Local firms in bank bribery deal

ROSE ATHUMANI and ORTON KIISHWEKO

CHIEF Secretary, Ambassador Ombeni Sefue speaks to reporters in Dar es Salaam regarding the financial fracas that involved Stanbic Bank Tanzania Limited. Right is the Director of Information Services, Mr Assah Mwambene. (Photo by Mohamed Mambo)

THE government is conducting own investigation into local entities involved in the 6 million US-dollar bribery scandal involving public servants through Enterprise Growth Market Advisors Ltd (EGMA).

Chief Secretary Ombeni Sefue told reporters in Dar es Salaam that following the recent ruling by the British High Court in London over the alleged bribery scandal involving the UK Standard Bank, the government is conducting its own investigation to determine where the money disappeared to.

Ambassador Sefue urged EGMA chairperson and one of three shareholders and directors, Harry Kitilya, who was at the time Commissioner General of the Tanzania Revenue Authority (TRA) and the company’s Managing Director, Mr Fratern Mboya, who was former Chief Executive Officer of the Tanzanian Capital Markets and Securities Authority to cooperate with investigating bodies.

“We want to know where the money went and what it was used for. And once we have gathered enough evidence, legal measures will be taken against those involved in the scandal,” Ambassador Sefue said.

He said the achievement is a result of determination of the UK and Tanzania governments in fighting corruption, describing it as a milestone in such effort. He expressed gratitude to all institutions involved in unearthing the scandal including those from Tanzania and the UK such as the Serious Fraud Office (SFO).

The case stems from a sovereign note private placement undertaken in 2012-2013 by Stanbic Bank Tanzania Ltd, lead manager and London-based Standard Bank Plc to raise $600 million for the Tanzanian government as part of its five-year development plan.

According to Ambassador Sefue, the government was allowed a grace period of two-and-a-half years before commencing paying back the loan-- in a period of 7 years.

He said the money was received in 2013 but problems involving irregular financial transactions were raised by Stanbic Bank Ltd employees, prompting the Bank of Tanzania (BoT) to conduct a special targeted examination audit.

The special audit found out that about six million US dollars was paid to EGMA for supposed consultancy services -- withdrawn within days without remitting government withholding tax.

“A report of the BoT findings was given to the bank’s board and the Financial Intelligence Unit. SFO London was notified, which embarked on the investigations that earthed the bribery scandal,” he explained.

Following the scandal, Tanzania is set to receive 7 million US dollars, approximately 15bn/- as compensation. Ambassador Sefue said the government will determine how the money will be spent to benefit Tanzanians.

Earlier yesterday, the Prevention and Combating of Corruption Bureau (PCCB) welcomed the recent ruling in the UK on Standard Chartered Bank over the alleged bribery in Tanzania but noted that it is almost concluding its own investigation into the matter.

PCCB Director General, Dr Edward Hosea, told the ‘Daily News’ in Dar es Salaam that should it find anyone culpable of bribery or corruption in the deal; they would hand over their files to the Director of Public Prosecution for action. Dr Hosea said that the PCCB investigation was parallel to the one that the UK’s Serious Fraud Office was carrying out on the entire deal.

“We are investigating the entire deal and not just specific components -- and as long as we find any elements of bribery, we will hand over their files to the DDP for prosecution of any individuals who will have been found culpable of corruption,” he said.

Recently, a judge approved Britain’s first deferred prosecution agreement (DPA), a new type of plea deal, in a case centred on $6 million in bribes paid to Tanzanian officials by the Tanzanian unit of South Africa’s Standard Bank (SBKJ.J).

Under the deal with the Serious Fraud Office (SFO), the London arm of Standard Bank, which worked with the bank’s Tanzanian subsidiary on a 2012-2013 transaction to raise $600 million (£399 million) for the Tanzanian government, faces penalties totalling $32.2 million after admitting to failing to prevent bribery.

The penalties in this case include a $16.8 million fine to be paid to the SFO, a $6 million fine plus interest of over $1 million to be paid to the government of Tanzania, and $8.4 million in disgorgement of profits. The London-based Standard Bank Plc has since changed its name to ICBC Standard Bank following the acquisition of a controlling stake by China’s ICBC earlier this year.

In a lengthy statement setting out the details, SFO counsel Edward Garnier told the court that Stanbic and Standard Bank had initially quoted a fee of 1.4 per cent of gross proceeds raised, but matters did not progress until that went up to 2.4 per cent.

Evidence showed that the additional 1 per cent, worth $6 million, was paid to a “local partner”, a Tanzanian company called EGMA, for supposed consultancy services.

These arrangements were made by Bashir Awale, then chief executive of Stanbic, and Shose Sinare, then the unit’s head of corporate and investment banking. Awale was later sacked while Sinare resigned. EGMA’s chairman and one of its three shareholders and directors was Harry Kitilya, then head of Tanzania’s tax authority, while its managing director was Fratern Mboya, ex-CEO of Tanzania’s Capital Markets and Securities Authority.

Garnier said the purpose of the $6 million was to induce government officials to show favour to Stanbic in appointing it to conduct the private placement -- and to reward those whom Awale and Sinare believed had been induced to act improperly. The money was deposited into an EGMA account in March 2013, and withdrawn by Mboya in large cash amounts within days. Garnier told the court the cash has never been traced.