Maputo — The United States Federal Bureau of Investigation (FBI) is investigating the role of the European banks Credit Suisse, VTB of Russia, and BNP Paribas of France for their role in loans of over two billion US dollars to three Mozambican security-related companies, Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management).
According to a report carried on Monday by the "Wall Street Journal", the FBI is examining whether the banks facilitated corruption by enabling Mozambican officials to take money raised via the loans.
In addition, according to the report, the US Justice Department is probing whether the firms helped Mozambican officials borrow more than the economy could reasonably repay.
There is no doubt about the latter charge. The three loans added 20 per cent to Mozambique's foreign debt and pushed it beyond the bounds of sustainability. The projections of how much money the three companies could make to repay the loans proved wildly opimistic, and the companies are effectively bankrupt.
All three loans were only possible because, in 2013 and 2014, the Mozambican government of the time, headed by President Armando Guebuza, guaranteed them. The government guarantees were illegal since they smashed through the ceiling on loan guarantees fixed in the 2013 and 2014 budget laws. They were also unconstitutional since they violated an article in the Mozambican Constitution whch states that only the country's parliament, the Assembly of the Republic is empowered to authorise such debt.
Neither the companies nor the government can possibly repay the loans. As a result, over the past two years there have been repeated defaults. The banks, perhaps recognising that their legal position is precarious, have so far refrained from activating the guarantees.
It is also reasonable for the FBI to ask whether any of the money was stolen. The audit by the company Kroll Associates, ordered by the Mozambican Attorney-General's Office (PGR), was unable to establish how all the money had been used. In part, this was because of deliberate obstruction by the top management of the three companies.
The chairperson of all three companies is security official Antonio do Rosario who, in a message widely circulated over the Internet, boasted of throwing the Kroll auditors out of his office.
The main challenge in completing the audit, Kroll said in its report, "was the lack of information available from the Mozambique companies. Kroll spent a considerable amount of time requesting and liaising with representatives of the Mozambique companies to obtain information and documentation that was, in some case, either ultimately incomplete or not provided at all".
Kroll said it repeatedly asked Rosario for "outstanding information that would provide a better understanding of expenditure: the response was that the requested information was 'classified' and not available".
Kroll also found it could not obtain "reliable accounting records from the Mozambique companies to enable a proper assessment of the financial position of each company. Further, the Mozambique companies were unable to provide complete loan agreements or supply contracts".
The invoices that the companies did provide "did not include sufficient detail to provide comfort that the documents accurately reflect the true price of the assets and services". Some of the assets, such as the Ocean Eagle patrol vessels supplied to Ematum, did not feature in the accounting records at all.
There were huge holes in the Ematum records. Kroll found that Ematum "only provided limited information for two bank accounts which did not cover the period from the account opening, nor did Ematum provide details of two bank accounts held with BNI-Mozambique and Moza Banco. Of particular concern is that the Moza Banco account was not recorded in the Ematum accounting records, despite this account being used to receive more than 1.7 billion meticais (USD 55 million) from SISE (the Mozambican State Intelligence and Security Service)".
"The inability of Ematum to provide complete accounting records and bank statements demonstrates that the company has not maintained adequate books and records, either through mismanagement or a deliberate attempt to frustrate Kroll's independent audit", the report declared.
Regulators in the USA, Britain and Switzerland began probes into potential violations of securities laws by the banks last year. The latest inquiries, the "Wall Street Journal" says broaden the investigations to examine the possibility of criminal prosecution.
Not surprisingly, none of the three banks were willing to comment on the WSJ article.