Will FRELIMO Betray the Mozambican People to Protect Its Own?

FRELIMO, Mozambique’s governing party, is at a historic crossroads. A party once known for the integrity of its leaders and its commitment to the welfare of all Mozambicans must choose: Pursue a lawsuit to recoup damages from the “hidden debt scandal” that will expose the role of Felipe Nyusi, its leader and the country’s president, in the corruption. Or scrap the suit to protect him.

The scandal arose from some $150 million Dubai-based shipbuilder Privinvest paid Mozambican officials to approve $2.1 billion in contracts to supply it with coastal patrol vessels, tuna boats, and a shipyard to maintain them. Privinvest kicked back $50 million from the deal to Credit Suisse executives in return for their arranging financing for the purchases. The loans they secured were not disclosed: either to the Mozambique parliament, as required by law, or to the IMF, as required under the terms of an IMF bailout loan. When the Wall Street Journal revealed them, donors cut funding, foreign investors pulled out, and the economy tanked.  

This hidden debt scandal may well go down as the most damaging corruption scam in modern history. According to a recent estimate by a team from Mozambique’s Centro de Integridade Pública and Norway’s Chr. Michelsen Institute, the damages from the scandal over the 2016-2019 period alone equals $11 billion, $403 for every man, woman, and child in Mozambique. At the same time, the World Bank ranks it as the world’s third poorest nation with a GDP per capita for 2020 of a little over $1200.

Mozambique’s only chance to recover the enormous damage the scandal has done is a civil law suit the government filed against Privinvest, Credit Suisse, and many of the individuals involved.  Privinvest has now countered. At paragraph 22.5 of its defense, the shipbuilder claims Nyusi was “fully aware of, and/or participated, in [the corruption], and indeed was at the heart of the matters now complained of by the Republic.”

The threat is now on the table. If Mozambique continues to press the suit, Privinvest will produce in excruciating detail evidence of Nyusi’s involvement. The only way to avoid the likely discrediting of the party’s ruling elite is for Mozambique to scrap the suit.

Will a party once led by the likes of Eduardo Mondlane and Samora Machel sell out the Mozambican people to maintain its grip on power? Will those party members who were their colleagues and those whom they inspired with their dream of a free and prosperous Mozambique stand up?

Guest Post. Effective AML Strategy: A Small Country Perspective

Smaller states are often thought to be more vulnerable to money laundering: less resources, fewer personnel, a lackadaisical attitude towards others’ problems. But as Charles Littrell explains in today’s guest post, even the smallest jurisdictions can prevent money laundering if there is the will to do so, and those don’t care or think they will benefit by turning a blind eye towards it are inviting a particularly virulent strain of cancer into their society.  Mr. Littrell is head of bank and trust company supervision for the Central Bank of The Bahamas, including AML supervision.  He was formerly an executive at the Australian Prudential Regulation Authority, and a member of the Basel Committee on Banking Supervision. He founded and is the Convener of the International Research Conference on Empirical Approaches to Anti-Money Laundering. This post represents Mr. Littrell’s personal views.

This post outlines a suggested strategy for small states to engage in the international money laundering movement.  The strategy comprises three elements:

  • Know what you don’t want—which is engagement with dirty money and the people associated with dirty money.
  • Deploy locally successful AML tactics in a globally unsuccessful world.
  • Proactively manage the FATF relationship.

Despising dirty money and dirty people

The core element in a successful small state AML strategy is sincere and comprehensive rejection of foreign illicit money, and the people associated with that money. The world’s major league criminals and their financial facilitators are among the least attractive and most dangerous human beings on the planet, and a successful small state will absolutely not welcome such people, their money, or their activities.

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With a Dad’s Help? Home Mozambique President Filipe Nyusi’s Son Bought

Not every 21-year-old has the means to buy a luxury house in one of Cape Town’s toniest neighborhoods. But somehow Jacinto Nyusi of Mozambique managed, plopping down 3.9 million rand, $350,000, for the home pictured above. In cash no less.  

While he isn’t saying where he got the money, many Mozambicans allege his father helped. The July 2014 purchase was made while father Felipe Nyusi was Minister of Defense and shortly after he had been tapped as ruling party FRELIMO’s candidate for president, guaranteeing victory at the January 2015 election. More significant, say many Mozambicans, is the house was bought while the country was swimming in money Middle East shipbuilding giant Privinest was allegedly doling out to Nyusi père and other senior officials to seal the deal on the hidden debt scandal, a corruption case which has wreaked more harm on more people than any in decades.

Thanks to sleuths from Mozambique’s Center for Public Integrity, CIP after its initials in Portuguese, the records documenting Jacinto’s purchase of the house are circulating freely in Maputo. Click here for them and for more on why so many think dad helped him buy it.

 

Proposed Method for Assessing the Transparency, Accountability, and Inclusiveness of the Return of Stolen Assets: Comments Requested

France recently enacted an asset repatriation law enshrining GFAR-inspired principles of transparency, accountability, and inclusivity. Now that the principles are law, the French chapter of Transparency International has set out to ensure they are observed in practice.

To that end, it has developed a method for evaluating the return process on each of the three dimensions using indicators for each as shown in the diagram.

The organization plans to publish its methodology, alongside concrete examples from past restitution processes of good and weak practices, as a handbook. Publication is now scheduled for the beginning of October.

TI-France welcomes feedback and comments on its methodology. Click here for the French version of the paper explaining it and here for the English translation. The group would be pleased to receive thoughts and suggestions by September 10th.  They should be directed to Sara Brimbeuf and Rahima Zitoumbi at sara.brimbeuf@transparency-france.org and rahima.zitoumbi@transparency-france.org.

The trial of Mozambique’s “hidden debt case”: the omnipresent absence of Filipe Nyusi

As the corruption trial of the decade if not the century enters its fifth day in a Mozambique court, guest commentator Marcelo Mosse, editor and publisher of the independent online outlet Carta de Mozambique, notes that the presence in the courtroom of a very large elephant remains unremarked. During the first days of the trial, witnesses have identified those responsible for a scheme saddling one of the world’s poorest nations with $2.1 billion of debt and driving millions into poverty. Mosse explains that the culprits have been identified by name and by the office held when the scheme was hatched and executed. With one exception. His own translation of his commentary from Carta de Mozambique on the significance of that exception is below.

Almost 20 years ago, at the time of the trial of the murder of journalist Carlos Cardoso, Mozambican society witnessed a judicial process that hit the presidential family to the core, due to the suspected involvement of Nyimpine Chissano [son of the then president] in the crime. This involvement was never proven. However, incriminating “nuances” of various kinds remained engraved in the imagination of the Mozambicans.

In addition, the trial was conducted within a tacit agreement among the interveners: everything was acceptable, except directly tweaking [then president] Joaquim Chissano. Bringing his name out at the hearings was like striking at the heart of the State, shattering our Mozambicanity, emptying the last stronghold of the beloved homeland, draining out its blood. Although the son ended up somewhat hit by the unraveling of his calls, the father, Joaquim, came out unscathed. Mozambicans would not be the ones to bury their own Father, even if hostile forces wanted to. Moreover, the administration of Justice was able to achieve this desideratum.

Twenty years later, history repeats itself, with the due distinctions of circumstance. The first four days of the trial of the “hidden debts” showed that we are facing the same tacit understanding: no one has yet mentioned Filipe Nyusi‘s name, but everyone mentions the Minister of Defense at the time. However, nobody asked for the name of the Minister at the time. Neither Judge Baptista nor the prosecutor Sheila Marrengula. Much less the Bar Association [participating in the case as assistant to the prosecution].

The Bar Association demanded that the former Minister of Finance, Manuel Chang, be required to come and testify as a declarant. The request followed several mentions made by the defendants Cipriano Mutota and Teófilo Nhangumele about his presence in decision-making meetings on the coastal protection project for which some of the debt was incurred.

However, just as Chang’s name was mentioned, the Minister of Defense was also mentioned several times, but never by name. We emphasize: no one wanted to know the name of this minister, much less his role in the various meetings where he would have been invested with his decision-making power on the subject. Several ministers of the time were addressed by name; the former President of the Republic, Armando Guebuza, was as well.

Why has no one mentioned Nyusi by name? Neither the judge nor the prosecutor asks about the role of this so-called Minister of defense. Why? That is the question.

The trial is still in its beginning stages. And our assertion may be refuted as the days go by, especially with the long awaited testimony of Antonio do Rosário, the second “mastermind” of the default. It is very likely that he will call a spade a spade. However, this taboo regarding Filipe Nyusi’s name shows that ultimately, and as we wrote a few days ago, we are facing the ultimate trial of Guebuzaism. And Nyusi will probably get off without being tweaked. Nyusi is still the President of Mozambique.

 Editor’s note: The trial is live streaming on Mozambican public television. Links here and (Facebook link) here. Excerpts can viewed on YouTube by searching “television moçambique dividas ocultas.”

Mozambique Hidden Debt Case: South Africa Must Say Why It Thinks Chang Will Face Justice; Trial Summary

Earlier today, August 27, the South African High Court blocked the extradition of former Mozambican Finance Minister Manuel Chang to Mozambique.

The order (here) came in response to an urgent request (here) by the Forum De Monitoria Do Orçamento, a coalition of Mozambican civil society groups, raising serious doubts that were Chang, a senior member of Mozambique’s ruling party, returned he would face justice for his part in a scheme that drove millions of fellow citizens into poverty and cost the impoverished nation billions of dollars in lost GDP (here).

The United States is also seeking Chang’s extradition for participating in the hidden debt scheme, and there is a widespread belief he is far more likely to face justice if extradited there.  South African law bars the government from picking Mozambique over the United States if it does not think Change will be tried, or if tried, the trial will be anything more than theatre. The court has ordered South African Minister of Justice and Correctional Services Ronald Lamola to produce the documents justifying his choice of Mozambique by August 30. A hearing on the decision is set for September 17. If the court finds the evidence supporting the decision insufficient, “irrational” in South African legal terms, it will vacate the extradition order.

Separately, Centro para Democracia e Desenvolvimento, a Mozambican civil society organization and FMO member, has released English language summaries of the first four days of the hidden debt trial.  Click on the day to see: Day 1, day 2, day 3, day 4.

Mozambique Hidden Debt Scandal UPDATE: Two Presidents Implicated/Crony’s Return Temporarily Blocked

The government of Mozambique took two hits at the second day of what could well be the corruption trial of the decade. Defendant Cipriano Mutota, a former intelligence official, testified that both the country’s current president and his predecessor were deeply involved in the corruption, a scheme where officials approved $2.1 billion in secret loans for dodgy projects in return for $150 million in bribes. His gripping testimony, captured in a screen grab circulating on Mozambican social media, appears below.

Separately, the Budget Monitoring Forum, or FMO after its initials in Portuguese, has filed an emergency motion to prevent South Africa from extraditing Manual Chang, who signed off on the loans as Finance Minister, to Mozambique. Chang has been jailed in South Africa for two years pending the government’s decision on whether to extradite him to the U.S. or Mozambique. Both want him, the U.S. because American investors lost millions thanks to the secret debts, Mozambique to stand trial for his role in the corruption.

Screenshot, Hidden debt trial, August 24, 2021

The government of South Africa has agreed to delay returning Chang to Mozambique pending a hearing on its legality Friday at 10:00 AM. Along with South Africa’s Minister of Justice, the government of Mozambique will appear and argue in support of the decision. FMO’s draft order, which the court accepted and issued, is here.

FMO filed the emergency request Tuesday evening after the South African government refused to consent to a brief delay in Chang’s return to allow an orderly consideration of whether the decision complied with South African and international law. In its filing, the group, an umbrella organization whose 22 civil society organizations serve virtually every impoverished or low income Mozambican, argues that the evidence shows the government will not really put such a senior figure on trial for corruption. Or if it does, he will get a most a slap on the wrist for a scheme that threw millions into poverty and by one estimate shaved $10 billion off the GDP.

FMO cites a previous Mozambique extradition request (here) that had every appearance of a put-up job, initiated not to bring Chang to justice but from a fear that were he sent to the U.S. he would spill the beans on cronies in return for leniency. Rumors circulating in Maputo that Chang’s relatives have planned a lavish welcome home party have only stoked concerns he has little to fear from a trial in Mozambique.

FMO chair Adriano Nuvunga has called South Africa’s decision to send Chang to Mozambique, “a victory of impunity” and has urged “all southern Africa CSO movements to come together to stop the triumph of impunity.” FMO’s papers seeking a temporary delay in Chang’s return pending a full hearing are here. The Gauteng Division of the High Court may act on the request as early as Wednesday morning South African time.

On Corruption

Taking a break from his GAB duties, our indefatigable editor-in-chief Matthew Stephenson provides readers of Liberties, a leading American journal on culture and politics, a tutorial on corruption. GAB readers will not want to miss it. For in less than 10,000 words, his essay not only make sense of the (tens of? hundreds of?) millions of words written on the topic but provides corruption fighters an order of battle.

Citing passages from the Hebrew Bible and the great Indian text on governance the Arthaśāstra, Matthew reminds that corruption has always been with us and always tolerated — if only grudgingly. What’s new is the extraordinary international consensus that has formed over the past quarter century to end that toleration. Matthew explains how that consensus developed and the opposition it has had to overcome. From those who argue that in some societies corruption is culturally acceptable, from those who believe corruption fosters economic development, and from those think nothing can be done to combat it.

He calls each of these claims a “quasi-myth,” for each contains a kernel of truth, just enough to make a debater’s point. He crushes each, with the cultural determinate one quoting Edmund Burke’s pithy response that the claim of “geographical morality” simply doesn’t stand up to scrutiny.  

The research on corruption has exploded over the past two decades. Matthew’s bibliography is now at 720 pages! He seems to have read every one of the articles, for he brings their findings to bear on the pros and cons of the various solutions that have been proposed — “wise king,” “moment of crisis,” “long slog” — interweaving stories how Denmark, Sweden, and the United States overcame entrenched corruption. He admits that taming corruption is no easy task, especially where it involves persuading corrupt elites reform is critical (“bit like trying to convince turkeys to support Thanksgiving”), but he concludes that while history shows the cancer of corruption can never be fully eradicated “progress against this chronic disease of the body politic is possible, so long as those engaged in the fight do not lose heart.”

The full text of Matthew Stephenson, “Honey and Poison: On Corruption,” Liberties, Summer 2021 is here.

Why Guatemala’s Experiment with Fighting Grand Corruption Was Not a Failure

The July 23 firing of Juan Francisco Sandoval, Guatemala’s top corruption prosecutor, seemed to put paid to the nation’s extraordinary experiment in fighting grand corruption.  Sandoval’s office was established to prosecute cases developed by the Commission Against Impunity, or CICIG after its Spanish initials. CICIG was a U.N. entity the Guatemalan government accepted as the price for international assistance after the civil war ended. It was tasked with investigating gross human rights abuses and grand corruption; recognizing how powerful Guatemalan elites were and how weak the judiciary was, it was staffed by non-Guatemalan investigators and prosecutors.

As Matthew described here, in 2019 an unholy alliance of Guatemalan elites and Trump cronies succeeded in pulling U.S. support for CICIG, allowing the elites to kill it off. With its demise, all that stood in the way of their looting the country was Sandoval’s office.  

The original plan had been for CICIG to both investigate and prosecute cases themselves.  But after the Guatemalan Supreme Court ruled that only the public prosecution office (Ministerio Publico) could prosecute, CICIG’s first head, Carlos Castresana, worked out arrangement with the then Attorney General to assign ten young, “clean,” newly recruited lawyers to an office that would be responsible for CICIG’s cases.  Given how far the elites’ tentacles reached into Guatemala’s middle class, Castresana doubted “clean” recruits could be found.  Or if they were clean, they would stay that way if faced with the notorious choice between plata o pluma, taking a bribe to drop the case or being killed. One of the great parts of the CICIG story, and as far as I can tell one still untold, is how those like Sandoval, from a new generation of Guatemalans, rose to the challenge.

The creation of CICIG and its early successes developing cases against powerful military and civilian leaders that Sandoval’s office successfully prosecuted provided a hopeful example of what an alliance between the international community and a nation’s citizenry could achieve. Its end, and now Sandoval’s firing, show the limits of the approach.  At the same time, it shows the effort is worth emulating.  Sandoval’s firing prompted international and condemnation and will lead to sanctions likely to create divisions between at least some in the business class and the politicians.  The governing body of the judiciary has demanded an explanation for his termination, and his initial replacement stepped down after less than days in office (here). Sandoval and like-minded lawyers and public servants aren’t going away, and many are now moving up the ranks in the judiciary and prosecution service.  

In a fine article for PlazaPublica, former U.S. Ambassador to Guatemala Stephen McFarland explains what the U.S. and others in the international community can do in light of Sandoval’s firing to combat corruption in Guatemala.  That whatever they do, they have in-country allies like Sandoval is why the CICIG experiment should not be treated as a one-off failure.  

NGOs, Dark Money, and Corruption: Lessons from Ohio’s Biggest Public Corruption Scandal

Ohio public utility giant FirstEnergy pled guilty June 20 to capturing or at least renting the Ohio state legislature long enough to win passage of financial bailout legislation. The picture below shows how the company used third-parties and cut-outs to hide its campaign to get Ohio’s legislature to do its bidding.

As with all large corruption schemes, several lessons can be learned from its unraveling.  One comes from the picture itself: how a well-designed graphic can make a complex, convoluted corruption scheme readily understandable. A second is how savvy prosecutors can craft plea agreements to curb future corruption.  A third is a step the Biden Administration could take to make it easier to ferret out those behind some of the dark money now plaguing American politics.

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