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Mozambican finance minister arrested Credit Suisse, FBI caught up – Quartz Africa

From an isolation cell east of Johannesburg, Mozambique’s former finance minister is fighting extradition to the United States.

Manuel Chang was arrested on December 29 at OR Tambo International Airport on his way to Dubai from Maputo. He appeared twice this week in a Johannesburg court where his lawyers ruled, but did not argue, that his arrest was unlawful. He will have a cell to itself as he awaits a decision on his sending to New York to stand trial there alongside three Credit Suisse bankers and a Lebanese businessman. They face charges of corruption, securities and electronic fraud and money laundering.

Days after Chang’s arrest, three Credit Suisse bankers, Andrew Pearse, Surjan Singh and Detelina Subeva were arrested in London, while the Lebanese businessman Jean Boustani has been arrested at JFK New York Airport and refused bail. Boustani negotiated on behalf of the Abu Dhabi-based holding company Privinvest.

Together, they are accused of orchestrating a multi-million dollar racket that nearly brought Mozambique’s fragile economy to its knees. Almost three years ago, Mozambique’s war-ravaged economy was boosted by the discovery in 2010 of one of largest natural gas fields. Then, in April 2016, revelations of a hidden debt of more than $ 1 billion shook that new-found confidence. The IMF has suspended hundreds of millions of dollars in much needed aid and investors have been scared. Subsequent surveys revealed that the debt was closer to $ 2 billion.

Reuters / Shafiek Tassiem

At the quayside: Manuel Chang.

The plan

Today, a 47-page indictment filed in a New York court details how Boustani and the bankers have harmed Mozambique’s economic recovery. In a series of emails revealed in the indictment, they casually orchestrated entire maritime schemes to enrich themselves and bribe officials like Chang (who served as finance minister from 2005 to 2015) along the way, amounting to $ 200 million.

“In democratic governments like ours, people come and go, and everyone involved will want to receive their share of the deal during their tenure. “

The survey, led by the United States, reveals a pattern of how desperately needed development could be exploited by unscrupulous international bankers and greedy politicians. The indictment also names three Mozambicans in addition to Chang, one a senior finance ministry official and the other a relative of a senior official. “To ensure that the project is approved by the HoS [Head of State], a payment must be agreed before arriving there, ”reads an e-mail to Boustani, written by a person whose name has been redacted from the public document. The head of state at the time was former President Armando Guebuza, who resigned in 2015 after serving two terms.

“In democratic governments like ours, people come and go, and everyone involved will want to have their end of the bargain during their tenure, because once out of office it will be difficult…” wrote another redacted name in a November 14th email. , 2011, adding that the ministries of defense, interior, air force and others will all have to “be taken care of”. Current president, Filipe Nyusi was then Minister of Defense.

Credit Suisse is not named in the indictment, only a bank named “Investment Bank 1”. The indictment shows how the bank’s internal processes were manipulated or circumvented in order to obtain loans worth hundreds of millions. In one example, they covered up red flags, in another, the three oversaw secret due diligence processes to get ahead of the bank’s. In yet another, they created competing bogus offers to convince their colleagues. Then, in 2013, Singh reportedly led the bank’s due diligence trip to Mozambique, to examine a project he had previously set up using private emails.

“No action has been taken against CreditSuisse,” the bank said in an emailed statement to Quartz. “The indictment alleges that the former employees worked to circumvent the bank’s internal controls, acted for personal gain and sought to hide these activities from the bank.”

A second bank is also cited but not named. When the scandal broke, he was revealed that Russian bank VTB also provided loans in Mozambique.

Tuna roll

The survey shows how sensitive state-owned enterprises are to corruption. In 2013, Privinvest, the offshore shipbuilding and construction company represented by Boustani, signed a $ 366 million contract with Proindicus, Mozambique’s state-owned coastal surveillance company.

In the years following the scandal, businesses closed and jobs were lost as foreign investment declined, Matine says.

The deal would see Privinvest supply equipment and training to the country which is still exploring the newly discovered offshore gas fields. Thanks to Pearce and his colleagues, Boustani helped Mozambique secure a loan that swelled to $ 622 million from an investment bank, believed to be Credit Suisse and the second bank, likely VTB, to fund the deal. They used thinly veiled code language, referring to money and bribes like chickens and poultry, to ensure Chang would receive $ 5 million before signing with the Mozambican government in as guarantor of the loans, and ensured that the Attorney General of Mozambique never reviewed the tendering process. . Proindicus has never done any significant work or generated any real income and has defaulted on its loans.

Yet between 2013 and 2014, $ 45 million related to ProIndicus passed through Pearse’s bank accounts in the United Arab Emirates, some of which was shared with Subeva. Mozambican government officials shared $ 50 million in bribes and bribes, and secured an additional $ 12 million from Privinvest.

The investigation shows how easily government officials can be corrupted. To create a “cushion,” the “co-conspirators” created a state-owned tuna fishing company through Mozambique’s state-owned fishing company Ematum in 2013. Again with Boustani and Privinvest, a contract for 785 million dollars was obtained and another loan, this time for 850 $. million euros, was committed to ensure that Proindicus’ interest payments would be covered.

“We’re going to get $ 800 million, so we’re keeping a cushion for the interest payment of Proindicus next year,” Boustani wrote.

Between 2013 and 2014, an alleged $ 4.5 million related to the Ematum deal * was * transferred to Singh’s account in the United Arab Emirates, according to the indictment. An additional $ 8.5 million was transferred to an anonymous Mozambican citizen, and amounts of $ 3 million and $ 8.5 million were transferred to two other Mozambican citizens. Two other redacted names received $ 8.5 million and $ 15 million while Chang pocketed $ 7 million.

The bank sent $ 500 million to PrivInvest and sold bonds to investors in the United States and elsewhere with the understanding that the fishing company would generate $ 224 million in three years, by December 2016. Not surprisingly, Ematum didn’t fish, didn’t make any money, and defaulted on his first loan payment, due in January 2017.

It was Ematum’s $ 25 million in losses this first aroused the suspicions of investors. It became clear that Mozambican officials were hiding something when they refused to hand over their books. But it wasn’t until Pearce and his colleagues set up an infrastructure project in 2014 through the Mozambique Asset Management entity, under the pretext of building a shipyard and warships to support the previous two projects.

With a syndicated loan of $ 535 million from the Second Bank (previously declared as VTB) and guaranteed by the Mozambican government with the signing of Pearce, another state-run project was set up for the benefit of the alleged “co-conspirators”. When the projects were clearly bankrupt, they attempted to swap the participation notes in the Ematum loan for eurobonds issued by the Mozambican government to mask the project by restructuring the country’s debt. A flaw on these is what ultimately led to a surprise public scandal in 2016 and the subsequent criminal investigation.

Another surprise

Like the debt three years ago, Chang’s arrest came as a surprise to Mozambicans, says Jorge Matine, public finance researcher at the Center for Public Integrity in Maputo. In the years following the scandal, businesses closed and jobs were lost as foreign investment declined, Matine says. Angry Mozambicans want redress.

“The FBI is just the first step,” says Matine. “My opinion is that something else is coming from other governments that have invested.”

Mozambican civil society has welcomed the US investigation, which they say will absolve taxpayers from paying for a crime. Mozambique’s attorney general, however, complained this week in a public statement that the Americans had refused to comply with previous requests for assistance. Chang’s arrest also sparked a flood of fake news on social media, warned journalist and analyst Joseph Hanlon.

In a election year, a scandal involving members of the ruling party could be a political disaster, but that’s not what Matine says. Nyusi spent his first term cleaning up party scandals, now with it all out in the open the second term, which he will likely win, “he will feel relieved.” It is not clear, however, exactly how this investigation will affect powerful members of the ruling party.

Yet even in a prison cell, Chang is likely a confident man, Matine says, confident that his ties to Mozambique’s political elite will protect him, or fall with him.

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