31 January 2014

Zimbabwe: Navistar Insurance Scam Rocks Airzim

THE insurance scam which prejudiced Air Zimbabwe (AirZim) of more than US$10 million looted over a five year-period by senior managers at the airline and Navistar Insurance Brokers is just a tip of the iceberg, as there are more revelations of corruption to come involving the procurement of spare parts, fuel, aeroplanes and ticket sales, the Zimbabwe Independent can reveal.

Police have since opened dockets on the top 10 AirZim officials and Navistar directors. A team of six senior police officers are investigating the case and are camped at AirZim.

According to top government officials the details of the fuel, tickets sale and spare parts scams, in addition to an aeroplane engine that went missing, will be revealed in forensic reports to be released soon.

"Air Zimbabwe was prejudiced of millions of United States dollars," one official said. "The total amount is shocking -- it will run into tens of millions of US dollars when the final reports are out. "There is a fuel scandal which has been uncovered and prices of spare parts were also inflated, in some cases by more than 300%," he said."The insurance scam is just a tip of the iceberg. Imagine, a whole engine of a plane went missing."

A report by the BCA Forensic Audit Services signed on December 28 on aviation insurance looking at material payments made to Air Zimbabwe in the form of insurance premiums during the period 2008 to date exposes the rot at the national airline.

The audit was done at the behest of the then Transport minister Nicholas Goche who suspected underhand dealings at the national airline, particularly the contract with Navistar.

According to the report, more than US$10 million was looted by senior Air Zimbabwe officials and Navistar Insurance Brokers, which was appointed by Air Zimbabwe's legal manager and company secretary Grace Pfumbidzayi without going to tender on March 18 2009. Investigations by the Zimbabwe Independent yesterday revealed that the file containing ownership details on Navistar had gone missing at the Registrar of Companies.

It is suspected that the file disappeared when the story on AirZim broke this week.

BCA Forensic Audit Services said Navistar officials contravened the Criminal law (Codification and Reform) Act chapter 9:23: These involved fraudulent transactions and theft by conversion.

Navistar Insurance Brokers charged AirZim €15,7 million (US$21,3 million) in total instead of the premiums charged by the international reinsurers amounting to €10,6 million (US$14,3 million) being the total premiums for April 2009 to April 2013, thereby prejudicing Air Zimbabwe of €5,1 million (US$6,9 million). The airline was prejudiced of €4,5 million (US$6,1 million) when it was charged an additional €300 000 (US$407 000) per quarter over and above the quarterly payments made to the international broker.

AirZim did not respond to a letter by Navistar confirming the approval of the flat broker fee but the company went on to raise quarterly debit notes.

Investigations by BCA established that the amounts which AirZim was supposed to pay as aviation insurance premium are the amounts specified in the policy documents from the international broker.

According to the International Broker, Air Zimbabwe was not supposed to pay any amounts outside those specified in the policy documents.

BCA investigations also established that Navistar Insurance Brokers was receiving a commission from the international insurance broker for services they were providing to Air Zimbabwe.

"There is an element of unjust enrichment on the part of Navistar Insurance brokers as they were receiving payments for the same service from both AirZim and the International Insurance broker," reads the report.

Navistar was overpaid by €297 797 (US$404 393) by Air Zimbabwe for AirZim aviation insurance premium for April 2010 to April 2013. The amount was not refunded to AirZim.

Navistar also fraudulently charged AirZim US$142 300 as a top-up to bring the premium to EU levels as per EC regulations 989-2005, which relates to the sanctions imposed on Zimbabwe by the European Union, which had nothing to do with AirZim's aviation insurance.

Navistar Brokers and its executive directors, Vukile Hlupo (director) and Givemore Nderere (managing director), committed fraud/theft by conversion involving US$796 079, which was paid by AirZim as premiums for the hangar property for April 1 2009 to March 31 2013, which they did not remit to Altfin Insurance Company.

Altfin cancelled the cover leaving the national airline's assets exposed as there was no cover for the assets.

"The two airbuses were only received by Air Zimbabwe in January and July 2012 yet they were already being charged for by Navistar. The airbuses were also insured by the lessor for December 2012 to March 19 2013.

Air Zimbabwe paid US$360 448 to Navistar for the aviation insurance of the two A320 Airbuses, which were already insured by the lessor for the period concerned. Navistar was also paid US$713 921 by the national airline for the Chinese MA60 aircraft, which were already insured by Colemont Insurance Brokers. Navistar did not remit €90 739 (US$ 123 259) commissions due to FMRE property and casualty and Global Insurance Brokers.

The insurance broker stated they could not remit the commissions since AirZim owed them money but the airline owed them nothing. Nderere wrote to Pfumbidzayi asking her to fight for them if the Insurance and Pensions Commission (Ipec) penalises them by withdrawing their operating licences for remitting the AirZim aviation insurance premiums to the international market without approval from Ipec as requested by the Insurance Act.

When BCA asked Navistar for records for January 2009 to December 2011, it said it did not keep records for more than two years unless there is a pending claim.

AirZim also paid US$277 600 to Navistar, whose payment is not supported by documents.

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