May 19, 2022
  • May 19, 2022

Lawyers debate secret debts that bankrupted Mozambique

By on April 8, 2022 0

INo. 2013 Y The Lebanese businessman sent an email to Ndambi Guebuza, the son of Armando Guebuza, who was then president of Mozambique. He promised that a charter flight would soon leave France for Maputo, the Mozambican capital, carrying an unusual cargo: 7,427 bottles of wine. What did the email mean? When the public prosecutor questioned him during an ongoing trial, the young Mr. Guebuza fired back. “Would you like some wine, madam? he fumed, before alleging that the whole process is just a political set-up.

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Ndambi Guebuza is one of 19 high profile defendants tried in Maputo for corruption, embezzlement and money laundering (which they deny). The charges relate to a series of deals in 2013 and 2014 that saw state-backed companies borrow more than $2 billion, mostly in secret. Although the money was earmarked for fishing boats (pictured) and maritime security, US regulators say at least $200million was pocketed by Mozambican officials and Credit Suisse bankers, who helped to arrange transactions. The revelation of the hidden debts in 2016 pushed the country into default and sparked lawsuits on three continents.

One such case is the Maputo trial, which was held under the marquee of a maximum security prison and broadcast on national television. The hearing ended last month, with a verdict expected in August. Between legal details, he offered a grim insight into the lives of Mozambique’s super-rich and allegations of how they splurged on posh apartments and fleets of sports cars.

In February, the former president, Mr. Guebuza, spoke – as a witness, not an accused – and used the opportunity to subtly sting his successor, Filipe Nyusi. It was “strange”, he said, that Mr Nyusi claimed to know nothing about how the bribery deals were struck, despite being defense minister at the time. It’s a sign of the politicization of the issue, as rival factions jostle for influence within Frelimo, the ruling party. “These groups are fighting to control the party so they can control the state and take advantage of it,” says Edson Cortez, director of the Center for Public Integrity (C.I.P.), a Mozambican NGO.

Despite its internal turmoil, Frelimo retains a strong grip on power and does not want its dirty laundry aired in public. Mozambique and America are still arguing over who can extradite Manuel Chang, the former finance minister who signed the deals and is currently in a South African prison. Activists say he would be more likely to turn the tide in a US courtroom than in his home country.

It would not be the first American intervention. Three former Credit Suisse bankers who cooked up the loans have pleaded guilty to related charges in a New York court. Last October, the bank itself agreed to pay US and UK regulators $475 million for misleading investors and violating anti-corruption laws. The ruling said the bank ignored warning signs, including a due diligence report that described the contractor who received the money as “an expert in kickbacks, kickbacks and corruption”. VTBa Russian bank that was also involved in the deals agreed to pay regulators $6 million.

None of that money went to the Mozambican people, although Credit Suisse said it would forgive $200 million of the unpaid debt it is trying to collect. It would be meager compensation for the crisis caused by the scandal. When the debts came to light in 2016, donors halted aid to the government, the IMF packed up, the currency crashed and growth slowed. A study of C.I.P. and Chr. Michelsen Institute, a Norwegian research company, estimated that if these indirect effects are included, the cumulative costs of the loans amount to nearly $11 billion, almost as much as those in Mozambique. GDP in 2016.

The debt itself is still unpaid. Part of it is now in the hands of investors who were not involved in the corruption. Fiona Huntriss of Pallas Partners, a lawyer for some of them, says ‘innocent lenders’ should be paid ‘what is long overdue’. Mozambique’s government counters that it shouldn’t have to pay because the state guarantees for the debts were issued illegally. That issue will be settled in another court case, due to start in London next year, in which virtually all parties to the case are suing all others. Lawsuits may rumble, but justice remains elusive.

This article appeared in the Middle East and Africa section of the print edition under the headline “Wine and Punishment”