30 June 2017

Mozambique: Kroll Audit - Company Manager Boasts of Obstruction

Maputo — One of the men at the centre of the scandal of Mozambique's “hidden debts” has boasted that he obstructed the work of auditors investigating the three security-linked companies Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Aset Management), according to a Friday report from the Bloomberg agency.

Antonio do Rosario, an agent of the State Information and Security Service (SISE), is also the chairperson of the boards of all three companies which between them borrowed over two billion dollars from European banks (Credit Suisse and VTB of Russia) in 2013 and 2014. The loans were illicitly guaranteed by the government of the day.

The three companies were audited by Kroll Associates, the most prominent forensic auditing company in the world. An independent audit was a basic condition set by the International Monetary Fund (IMF) for the resumption of normal relations with Mozambique, cut off when the scale of the undisclosed loans became clear in April 2016.

Kroll delivered its audit report to the Attorney-General's Office (PGR) on 12 May, and the PGR published an executive summary of the report last Saturday. In the report, Kroll stresses that it did not receive full cooperation from the three companies.

The companies only provided “limited financial data, including incomplete trial balances and bank statements for certain periods, and incomplete supporting documentation, such as loan facility agreements and supplier contracts. As a result, it became apparent that a significant amount of the information originally envisaged to be held by the Mozambique Companies in Mozambique was not available”.

Rosario himself confirmed this obstruction in a message, distributed over various platforms, and which Bloomberg has seen. The Bloomberg correspondent in Maputo told AIM that he had spoken to Rosario who confirmed the authenticity of the message.

Rosario said that the Kroll auditors had personally attacked him in their report. He boasted that he had thrown the auditors out of his office “because they wanted details of questions about state security.”

The report does not name its sources, but Rosario admitted that he is the “Person A” referred to in the report. “Person A”, Kroll said, refused to provide some information on the grounds that it was “classified”.

He also told Kroll that money from the Ematum loan was used to purchase military equipment. The contractor, the Lebanon-based group Privinvest denied this and stated that no weapons were supplied. This left unsolved the fate of 500 million dollars of the Ematum which was incorporated into the defence ministry budget, supposedly to pay for maritime security equipment.

Rosario refused to tell Kroll whether any other suppliers had been considered besides Privinvest. Such matters he also regarded as questions of “state security”.

In his message, Rosario declared “For Kroll, we know who they really are and what they want,” he said in the letter. “I am happy to see the very negative way they attack me, because this proves that we do not give in to pressure and we are not afraid.”

Thus Rosario regarded Kroll as a foreign intrusion - but in reality Kroll was working for a Mozambican institution, the Attorney-General's Office. It is not clear who Rosario meant by “we” - but that term clearly does not include the Attorney-General and her staff.

He claimed criticism of the three companies comes from people (whom he did not identify) who “desperately” want Mozambique's defence and security forces to fail.

“Today our economic independence is at stake,” he said. “The struggle continues! Economic independence or death, we will win!” Thus Rosario hijacked revolutionary slogans to justify enormous financial abuses.

Kroll also denounced the mismanagement of the three companies by Rosario and his team. It found that the three companies “appear to be inadequately managed, are not fully operational, have generated no meaningful revenues, and have no contracts in place to provide future revenues”.

The business plans and feasibility studies claimed that the companies “were expected to generate combined operating revenues of USD 2.3 billion by December 2016”. But these projections verged on the fantastic. Kroll remarked that “at the time of reporting, negligible revenue has been generated and the Mozambique Companies can only meet debt obligations and operational expenses with the financial support of either shareholders, the Ministry of Finance or the Contractor”.

This reduces Rosario's boast that the management of the companies will do whatever is necessary to make them successful to mere wishful thinking.

Mozambique

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