suisse, Privinvest owner Iskander Safa and others, in which it is seeking damages and the cancellation of a government guarantee on a $622m loan taken out by state-owned company ProIndicus to pay for a contract with Privinvest, which it says was obtained by bribery;

2) The question of whether Privinvest’s claim that the claims brought by the Mozambican state should be dealt with through an arbitration tribunal is correct; and

3) The Mozambican state’s application to reject legal action brought by banks such as VTB Capital, United Bank of Africa and Portuguese bank BCP on the grounds of sovereign immunity, and whether or not the state is entitled to claim it.

The judge said that he expected the hearing to be completed within three months and that President Filipe Nyusi would be a “fourth party” in the first set of issues.

The ruling means that Privinvest has failed in its bid to exclude from the trial of the second set of issues, the question of whether the payments Privinvest made to government officials were bribes. It has also failed to delay the court’s consideration of those issues until after an arbitration has taken place. The Mozambican state’s request to initially exclude the question of whether payments to the Credit Suisse bankers who carried out the loan deal were also bribes was also rejected by the judge.

Privinvest denies the Mozambican state’s allegations that it paid bribes to government officials in order to secure contracts. The case continues.

AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter. For an archive of previous Bulletins, see http://www.africafocus.org ,

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