Yesterday Harbinder Singh Sethi and James Buchard Rugemarila were charged with obtaining $22 million and 309 billion Tanzania shillings from the Bank of Tanzania in what’s been dubbed the Tegeta Escrow case.
Perhaps the best summary of the Tegeta Escrow case comes from Africa Confidential (Vol 55 – N° 19) dated 26 September 2014 –
- Heads may be about to roll after revelations about the contested transfer of 200 billion Tanzania shillings (US$124 million) from an escrow account in the central bank, the Bank of Tanzania, to Harbinder Singh Sethi’s Pan Africa Power Solutions Tanzania Limited (PAP, AC Vol 55 No 13). The complex details of how Sethi acquired Independent Power Tanzania Ltd. (IPTL) and then raided the BoT account have now been pieced together by two opposition members of parliament, Zitto Kabwe and David Zacharia Kafulila, with the help of The Citizen and Mwananchi newspapers.
- If Sethi’s critics are proved right, this is the country’s biggest corruption scandal to date. Based in South Africa, Sethi is a Tanzanian-born businessman with a reputation for dubious past dealings in Tanzania, Kenya, South Africa and the United States. Sethi claims to have bought 70% of IPTL’s shares from Malaysia’s Mechmar Corporation, now in receivership. Yet Standard Chartered Bank Hong Kong (SCB-HK) claims to have purchased IPTL’s debt for $76 mn. in August 2005 and says Mechmar was already in liquidation when Sethi claimed to have acquired the shares.
- The Tanzanian behind IPTL, former BoT employee and self-styled international consultant James Rugemalira, is also under investigation over the $75 mn. that he was paid by Sethi for his company’s 30% share in IPTL.
- Both Sethi and Rugemalira have lived up to Kabwe’s description as ‘aggressive litigators’. Their strategy has been to steer the acquisition of IPTL away from non-Tanzanian jurisdictions (Malaysia and Britain), from other interested parties (SCB-HK) and lawyers, receivers and liquidators in Malaysia and Hong-Kong. In this way, SCB-HK’s property rights in IPTL have been summarily dismissed and attempts by SCB-HK’s lawyers to negotiate a compromise with Tanesco have all been blocked. Furthermore, the findings of the International Centre for Settlement of Investment Disputes over IPTL’s overcharging Tanesco for power supplied and the proposal for a solution involving SCB-HK claims have been ignored. Tanzanian courts have been complicit in rubber-stamping IPTL’s transfer to Sethi’s PAP. None of this helps improve the country’s image abroad.
- The unfolding details about the Tegeta Escrow case resulted in the removal of four ministers back in 2014. On Saturday, the energy minister, Sospeter Muhongo, resigned over his alleged role in the affair last year that saw $180m (£116m) taken from the country’s central bank. The move follows the removal from office of the attorney general, Frederick Werema, the energy secretary, Eliakim Maswi, and the housing minister, Anna Tibaijuka, who was sacked over the transfer of $1m to her private bank account Chairs of three parliamentary committees have also resigned following the scandal: Victor Mwambalaswa, energy and minerals committee; Andrew Chenge, parliamentary budget committee; and William Ngeleja, legal affairs and governance committee.
- Back in December 2014, Stanbic Bank Tanzania released a short statement on the-then parliamentary report on Tegeta Escrow and their role.
There have been two recent attacks which have looked like they were motivated by terrorists, but which now appear to have been linked to investors with issues or seeking gains
There was the deadly attack in Manila, Philippines on a casino and shopping complex that’s now attributed to a heavily indebted Filipino (a, former finance department employee who owed more than $80,000, and had sold off some property) who was hooked on gambling (his family had even asked casinos in the capital to ban him) …authorities released security footage showing Carlos casually exiting a taxi just after midnight and walking calmly into a vast entertainment and gambling complex like any other visitor. Shortly afterward, he dons a black ski mask, slips on an ammunition vest and pulls an M4 carbine assault rifle out of his backpack…at least 37 patrons and employees died, mostly from smoke inhalation as they tried to hide
But more shocking was the bus attack back in April on the team bus of a German soccer team.
- In what seems like a plot from a James Bond movie, police arrested a man on suspicion he attacked the bus of German soccer team Borussia Dortmund GmbH last week as part of a scheme to profit from a slump in the club’s share price.
- The man stayed in the same hotel as the soccer team, with a room overlooking the site of the attack. He bought put options online via the IP address of the hotel, the prosecutor’s office said. The options grant their owner the right to sell shares at a fixed price in the future. The man had taken out a loan to finance the transaction, according to the statement.
- On the day of the April 11 attack in the team’s home city, he bought 15,000 options on Borussia Dortmund shares, betting they would drop sharply after the attack. (On the day of the attack, 15,000 equity-covered put options were traded at 18 cents a piece at 11:16 a.m. in Frankfurt, about 8 hours before the bombs went off. The options, issued by DZ Bank AG and due to expire on June 16, give the right to sell Borussia Dortmund shares at 5.20 euros. The shares closed at 5.61 euros that afternoon, shortly before the attack took place, and fell as low as 5.50 euros the next day. The stock hasn’t traded below 5.20 euros since February. DZ Bank declined to comment. The suspect bought three types of derivatives, with the suspicious trades leading authorities to the man)
- The man later placed three bombs in a hedge on the road that the team bus was due to take to the stadium, prosecutors said. The explosives contained metal pins, which after the explosion were found as far as 250 meters (275 yards) away. One pin was found in a head-rest of one the bus seats, the authorities said.
- “A massive share drop would have had to be expected, had a player been gravely injured or even killed as the result of the attack,” the prosecutor’s office said. Police are still calculating what the maximum profit could have been had the plot gone as planned, she said.
- Borussia Dortmund said in a statement that it hopes all details of the plot will be cleared up in order to help the team, one of the few to be publicly traded, cope with the trauma caused by the incident.
Here in Kenya, we don’t have many mass attacks linked to such, but there are numerous stories of people who have taken their lives after gambling losses.
On Monday, the Justice Minister of Gambia Abubacarr Tambadou announced that he was freezing the assets of former President, Yahya Jammeh.
Reasons for this were that “preliminary investigations have revealed that between 2006 and 2017, former President Yahya Jammeh personally or under his instructions directed the unlawful withdrawal of at least 189,000,000 from funds belonging to Social Security and Housing Finance Corporation. Between 2013 and 2017, former President Yahya Jammeh personally or under his instructions directed the unlawful withdrawal of at least $50,000,000 from Special Projects Fund and International Gateway Accounts at the Central Bank of The Gambia.”
The freezing order affects:
- 131 landed properties held in the personal name of former President Yahya Jammeh or companies directly associated with him.
- 88 different bank accounts held in the personal name of former President Yahya Jammeh or held in the names of organizations directly associated with him;
- 14 companies purportedly belonging to or directly associated with former President Yahya Jammeh;
- A number of animals and livestock purportedly belonging to former President Yahya Jammeh.
“The freezing order is therefore meant to prevent former President Yahya Jammeh from liquidating or dissipating assets held in his personal name or his assets held in the names of his close associates or agents so as not to cause prejudice to the State should there be adverse findings made against him by a court of competent jurisdiction which may require the recovery of assets and monies from him by the State.”
Tambadou also announced that, after negotiations, the Government had reached a settlement with a company called Conaprio and would pay $4.6 million. This, he said, was down from a claim by Conaptop for $32 million which was part of potential liabilities of over two billion dalasis (about $43 million) arising from international cases instituted against the Government of The Gambia in different fora around the world as a result of the purported acts of former President Yahya Jammeh and some of his close associates.
See also this Guide to Banjul, the capital of Gambia.
This week, depositors at the closed Imperial Bank got some welcome news with the announcement that a third payment was going to be paid to them.
This comes after a first payment last December of up to Kshs 1 million per depositor that was paid through KCB and Diamond Trust banks and another one earlier this year of up to Kshs 1.5 million that was paid out by NIC bank.
This third payment is unique in that it targets the remains depositors many of who are believed to be large depositors. After the first payment, the CBK had expressed concern that some depositors had not bothered to claim the funds offered. But assuming that someone has funds of ~Kshs 50 million to Kshs 100 million at the bank, they were unlikely to be elated to received 1 million in the first or second rounds.
This time depositors can access up to 10% of the deposits, so the people above would get Kshs 5 or 10 million – still small, but much better- and depositors have a month to file claims at any NIC bank branches to receive the payments (deadline 31 Jan 2017).
The news also comes after a few days after newspaper stories that revealed the names and evidence of correspondence of CBK officials who may have benefited inappropriately from the largesse of the management of the bank that they were supposed to have supervises.
$1= Kshs 102
There are two or more sides to every story, and there are several at Imperial Bank. This is just one. The Central Bank (CBK) and the Kenya Deposit Insurance Corporation (KDIC) have accused the shareholders/non-executive directors of the bank of being negligent in allowing the fraud at the bank estimated at Kshs 34 billion (~$34 million), and collecting dividends from what was a shell institution. The shareholders have fired back in replying affidavits saying they were not party to the fraud and that, among other things:
- Documents they saw as directors (at board meetings). had been doctored by management of the bank (led by the late group managing director).
- CBK officials helped doctor the records for many years during their inspection audits.
- CBK officials received personal favours from Imperial Bank managers.
- CBK staff and Imperial managers conspired to prevent one shareholder from becoming an executive director of the bank, which would have created a second centre of power (other than the GMD) and which might have uncovered the fraud.
- The current CBK governor has made unreasonable demands on shareholders and failed to discipline his officers involved with Imperial – even appointing one of them as a receiver manager after Imperial closed.
Meanwhile, a judge issued a ruling that was interpreted differently and a group of depositors went back to court seeking a clarification of what the judge meant. It has been interpreted to mean:
- Shareholders: The receiver managers (CBK/KDIC) must share information with, and consult, them on decisions affecting the bank.
- Receiver Manager: Liquidation of the Bank can proceed liquidated.
- Depositors: Judge said to pay us 40% of our deposits immediately.
Hearings continue next week.