United States indicts former Mozambique finance minister

United States indicts former Mozambique finance minister

The United States indicts former Mozambique finance minister Manuel Chang on charges related to a $2 billion debt deal that led to a default in 2017.

Two other senior Mozambicans have also been charged but their names are blacked out, as they have not yet been arrested. These two are alleged to have received $36.5 million in “bribes and kickbacks”.

Chang is said to have personally received $12 million. Three “Mozambican co-conspirators” who are not charged, presumably because they cooperated with the US Department of Justice, received $23 million in bribes. But the largest payment, $45 million, went to Andrew Pearse, the then Credit Suisse (CS) managing director who orchestrated the secret loan deal.

The indictment, issued by a Grand Jury at a US district court in New York on 19 December, shows the large amount of information already provided to the US department of Justice, including e-mails and other documents. These make clear the secret loans were corrupt for the start, going to the top.

Eight people are charged, the three Mozambicans, two senior people from the Abu Dhabi company Privinvest, which received the money and was to supply ships and coastal protection equipment, and three senior people then at Credit Suisse.

Thus the indictment is not just against the Mozambicans who took the loans and received bribes, but also against CS senior officials for organizing fraudulent loans and Privinvest for charging “inflated prices” which it then used “to pay bribes and kickbacks”.

Bribe planning came first
The indictment makes clear that the whole idea came from CS and Privinvest and that Privinvest had to “persuade Mozambican government officials” to accept the deal. The indictment says that “almost immediately [Jean] Boustani and [the redacted Mozambican] negotiated the first round of bribe and kickback payments that Privinvest would have to make for the benefit of Mozambican government officials for the project to be approved.”

On 11 November 2011 the redacted Mozambican wrote an email to Jean Boustani, a senior executive at Privinvest: “To secure the project is granted the go-head by the HoS [Head of State, Armando Guebuza], a payment has to be agreed before we get there, so that we know and agree, well in advance, what ought to be paid and when.” Boustani replied the same day that because of “negative experiences in Africa” Privinvest now had a policy that no money could be paid before a contract was signed. On 14 November 2011 the redacted Mozambican agreed that part of the bribes would be paid on signing and part when the project started.

But the Mozambican warned in the e-mail that by the time of project implementation “there will be other players whose interest will have to looked after, e.g. ministry of defense, ministry of interior, air force, etc”. Money must be paid early because “in a democratic government like ours people come and go, and everyone involved will want to have his/her share of the deal while in office, becomes once out of the office, it will be difficult. So it is important that the contract signing success fee be agreed and paid in once-off, upon the signing of the contract.”

In another e-mail exchange on 28 December 2011, it was agreed that $50 mn in bribes would go to Mozambican government officials and $12 mn in kickbacks for Privinvest co-conspirators. It took a further year of negotiation. The ProIndicus contract with Privinvest was signed on 18 January 2013, and the first bribes were paid five days later.

Will Credit Suisse wiggle out?
“The indictment alleges that the former employees worked to defeat the bank’s internal controls, acted out of a motive of personal profit, and sought to hide these activities from the bank,” Credit Suisse said in a statement, adding that the bank would continue to cooperate with authorities.

But the indictment also makes clear how easy it was for Andrew Pearse, head of CS’s Global Financing Group, and the others to bypass the bank’s internal controls, and how little check there was on their activity.

CS is not charged in this indictment, but it will still be argued that the combination of pressure to lend and very light controls encouraged misconduct. The indictment also makes clear that CS and Privinvest pushed the loan and had to offer significant bribes before the Mozambicans would accept. So pressure will remain on CS to accept some liability for the $2 bn secret debt.