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?
- The Interdisciplinary Corruption Research Network (ICRN) website
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Today’s guest announcement is from Professor Michael Johnston of the Colgate University Department of Political Science.
Corruption, in its various forms, has allowed racism to flourish in many ways; arguably racism can drive and facilitate corruption as well. The social and economic consequences of these intertwined problems can be devastating, not only for their immediate victims but also for communities at large.
Because of the many possible intersections of racism and corruption, and because academic debates on those connections are very much in flux, the Journal of Economics, Race, and Policy (JERP) invites submissions for a special issue devoted to this topic. Contributions might be empirical or conceptual, could focus on a range of issues, cases, groups, and places (not just the United States), and could take historical or comparative, as well as contemporary, approaches. Papers can explore the economic costs that arise when racism and corruption interact, corrupt incentives that help sustain racism – or other incentives that might inhibit it – and the ways in which economic and social policies might illuminate the workings of both sets of problems when they become institutionalized.
We believe this special issue of JERP can be the starting point for some important and productive debates.
Submissions are subject to the usual length and style requirements of JERP and would be evaluated through its normal refereeing process, as well as by the guest editors. Abstracts for the special issue can be emailed to the guest editors below, anytime until November 15, 2021. A deadline of June 15, 2022 for submissions to the special issue can be made online via JERP’s online submission portal. The issue would likely appear in mid 2023.
The editors of the special issue are:
Oguzhan Dincer, PhD firstname.lastname@example.org
Department of Economics
Illinois State University
Michael Johnston, PhD email@example.com
Department of Political Science
All inquiries should be directed to the guest editors.
- The Interdisciplinary Corruption Research Network (ICRN) website
- Google Podcasts
- Apple Podcasts
- Pocket Cases
- Radio Public
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.Continue reading
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.
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 firstname.lastname@example.org and email@example.com.
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.
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.