Maputo, 18 Jan (AIM) – A New York court on Friday sentenced Mozambique’s former finance minister, Manuel Chang, to eight and a half years imprisonment for his role in the scandal of the “hidden debts”.
This term refers to the scheme whereby three fraudulent Mozambican state companies, Proindicus, Ematum, and MAM, all of them run by the security service, SISE, obtained loans of over two billion US dollars from the banks Credit Suisse and VTB of Russia.
No bank in its right mind would give such huge loans to companies with no track record and run by an intelligence service. But any qualms that Credit Suisse and VTB may have had were overcome when Chang, as Finance Minister, signed sovereign guarantees, which meant that, if the companies defaulted, the Mozambican state would repay the banks.
And, sure enough, all three companies soon went bankrupt, and so the hidden loans were transformed into hidden debts. The guarantees signed by Chang were illicit, since the loans smashed through the ceiling on lending established under the 2013 and 2014 budget laws.
The loans were a corrupt scheme designed by the Abu Dhabi-based group Privinvest, which spent hundreds of millions of dollars in bribing Mozambican officials (including Chang) and Credit Suisse bankers. Under these deals, Privinvest became the sole contractor for the three fake companies and sold them fishing boats, radar stations and other assets at vastly inflated prices. An independent audit of the companies showed that Privinvest had over-invoiced them by more than 700 million dollars.
Chang was arrested at Johannesburg international airport in December 2018, on an international arrest warrant issue by American prosecutors. Because American investors were among those swindled in the scandal, the US wanted Chang to stand trial in New York.
Belatedly, the Mozambican authorities said that Chang should be put on trial in Maputo. Chang’s lawyers worked for five years to avoid extradition to the US. Eventually, they failed and in 2023 Chang was deported from Johannesburg to New York.
He was found guilty of conspiracy to commit wire fraud and money laundering, and on Friday judge Nicholas Garaufis, sentenced him to a jail term of eight and a half years.
The prosecution wanted a much longer sentence, of between 11 and 14 years, but Garaufis opted for a shorter period on the grounds of the 69 year old Chang’s poor state of health, and because he has already spent six years in detention.
“The defendant, a corrupt public official, placed his own country, one of limited means and resources, on the hook for two billion dollars in loans it ultimately could not pay, so that he and his criminal partners could pocket tens of millions of dollars for themselves,” prosecutors wrote in a Nov. 13, 2024 filing.
If the six years behind bars are considered part of the sentence, Chang will still have to spend two and a half years in a New York prison, before he is deported to Mozambique.
The “hidden debts” plunged Mozambique into a huge financial crisis. When the International Monetary Fund (IMF) discovered the scale of the three loans, it accused the Mozambican government of concealing the true size of the country’s foreign debt.
The IMF suspended its programme with Mozambique and all 14 donors who provided aid in the form of direct budget support halted all further disbursements. The value of the Mozambican currency, the metical, crashed, and only vigorous intervention by the Bank of Mozambique prevented an economic meltdown.
The saga is by no means over, since Chang is almost certain to appeal against the sentence.
(AIM)
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