- Attorney General announces legal action against officials, but there is still no news of any action against the London banks by the UK’s Financial Conduct Authority
The Mozambique Attorney General has announced that legal action will be taken against the government officials who contracted the secret loans from the London branches of banks Credit Suisse and VTB.
The Attorney General has filed a legal complaint against the officials, saying that investigations had found that the loans violated Mozambique’s constitution. The $2 billion of loans were given in 2013, but mostly did not come to light until 2016. The loans were given to three state owned companies in Mozambique. An audit into the deals last year found that :
- A condition of Credit Suisse to get the loans signed off by the Bank of Mozambique was dropped in order for the loans to be given.
- Credit Suisse and VTB gave or arranged loans to three companies which had no revenue, and without the contracts in place to suggest that they would generate revenue in the future.
- There is an unexplained difference of between $683 million and $714 million on what was paid for equipment bought by the loans, and its expected cost.
The loans were guaranteed by then Finance Minister Manuel Chang, but were not approved by the Mozambique parliament. All three of the state-owned companies are in default on the loans, but no creditor has brought legal action against Mozambique – which would be heard in the UK courts – and no creditor has made a claim against the government guarantee.
Humberto Zaqueu from the Grupo Moçambicano da Divida (Mozambique Debt Group) said in response to the Attorney General’s announcement:
“We have been campaigning and waiting for so long, finally it looks like things are starting to move in the right direction. Indeed, this information on the “beginning of prosecution” comes after last week´s assurance by the President to diplomats in Maputo that those behind the hidden debts will be taken to justice.”
However, there are concerns as to how far reaching the legal process against officials will be, and whether and how fast it will take place. The Attorney General only announced that financial sanctions will be pursued on individuals responsible. Joe Hanlon, an expert in debt and Mozambique, said the investigation “does look like a slap on the wrist for a few scapegoats” rather than the more far reaching process which is needed.
In contrast to the Mozambique Attorney General’s action, the UK’s regulator the Financial Conduct Authority has still said nothing in public about any investigation or legal action against Credit Suisse and VTB for their role in the scandal. The FBI has been reported to be investigating both banks.
The big question is whether, now that legal action has begun against individuals, it is more likely that the Mozambique government will refuse to pay the debts because of their illegality.
The loans were given to three companies, Ematum, Proindicus and Mozambique Asset Management (MAM). The Ematum loan became known about later in 2013, and subsequently was restructured in 2016 to become a debt directly owed by the Mozambique government. Some of the owners of the debt originating from Ematum have called on the Mozambique government to repudiate the Proindicus and MAM debts, so that they can be paid instead. However, Mozambican campaigners argue that all three loans violated the country’s constitution because they were not agreed by parliament. Therefore, all three loans should be declared illegal, the officials responsible prosecuted and the debt should not be taken on by the Mozambique people.