Maputo — The Russian bank VTB is suing the Mozambican government in London over the illicit loan of 535 million US dollars, which a fraudulent, security related company, MAM (Mozambique Asset Management) obtained from VTB in 2014, according to a report in the English language "Moscow Times" on Tuesday.
The same story was also published on Tuesday by the Reuters news agency.
The lawsuit was filed on 23 December, and named as defendants the Mozambican state and MAM. It says the case relates to "general commercial contracts and arrangements" but does not give any further details. It provided no additional information other than that VTB Capital, the investment banking arm of VTB, is being represented by law firm Freshfields Bruckhaus Deringer.
This is the latest move in the long-running saga of Mozambique's "hidden debts" - a term that refers to over two billion dollars of loans, from VTB and from Credit Suisse, to MAM and to two other fraudulent companies, Proindicus and Ematum (Mozambique Tuna Company) obtained on the basis of illegal loan guarantees, issued by the Mozambican government of the time, under the then President Armando Guebuza.
The guarantees, mostly signed by Guebuza's finance minister, Manuel Chang, smashed through the ceiling on loan guarantees established by the budget laws of 2013 and 2014. They were also unconstitutional, since the decision to incur such potential debt can only be taken by the country's parliament, the Assembly of the Republic, but the Assembly was kept in the dark.
Chang has been in police custody in Johannesburg for over a year. The United States authorities are attempting to extradite him to stand trial on charges of conspiracy to commit money laundering, wire fraud and securities fraud. But the Mozambican Attorney-General's Office is attempting to secure Chang's extradition to Maputo, where he is wanted on a range of charges connected to the illicit loans. The South African Justice Minister, Ronald Lamola, must decide Chang's fate.
The American prosecutors argue that the statede purpose of the loans (to boost Mozambican coastal protection and establish a tuna fishing fleet) was no more than a smokescreen for a gigantic fraud, in which at least 200 million dollars of the loan money was siphoned off in bribes and kickbacks.
The money from Credit Suisse and VTB was never sent to Mozambique at all - instead it was transferred to the Abu Dhabi based group, Privinvest, which became the sole contractor for Proindicus, Ematum and MAM. The independent audit of the three companies in 2017 showed that Privinvest grossly inflated the value of the assets it sold to them. The companies were overcharged by over 700 million dollars.
Despite the wealth of evidence, Privinvest has always denied any wrongdoing.
The VTB lawsuit comes as something of a surprise, since it was previously believed that VTB was amenable to restructuring the debt.
When President Filipe Nyusi attended the Russia-Africa summit in the Black Sea city of Sochi in October, he met with the chairperson of the VTB board of directors, Andrey Kostin, who claimed that VTB could "never" give an ultimatum to Mozambique.
Cited at the time by the independent television station STV, Kostin said "we could never give an ultimatum to our friend that is the government of Mozambique. There is no way we would do that".
"Indeed, we had a good discussion", he continued. "There is no ultimatum on either side. We are willing to cooperate, and the idea is to work together and never to give ultimata".
Kostin was denying remarks attributed to him when he was speaking to reporters at the Eastern Economic Forum in Vladivostok in early September. He was then cited as saying "If our colleagues in Mozambique do not take steps to speed up this process (i.e. repayment of the debt), by the end of the year we shall have to declare that the country has defaulted".
In light of the London lawsuit, it seems that Kostin was telling the truth in Vladivostok but not in Sochi.
VTB's case against Mozambique could be compromised by allegations that VTB bankers, like their counterparts in Credit Suisse, took bribes from Privinvest. During the trial of Privinvest sales executive Jean Boustani in New York in October, former Credit Suisse banker Andrew Pearse directly implicated Makram Abboud, a senior banker at VTB, who was working on the Mozambican loans.
Pearse, who admitted to taking kickbacks, said Boustani told him that Privinvest paid a bribe of two million dollars to Abboud.
VTB issued a routine denial of Pearse's testimony, calling him a "convicted fraudster", and claiming "We have seen no evidence that Mr. Abboud or any other VTB employee received improper payments of any kind".
The majority shareholder in VTB is the Russian government, and the bank is under United States sanctions.