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Mozambique/Global: “Most Egregious Corruption Case of the 21st Century”
August 26, 2021 (2021-08-26)
(Reposted from sources cited below)
“In my view the hidden debt scandal is the most egregious corruption case of the 21st century. In dollar terms, the Malaysian 1MBD case is larger, but Malaysia is far wealthier than Mozambique, ranked 47th out of 185 countries on GDP per capita whereas Mozambique ranks 180.“ - Richard Messick, senior contributor to the Global Anticorruption Blog and pro bono legal counsel to the Budget Monitoring Forum, a civil society coalition in Mozambique.
"The damage the scandal has done to Mozambique," Messick continued, "has been incomparably greater than that 1MDB caused in Malaysia. Not only did it throw millions into poverty but it clipped several billion dollars off cumulative GDP."
Among global corruption scandals, a listing by Transparency International does include many adding up to even larger sums, but those are the results of multiple years of corruption by ruling regimes and their collaborators, rather than specific instances such as the Mozambican and Malaysian cases.
The trial of 19 defendants in the transnational $2 billion corruption case began on Monday, August 23, followed intensely by Mozambicans at home and abroad, as well as all others with ties to that country. It was expected to continue for at least 2 months. The court proceedings are being streamed live on Mozambican television, which is available on YouTube (see, for example, https://www.youtube.com/watch?v=P6aDwTkMBUI, reporting on today's proceedings).
Despite the open proceedings and the presence of many journalists, however, the case has so far drawn relatively little international attention, apart from an initial article by the BBC. To date it has not been covered by the Washington Post, the New York Times, or even The Guardian or Al Jazeera.
Full reporting by Mozambique specialist Joseph Hanlon, with background documents and daily updates both in Portuguese and in English, is available on his Google Drive.
Yet, as noted in the summary articles by the Mozambique News Agency included below, the case is a dramatic illustration of the transnational character of corruption and illicit financial flows, implicating intermediaries, multinational companies, and banks from New York to Abu Dhabi. There has already been one trial in New York, and another in New York not yet concluded.
Just last month, A judge in London ruled that a case could also proceed there.
This will be a super-trial in 2023 of claims and counter-claims between the Mozambican state, the shipbuilding giant Privinvest and others in relation to the “hidden debts” scandal.
For a summary of background on the hidden debts, as of May 2021, see http://www.africafocus.org/docs21/moz2105b.php. And for background on the war in Cabo Delgado province, see http://www.africafocus.org/docs21/moz2105a.php.
The two issues are closely linked, both deriving from the high expectations of earnings from natural gas production in the far northwest of Mozambique. Most recently in the war, the entry of Rwandan troops, with support from France and approval from many other global and regional countries, has for now changed the dynamic of the conflict. It remains to be seen, however, if those military advances will benefit the population rather than only serve to protect the natural gas production zone.
For much additional documentation on the $2 billion debt scandal, from the leading Mozambican anti-corruption organization Center for Public Integrity, in both English and Portuguese. see https://www.cipmoz.org/pt/documentos/
For previous AfricaFocus Bulletins on Mozambique, visit http://www.africafocus.org/country/mozambique
For previous Bulletins on Illicit Financial Flows and Corruption, visit http://www.africafocus.org/intro-iff.pho
For an overview of the issue of illicit financial flows and tax justice, see
https://www.us-africabridgebuilding.org/tax-justice/tax-justice/, https://www.us-africabridgebuilding.org/tax-justice/movement/, and https://www.us-africabridgebuilding.org/tax-justice/local-and-global-action/
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The Covid-19 pandemic has had a serious impact on us, as our traditional supporters have moved their funding to fight the worldwide Covid-19 crisis.
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We once again call on you for your support. Your support will help us: expand our student internship programme strengthen our research and partnership programmes with universities, archive community history and heritage groups develop new resources to support teach and learning in our schools.
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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
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
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
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
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
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
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
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
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”,
(AIM) Pf/ (858)
London judge sets Mozambique Privinvest showdown for 2023
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
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.
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