The Promise – and Risk – of Internationalizing the Corruption Fight: Prosecuting the Mozambique Loan Fraud

Manuel Chang, Mozambique’s longest serving Finance Minister, has just lost the first round in his attempt to duck U.S. charges he defrauded the Mozambique people out of some $2 billion.  A South African Magistrate ruled January 9 that Chang’s December 30 arrest in South Africa, requested by the U.S. Justice Department, was valid.  Assuming South Africa stands firm in the face of legal maneuvering by Chang and political pressure by the Mozambique government, Chang will join accomplices in a Brooklyn jail to await trial for corruption.

That the corruption trial of a former official of the one of the world’s poorest nations will be held in the courts of one of the world’s wealthiest and that the trial turns on the strength of a third country ’s legal system and the political resolve of its government shows both the promise – and the risk – of the internationalization of the fight against corruption.

The Promise.  Chang and accomplices – a Lebanese businessman, three former Credit Suisse bankers, and others still not named – are charged with violating the U.S. Foreign Corrupt Practices Act, its money laundering statutes, and various other criminal laws for their part in a scheme that had the government of Mozambique guarantee over $2 billion in loans.  The loans went to a series of dodgy corporations that had promised to develop Mozambique’s coast but instead absconded after doing little work. The companies’ failure to repay the loans forced the Mozambique government to make good on its guarantee, creating a fiscal crisis from which it is still recovering.  If Chang and his accomplices are convicted, they would not only face lengthy prison terms but would also be ordered to repay the money they stole.

The Risk.  South African authorities arrested Chang in accordance with the 1999 U.S.-South African Extradition Treaty.  The treaty obliges South Africa to extradite him to the U.S. if the U.S. has charged him with an offence punishable under South African law by a prison term of one year or more.  The United States need not prove Chang committed the offenses for which extradition is sought.  Under South Africa’s extradition law, all it need do is present a certificate stating it has sufficient evidence to prosecute Chang. His indictment alone would seem to suffice, and the U.S. now has 60 days to file it and whatever else it thinks necessary to comply with the certification requirement. Once it does, the magistrate should issue an order granting extradition without delay.

Chang has the right to appeal the order to South Africa’s Supreme Court. Given the evidence disclosed in the indictment, he would appear to have no grounds on which to base an appeal, and one would expect a speedy affirmance.  But here is where the first risk appears.  Chang can certainly afford South Africa’s the best lawyers and will most surely instruct them to raise every possible issue on appeal and to draw the appeal out for as long as possible. While South Africa’s courts have a deserved reputation for competence and integrity, clever lawyers, prepared to fight until hell freezes over and then fight on the ice, could, if not ultimately prevail on a technicality, prolong the case for a very long time.  It will take a decisive, steadfast judiciary willing to diligently and expeditiously wade through voluminous filings to see past the arguments and promptly approve the extradition.

Nor is Chang’s fate sealed when a final order of extradition issues.  Under South African law, the ultimate decision on extradition is the government’s.  The Minister of Justice and Constitutional Development can deny extradition if he or she finds it would not be “in the interests of justice,” or extradition would be “unjust or unreasonable,” or the punishment would be “too severe,” or extradition is sought “by reason of [defendant’s] gender, race, religion, nationality or political opinion.”  The decision is solely the minister’s and is not appealable – no matter how questionable his or her reasoning.

One would think the risk that politics would intercede to protect Chang from facing U.S. justice is slight. South Africa’s new government, brought to power thanks to the corruption scandals that enveloped the previous one, has vowed to tackle corruption in all its forms.  Extraditing Chang to the U.S. would send a powerful message that it is serious about observing its mandate.  Furthermore, current Justice Minister Michael Masutha is likely the last person in South Africa to sympathize with one who helped steal hundreds of millions if not billions from Mozambique’s most deprived, coming from a human rights law background where, thanks to his own visual impairment, he became one of the nation’s leading advocates for the rights of the disabled.

Nonetheless, the political and legal risks that the Chang extradition will be de-railed cannot be dismissed.  Chang is surely one of Mozambique’s most powerful citizens, having served as Finance Minister during the period when Mozambique’s tightly interconnected business and political elite quashed the nascent development that had followed the end of civil war and began stealing ever larger sums from its impoverished citizens (here and here for representative accounts).  He would have been at the center of any number of corruption scandals, meaning he has the wealth and power not only to hire the best South African counsel but to mobilize the current government of Mozambique to fight his extradition too.  After all, who knows what he could tell U.S. authorities about other past or current Mozambique officials corrupt dealings in return for a reduced sentence?

Indeed, it would seem Mozambique has already launched an effort to defeat his extradition.  Just three days after the U.S. unsealed the indictment charging Chang, Mozambique’s prosecutor general filed his own charges against Chang and announced she would seek Chang’s extradition from South Africa. The next move will be for Mozambique to intervene in the extradition proceeding, arguing that its request for Chang should take precedence over the U.S. request as he is a Mozambique national and former official.

(If anyone believes the current government of Mozambique would actually put Chang on trial, actually try to convict him if it did, and really seize his assets if he were convicted, please contact me directly. I have bridge in Brooklyn I would like to sell you.)

The next battle in the now very international war against corruption will be fought at the South African front. It is now up its courts and its government whether the war will take an important step forward.

1 thought on “The Promise – and Risk – of Internationalizing the Corruption Fight: Prosecuting the Mozambique Loan Fraud

  1. Pingback: Who Will Prosecute Mozambique’s Former Finance Minister for Corruption? – Matthews' Blog

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