Hidden Debts: Privinvest obtained projects in Mozambique through bribery

New York, 8 Aug (AIM) – The prosecution in the New York trial of Mozambique’s former Finance Minister, Manuel Chang, argued on Wednesday that the Abu Dhabi based group, Privinvest, “from the very beginning agreed to bribe the defendant and other Mozambican officials to get these projects”.

The projects in question are the fraudulent Mozambican companies Proindicus, Ematum (Mozambique Tuna Company) and MAM (Mozambique Asset Management), which, in 2013 and 2014, obtained loans of over two billion dollars from the banks Credit Suisse and VTB of Russia. The loans were only possible because the Mozambican state provided sovereign guarantees that, if the companies failed, the state would repay the money. The man who signed the guarantees was Manuel Chang.

The money went, not to Mozambique, but directly to Privinvest as the sole contractor for the three companies. Privinvest then sold the companies fishing boats, patrol vessels, radar stations and other assets at vastly inflated prices. An independent audit of the three companies put the over-invoicing at around 700 million dollars.

Chang is facing charges of conspiracy to commit money laundering and wire fraud, and the prosecution has presented a mountain of documentary evidence (including bank statements and incriminating email correspondence between the fraudsters) indicating that Chang did indeed take bribes of seven million dollars from Privinvest.

Concluding her summing-up on Wednesday, Prosecutor Genny Ngai, according to the trial transcript, described the loans as “a massive international bribery, money laundering and fraud scheme”.

They depended on Chang’s cooperation. Senior Privinvest official Jean Boustani, said Ngai, “bribed the defendant so that the defendant would approve these projects and sign the loan guarantees”. Once the loan guarantees had been signed, Boustani went to Credit Suisse and VTB to borrow the money needed.

At Credit Suisse, he bribed the negotiating team, led by Andrew Pearse and Surjan Singh “so that they could help push these loans through from the inside”. Pearse and Singh have confessed to taking bribes from Privinvest, and testified for the prosecution.

Without the loan guarantees signed by Chang “there would be no money for the projects”, said Ngai. “And if there’s no money for the projects, there are no projects”.

Chang was Finance Minister, said the prosecutor, “yet he took seven million dollars in bribes to approve projects, to sign loan documents, for projects that ultimately failed. And when those projects failed, the loan documents that the defendant signed put Mozambique and its people on the hook to repay two billion US dollars”.

All the evidence, Ngai added, “proved that the defendant knew that what he was doing was wrong. But he did it anyway. He took the bribes, he laundered those bribes so that nobody would find out, and all of that bribe money went through the United States”.

Chang and his co-conspirators “also agreed to lie to investors about those bribes so that they could keep getting more and more money”, said Ngai. “The damage they caused wasn’t just in Mozambique, because investors lost hundreds of millions of dollars, including investors right here in the United States”.

Some of these investors testified for the prosecution, and they all told the court “that they believed the lies in the contract and that they lost millions of dollars because they decided to invest based on those lies”.

Andrew Pearse was a key figure in the fraud, and he confessed in 2019, when he pled guilty to wire fraud conspiracy. At Chang’s trial, Ngai recalled, this former leading banker in Credit Suisse told the court “that he received 45 million dollars from Privinvest, and he says ‘I received millions of dollars in kickbacks and illegal payments from Privinvest’”.

Pearse conspired with his fellow Credit Suisse banker, Surjan Singh, to have the loans approved by the banks, notably the loan for MAM. Pearse did that “even though he knew there was no chance that MAM would be successful. In fact, he testified that the project was rubbish”.

The money for the fraudulent companies kept rising through “upsizes”. Thus the amount lent to Proindicus began at 372 million dollars, but three “upsizes” brought the final sum to 622 million. At every stage, the Mozambican government had to guarantee the money, and it was Chang who signed those guarantees.

“The defendant got paid to approve the upsize for Proindicus”, said Ngai. “He is the Minister of Finance. Boustani is the contractor who’s supposed to be executing these projects. Boustani is paying the defendant and they’re flying to Paris multiple times because they’re conspiring together”.

Chang signed an additional guarantee for 278 million dollars for Proindicus in December 2014 “even though he knew for a fact that Proindicus was failing and couldn’t pay back the interest to the banks”.

Proindicus was in serious trouble, and a 90 million dollar interest payment was looming which Proindicus could not possibly pay. The fraudsters feared that if Proindicus were to default, Ematum and MAM would also collapse.

The solution was to pour more money into the Proindicus black hole. Hence the “upsize” of 278 million dollars. The conspirators, Ngai said, told prospective investors “that Proindicus just needs more money for projects – when, in fact, what they’re doing is using that upsize to cover their old loans”.

Chang’s term of office was coming to an end, and so he signed an agreement with Boustani and Rosario under which, if Chang signed the guarantee for the 278 million dollars upsize, Privinvest would pay the Proindicus interest, thus avoiding a default.

This deal was completely secret. “No-one told the banks”, said Ngai. “No-one told the investors”.

Chang involved his family in the scam. His daughter, Manuela, was flown to Lebanon for the sole purpose of opening an account at the First Bank of Lebanon. She sent Boustani an email with the Lebanese bank account numbers.

Within days, Chang signed the final Proindicus agreement, under which. Ngai said, “he promised that Mozambique would pay up to 900 million dollars, if Proindicus defaulted”.

Chang laundered the seven million dollars of bribe money through accounts held by his friend Luis Rocha Brito in the companies Genoa Asset and Thyse International, who subsequently tried to cover up the arrangement, by giving his bank (Barclays) “a fake real estate transaction” to disguise the Privinvest payments.

Chang, accused Ngai, “laundered his criminal proceeds to try to hide where it was coming from, who it was coming from and where it was going. That’s a crime. That’s called money laundering”.

The conspirators, the prosecution argued, “sent money through accounts in other people’s names. Privinvest divided up the payments in instalments, and Privinvest created fake documents to conceal these bribes. For example, fake invoices for consultancy fees, fake invoices for real estate projects, even fake residency permits for government officials and bankers so they could open secret accounts in Abu Dhabi”.

“We have proven beyond a reasonable doubt”, Ngai said, “that the defendant agreed to lie and agreed to commit wire fraud. Because every time he signed a government guarantee, the defendant agreed to lie to investors”.

(AIM)

Pf/ (1172)