CIP CALLS FOR IMMEDIATE ACTION

Mozambique’s main anti-corruption NGO, the Centre for Public Integrity (CIP), has demanded that the Attorney-General’s Office (PGR) should, in the wake of the independent audit undertaken by the company Kroll Associates, act immediately to bring to justice those responsible for the scandal of the country’s “hidden debts”.Three security related companies, Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management), took out loans of over two billion US dollars from the banks Credit Suisse and VTB of Russia in 2013 and 2014. The loans were illicitly guaranteed by the government of the time, in violation of the ceilings on guarantees set in the budget law, and also in violation of the Mozambican constitution which states that only the Mozambican parliament, the Assembly of the Republic, can authorise such debt.

Kroll audited the three companies, and the executive summary of the audit report, released by the PGR last Saturday, is a damning indictment of financial abuses, mismanagement and incompetence.In a Wednesday press release, CIP argues that, although the report does not name the officials complicit in the loans and guarantees, “it provides enough information with legal relevance for the PGR to take immediate action to hold those involved criminally responsible in what is the largest financial scandal in the existence of Mozambique as a state”.

Among the report’s finding, CIP points to the unexplained fate of 500 million dollars (or a quarter of the total lent). This sum was part of the 850 million dollar loan to Ematum, and it was supposedly spent on maritime security equipment. But Kroll could find no sign of any such military equipment.

“The Ministry of Finance has not been able to confirm to Kroll any details of the maritime security equipment that was effectively included in the USD 500 million allocation, nor if the transfer of responsibility has actually been complete”, the report noted.One of the report’s key sources, referred to only as “Person A” (but who is clearly Antonio do Rosario, the chairperson of all three companies), also claimed to Kroll that the money had been used for military purposes. However, the contractor, the Lebanon-based group Privinvest, insists that it does not supply military equipment, and the report says Privinvest “categorically stated to Kroll that the assets delivered to EMATUM were per the agreed supply contract and specifically that no weapons were provided”.

“Until the inconsistencies are resolved, and satisfactory documentation is provided, at least USD 500 million of expenditure of a potentially sensitive nature remains unaudited and unexplained”, Kroll remarked.CIP also points to evidence in the report of “the diversion of 713 million dollars (more than a third of the total value of the loans) in schemes to over-invoice assets”. Unable to obtain a detailed breakdown of the invoices provided by the three companies, Kroll called on an independent expert to value the boats, aircraft and other goods purchased with the loans. A comparison of the invoiced amount and the independent valuation showed a discrepancy of 713 million dollars.

CIP noted that 10 per cent of the value of the loans – about 200 million dollars – went on bank charges and fees to other agents who supposedly intermediated in the loans.Furthermore, CIP accuses, there was no sign of any real cooperation by the government in the audit. Throughout the report Kroll complained of inadequate information, and this failure to assist the auditors extended from the three companies themselves to the Finance Ministry and to the State Security and Intelligence Service (SISE), which is the dominant force in the shareholding structure of the three companies.CIP found it strange that the PGR has not yet taken any visible action to hold anyone involved in the loans responsible for the financial abuses reported. For, although the summary was only published on Saturday, the PGR has been in possession of the full audit since 12 May, and the PGR opened preliminary investigations over a year ago.CIP calls for immediate action which should include “the preventive detention of those who may interfere in the investigations under way”, as well as the preventive seizure of their assets.

It also urged the PGR to take action against all those bodies who failed to cooperate fully with the audit. CIP points out that this lack of cooperation is, in itself, a criminal offence.In the first place this means the management of the three companies themselves. Kroll declared that the companies only provided “limited financial data, including incomplete trial balances and bank statements for certain periods, and incomplete supporting documentation, such as loan facility agreements and supplier contracts. As a result, it became apparent that a significant amount of the information originally envisaged to be held by the Mozambique Companies in Mozambique was not available”.

“The main challenge in completing the Independent Audit was the lack of documentation available from the Mozambique Companies”, the report said. “Kroll spent a considerable amount of time requesting and liaising with representatives of the Mozambique Companies to obtain documentation and information that was, in some cases, either ultimately incomplete or not provided at all.”CIP insists that “the Mozambican state should not pay the debts contracted by the three companies, since the money in no way benefitted the State”. Furthermore, the guarantees, since they were issued in violation of the Constitution should be regarded as “null and void, so that they cannot be invoked to justify the State paying off the debts”.