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Echoes of 1990s debt-swap in new scandal at Tanzania central bank
By JOSEPH MWAMUNYANGE
The scope of the probe into the looting of billions of dollars from the Bank Tanzania that was recently announced by Finance Minister Zakia Megji may be expanded to include the abuses of the controversial Debt Conversion Programme of the 1990s.
In that programme — which involved investors buying the country’s foreign currency debt at a discount and accepting payment in local currency that was then supposed to be invested in projects in priority areas — it is suspected that unscrupulous businessmen incorporated fake companies to access the facility and beat the guidelines that were set by the Central Bank.
Last month, Mrs Meghji told The EastAfrican that the government would float an international tender for auditors of repute to investigate the curRent fraud at the central bank involving the management of the Commercial Debt Account.
In another inquiry, carried out in September last year, a reputable international audit firm wrote to the BoT governor questioning the over $120 million that was paid to several companies in Tanzania under the Commercial Debt Programme. One company was paid about $40 million. The claims and payments were made between May 2005 and March 2006.
The audit firm advised the BoT governor to hire a forensic expert to assist in investigations into the alleged forgery. Instead, the BoT disputed the report and terminated the services of the audit firm.
For two weeks, efforts to get the names of directors or shareholders of the companies from the Business Registration and Licensing Authority (BRELA) proved fruitless because the files couldn’t be traced.
A source from the Treasury told The EastAfrican, “If the auditors expected to be engaged by the government do not move in fast enough, there is a possibility that they will find some important documents missing.”
The 1990s scam involving the Debt Conversion Programme (DCP, 1990-94) had dramatic repercussions. Augustine Mrema, (then minister for Labour and Youth) was fired for “spilling the beans” in parliament over the DCP money, while a Treasury Permanent Secretary also lost his job “in the public interest” over the scandal.
Mr Mrema was sacked by the then president Ali Hassan Mwinyi for what was described as “collective responsibility” following his revelations in parliament that he was blocked from investigating the DCP funds.
The DCP was created by Tanzania to sell government debt at a discounted rate. One objective was to encourage investments in priority areas chosen by the government. They included agriculture, tourism, industry, commerce and transportation and would have involved local and foreign investors creating jobs. The other reason was for the government to reduce its local and foreign debt stocks, which had reached alarming proportions. In summary, the DCP enabled an investor to purchase foreign debts at a discounted rate. The Bank of Tanzania would then make available to the investor local currency to the full amount of the debt redeemed.
But some of the funds were repatriated abroad instead of being invested.
The Debt Conversion Programme (DCP) was established in 1990 but only became operational in January 1991; by 1993, the government had halted the whole programme after discovering that it was “distorting the economy” instead of bringing about economic development, as the government had expected.
In the two and half years that the programme was operational, some 82 companies were given permits to buy debt. The government paid the firms Tsh50.877 billion in local currency, equivalent to 18.02 per cent of the government’s recurrent budget for 1992/93.
“The government was forced to print money worth Tsh 48 billion to cover the deficit. A simple analysis showed that 15 companies were given Tsh 1 billion each, while 13 others were allocated between Tsh500 million and Tsh1 billion each; and 54 companies got Tsh500 million,” said the 1994 Parliamentary Report.
A quick analysis showed that 45 per cent of the money was paid to just 4 companies. These were Deco Arts (Tsh3.054 billion), Hotel Sea Cliff (Tsh1.786 billion), M.M. Motors (Tsh1.619 billion) and M.M. Garage (Tsh522.128 million), totalling some Tsh6.982 billion. All four were associated with one businessman.
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by Joseph Mwamunyange
The Tanzania Government Has Decided To Contract International Forensic Auditors To Investigate The Mysterious Disappearance Of Millions Of Dollars From The Bank Of Tanzania (bot), The Country’s Central Bank.
The Saga Started In December When Finance Minister Zakia Meghji, In A Surprise Move, Put A Notice In The Daily News Announcing That, “the Government Had Been Informed Of Alleged Impropriety In The Management Of External Commercial Debt Accounts At The Bot.”
The Minister Described The Allegations As “serious” And Announced That The Government Had Directed The Office Of The Controller And Auditor General To Conduct A Special Audit And To Report To The Government Urgently.
Curiously, Mrs Meghji’s Statement Did Not Disclose Who Reported The Matter To The Government Or How It Came To Know Of The Missing Millions.
But It Is Suspected That The Information The Government Is Acting On Came From A Report By A Mission Of The International Monetary Fund (imf) That Conducted An Audit On The Bot Last Year — Which Explains Why The Government Has Wasted No Time In Bringing In Investigators.
Whichever Way One Looks At It, The Development Is Significant Because It Is The First Time The Country Will Be Conducting A Thorough And Independent Investigation In The Sensitive Area Of The Commercial External Debt Account — The Same Account That Has Proved To Be So Prone To Abuse By Corrupt Regimes In Developing Countries.
For Instance, The So-called Anglo Leasing Scam That Has Dogged The Regime Of President Mwai Kibaki In Kenya For The Past Two Years Basically Involves Abuse Of The Country’s Commercial Debt Account By Well-connected Government Contractors And Cronies Of The Regime.
The Case Must Also Ring A Bell With Indonesia Where, In 2002, The Governor Of The Central Bank, My Syahrill Jabril, Was Indicted After He Being Accused Of Having Surreptitiously Channelled Millions Of Dollars To Foreign Commercial Banks By Disguising The Money As Payments For Servicing The External Commercial Debt Account.
When The Payments Were Audited, It Turned Out That Part Of The Money Was Paid In Commissions To Companies Linked To Key Leaders Of The Of The Ruling Golkar Party.
The Suspicion Was That The Money Was Used To Finance President B.j Habibie’s Election Campaign.
In An Exclusive Interview With The Eastafrican, Tanzania’s Controller And Auditor General, Ludovick Utouh, Revealed That His Office Had Already Prepared The Terms Of Reference For The Investigations And That These Had Been Submitted To The Imf.
The Special Audit Is Expected To Start Within The Next Six Months. Mr Utouh Said That The Investigation Would Establish The Actual Amount Of Money Missing From The Central Bank And If There Was Any Impropriety.
Insiders Estimate The Amounts Involved Run Into Millions Of Dollars And That Some Of The Firms Used In The Fraud Were Off-the-shelf Companies Registered In A Very Short Period Of Time Specifically To Facilitate The Channelling Of Monies.
Speaking To The Eastafrican, Mrs Meghji Said The Government Was Keen To Determine Whether There Was Any The Truth In The Allegations, Adding That The Findings By The Reputable External Auditors And Investigators Would Be Made Public Because The Government Wanted To Be Transparent On This Issue As Well As On Other Sensitive Matters.
It Remains To Be Seen How Quickly The International Investigators Will Move And How Much Co-operation Will Be Given To Them By Government Officials.
In 2001, The Government Of Former President Daniel Arap Moi Of Kenya Gave In To Pressure From The Imf To Appoint International Investigators To Audit The Country’s External Debt Account At The Central Bank Of Kenya.
The French Finance House Lazard Brothers, Who Were Engaged To Conduct The Inquiry, However Failed Make Any Progress Because Some Ministers Refused To Provide The Auditors The Original Documents And Contracts For Which Payments Were Being Released From The External Debt Accounts.
Since Most Of The Contracts Belonged To Suppliers Of Security Equipment And Services, The Government Argued That Secrecy Laws Prohibited The Handing Over Of Such Documents To Foreign Consultants.
For President Jakaya Kiwete, The Investigations Are Thus A Litmus Test Of His Commitment To Transparent Government. Kikwete’s Government Came To Power Promising To Give More Powers To The Prevention Of Corruption Bureau (pcb) To Go After The Big Fish.
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In Line With This “new Vigour,” A Former Tanzanian Envoy To Italy, Prof Costa Mahalu And Two Others Last Week Become The First Envoys In Tanzanian History To Be Brought To The Court To Answer Charges Of Misappropriation Of Funds Whilst Serving Tanzania Abroad.
Another Prominent Businessman Is Likely To Be Taken To Court By The Corruption Watchdog When Investigations Into His Activities Are Completed.
On His Recent Visit To The United Kingdom, President Kikwete Said That Tanzania Government Would Like The Ongoing Investigations By The Uk’s Serious Fraud Office Into The Purchase Of The Bae Watchman Radar System To Go On An Interrupted, Promising That His Government Would Not Interfere.
The Controversial Multibillion Military Radar System, Which Tanzania Purchased From The Uk-based British Aerospace Engineering At $40 Million Was Of The Same Kind That Three Other Countries Bought At 45 Per Cent Less Cost. [FONT=verdana,geneva,lucida,'lucida grande',arial,helvetica,sans-serif]
We would like to thank The Government and all the people of Tanzania for the great support and contribution in making our efforts to rob Jayant Kumar Patel Alias Jeetu Patel
and pillage the nation easier, faster and profitable in every way.
As you may be aware, we have been doing so for a number of years.
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1.Jayant Kumar Patel [Alias Jeetu Patel] Carpo Crimine
Heads largest crime group in Tanzania spanning over 4 decades. He has grown his influence with mafia like grip and wealth with close association with Vimal Mehta and with protection of Don Andy over the last 15 years.Has used soldadis to threaten and injure people in Tanzania.
2.Sailesh Vithlani Capo Crimine
Owns several companies including Merlin International,Vithcorp Food Packers in Tanzania. Currently wanted by the Serious Fraud Office for BAE Radar Deal.
3.Tanil Somaiya Capo Crimine
Close associate of Sailesh Vithlam and named as partner in the BAE Scandal but remains safe in Tanzania where he believes he can buy everybody. Has donated funds to Police recently in exchange for influence.
4.Vimal Mehat Carpo Crimine
Originally known as the Stella Container King in the 1990's,Vimal Mehta has always been a hard core criminal. Lives in a mansion next to the Slipway in Dar es Salaam and known to share 5000 USD wines with the Governor regularly,this man can equal Don Corleone in the fraud and crime committed in Tanzania. Enjoys chaufeur Rolls Royce in Dubai with apartments worth USDs millions with Governor Balali and Jeetu Patel with similar styles as his neghbours in Burj area of Dubai.
4.Johson Lukaza,Makubo and Malegesi Capo Crimine
Malegesi is known as a thug lawyer and Makubo/Lukaza brothers as illiterate small time criminals who have formed a profitable alliance with other capos and the Governor. Has a close relationship with Amb. Kazaura the Chairman of Tanzania Investment Bank..
5.Ketan Sonaiya Capo Crimine
Based in Kenya,and currently in jail. Mr. Somaiya operated the notorious Delphis Bank which robbed deposition funds over USD 90 million. Also owned Marshalls Kenya which sold trucks and cars to the Army of Kenya that were never supplied . Don Andy Chande was a close associate of Somaiya and remained Chairman of his Marshall Kenya for 10 years. Ketan Somaiya also defrauded deposition funds in Tanzania to sell the Trust Bank which was managed by BOT under trust to Delphis Bank belonging to Somaiya in 1990. Don Andy also used Governor Balali to protect the Delphis Bank when the bank was failing and alllowed Ketan Somaiya to transfer funds belonging to Tanzanian depositers valued at over USD 15 million in 2001.
The Following 2 Users Say Thank You to ganesh For This Useful Post:
August (7th November 2009), Mkandara (7th November 2009)
Governor of Bank of Tanzania Don Daudi Balali,Capo Di Tutti Capi of Balali Family.
A demure and insignificant former official of the IMF ,his close relationship with Anna Muganda brought him back to Tanzania as an advisor to the State House . He then went on to become Governor of the Bakn of Tanzania and discovered that he could pillage resources without fear.He has been involved in every major scandal and now holds more wealth than half the Government's recurrent budget per annum. He has various companies and houses in South Africa ,Tanzania,Dubai,Morroco,Mauritius,Monaco,Switzerla nd and Wsahington. Not satisfied with the already high salary of USD 12000 per month from the Bank of Tanzania,Balali,under heavy influence from his wife,Anna Muganda ,went on to rob Tanzania.Anna has close ties with the powers that be in the Third Phase Government,and close family ties with Malegesi. Balali became a hard core white collar criminal using his office to enrich himself and his friends,the other capo crimines. The projects and the amounts of funds stolen by him exceed USD 3 billion over the last 7 years
a. Bank of Tanzania
The Bank of Tanzania Project is costing Tanzania USD 8625 million per square meter,when the going construction cost in Tanzania is USD 700 per sq.mt.. In New York and Tokyo,per sq, mt.cost for furnished building does not exceed USD 2000 per sq. mt. including land. Even considering the cost of USD 2000 per sq. mt,the cost of the 40,000 sq. mt.BOT towers should cost USD 80 million. This would be gold handles and high security etc. included. The Tanzania Engineer's Board,The Architecture's Board,The Constructor's Boards,made statements opposing the manner and cost of the BOT towers. Balali has managed to get approval and spend USD 345 million,which means the estimated cost per sq.mt.is USD 8625,over four times New York prices. Despite corruption allegations in the project early on in 1998 with Skanka[a Swedish Company paying a bribe of USD 5 million to Balali,the Governor went to give the project to Group 5,a subsidiary of Skanka in South Africa.. Estimated loss to Tanzania is USD 265 million.
b. The Meremeta Gold Company.
The Governor is the custodian of this ill conceived mining project. He guranteed this project for USD 100 million in 1999. Anna Muganda was a major shareholder and partner who brought in Time Mining to manage and operate Meremeta on behalf of the Tanzania Goverment. She went on to become the wife of Balali in 2004. The Meremeta Mine was a classic example of Daudi Balali giving guarantees to comapnies in which he had an interest. The Company thereafter filed for bankruptcy and the Bank of Tanzania paid the funds against the Guarantee. Noting the strategic importance of having its own Gold Mine, BOT invested heavily into this mine while the South Africa partners raised the moneyand sold their shares after utilising the funds in the first year of operation. The Governor,after supporting the loss making operation for 7 years
The Governor,after supporting the loss making operation for 7 years,sold the mining rights to Rand Gold,making the Government Mine unsustainable. The loss to the Governmnet of Tanzania is USD 132 million paid to the lenders against the guarantee from BOT with interest and penalties. The Governor made payments in October 2005 before the end of the Third Phase Government. He sold the mining roghts to Rand Gold for below market prices causing a further loss of USD 100 million. Toal loss to the Government is USD 232 million.
c. Foreign Debt Service Account Bank of Tanzania.
The Governor had his associates preparing false and fraudulent deeds of assingments for funds owed to Japanese and other International Companies. While the International Companies themselves have no knowledge of the payments,nor have they assigned the deeds to these Tanzanian Companies,the Bank of Tanzania approved over USD 150 million during two years to be paid tp local companies belonging to close and personnal associates of Daudi Balali. While Don Andy used his influence to convince the Governor top use Jeetu Patel and his partners,Don Daudi had his own people in mind. He therefore decided to spread the risk and use the Johnson Lukaza family to present part of the fake deeds of assignment. To avoid detection,Balali asked the claims to be submitted for between 2-4 billion and paid the money over four months to 28 companies in 2005 alone. The Tanzania currency loss is parlty attributed to this scandal as the Capos get paid in TAS and then rush to exchange this into USD cash to carry it out of the country. Since there only USD 15 million available as cash in the Tanzania market at any given time,the huge demand by the capos for over USD 150 millionhas forced the shilling to fall over 25 per cent in one year.The Governor even convinced the Government to release more USD in the market in order to shore up the shilling while he knows very well there is no sound economic reason that releasing more USD on the market can shore up the shilling.What he was really doing was releasing USD cash into the market that the capos and himself needed to buy.
Companies involved in BOT scandal belong to capos Crimines Jayant tila Patel..........
29th January 2007, 02:11 PM
Re: The Leaked EPA Report by DeLoitte Touche
29th January 2007, 02:11 PM
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