PGR wants those responsible for hidden debts to be held financially responsible – AIM report
7:43 CAT | 29 Jan 2018
The Mozambican Attorney-General’s Office has asked the Administrative Tribunal, the body responsible for checking the legality of public expenditure, to hold financially responsible those public managers involved in what have become known as the “hidden debts”.
This term refers to the loans of over two billion US dollars contracted from the European banks Credit Suisse and VTB of Russia in 2013 and 2014 by the security-related companies Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management), with illicit guarantees issued by the government of the time, headed by President Armando Guebuza.
The PGR has been investigating possible crimes committed in the contracting of these loans. Key documents in this investigation are the independent audit of Ematum, Proindicus and MAM by Kroll Associates, widely considered the world’s foremost forensic auditing company, and the report by the commission set up by the Mozambican parliament, the Assembly of the Republic to investigate the loans and their guarantees.
A statement issued by the PGR on Monday said that during the investigations prosecutors have noted facts that may constitute financial crimes. These include disrespect for the ceiling set on government guarantees for loans laid down in the budget legislation (the guarantees smashed through the ceilings fixed in the budget laws of 2013 and 2014).
There had also been “lack of observance of the legal procedures for contracting foreign financing and in contracting goods and services”. The goods and services for Ematum, Proindicus and MAM were provided by just one contractor, the Lebanese Privinvest Group.
The Kroll audit revealed invoicing procedures that were grossly inadequate. The invoices for the assets and services provided by Privinvest to each of the three companies were just a page long. Kroll says it spoke to an industry expert who said invoices should include a clear and detailed description of all the assets and services provided. “The invoices provided to Kroll do not supply sufficient detail to gain comfort that the documents accurately reflect the true price of these assets and services, and therefore do not allow accurate accounting records to be maintained by the company”, the audit report noted.
Kroll also found no sign that the inventory of assets required by the Mozambican Commercial Code had been kept, and the companies failed to provide Kroll with reliable balance sheet records – in breach of Article 60 of the Code which requires companies “to prepare an annual balance sheet of assets and liabilities during the first three months of the immediately following year, to enter it into the inventory and balance sheet records, and to duly sign it”.
Regardless of the Kroll audit, the three companies had a legal duty to publish audited accounts every year. There are accounts for Ematum for the 2013 and 2014 financial years, but nothing for 2015 or 2016 (and nothing at all for the other two companies).
The PGR also noted that the contracts and other acts had been carried out “without being submitted for the obligatory inspection by the competent bodies”. The main such body is the Administrative Tribunal.
The PGR announced that on Friday it submitted a denunciation to the Administrative Tribunal in order for the public managers involved in the scandal to be held financially responsible for their acts.
The statement does not name these managers – but one and the same person is chairperson of the board of all three companies. He is Antonio do Rosario, an official of the State Intelligence and Security Service (SISE), who has openly boasted of refusing to hand over data to the Kroll auditors, on the grounds of “national security”, and even of expelling the auditors from his office.
The man who signed most of the illegal government guarantees was the then Finance Minister, Manuel Chang – but he was supported by President Guebuza, who, when questioned by the Parliamentary Commission of Inquiry, defended the loans and guarantees, and said he would do the same thing again if necessary.
The PGR is also calling on the government and the Assembly to “improve the legislation on the state business sector so as to define clearly the nature and treatment of the various categories of companies in the sector and the mechanisms and limits on their expansion and their participation in the creation of other companies”.
Given the way in which the scandal of the “hidden debts” is justified by reference to national security, the PGR calls for “improvements in the legislation on state secrets”.
It also wants to see new regulations and manuals of procedures to govern the issuing of government guarantees, and a system to monitor all projects that receive guarantees. It suggests that an opinion from the PGR should be a legal requirement before any guarantees are issued.
Meanwhile, the investigations are continuing, and evidence is being collected inside the country and abroad. The PGR adds that there has been “a certain slowness” in the response to the PGR’s requests for assistance from foreign bodies under international cooperation agreements – and this “is compromising speed in reaching an outcome to the case”.
Full PGR Press Release in Portuguese here