Plot To Plunder govt coffers
The Lilongwe Senior
Resident Magistrate Court has on Tuesday sentenced one of the cashgate convict
Victor Patrick Sithole to nine years imprisonment for being found guilty of
money laundering, found in possession of foreign currency illegally and found
in possession of property suspected to have been stolen.
Sithole was the first
person to be arrested in September last year in connection to cashgate when
police impounded in his house and found him with foreign currency, of South African Rand's R122,
200 and, US$31, 000, and was also found with MK112 Million cash.
From these three counts, Senior Resident Magistrate Patrick Chirwa before passing judgment said
giving Sithole a non custodial sentence would be a mockery of justice because
the convict committed very serious offenses to the effect that he he contributed to the shortage of public resources like drugs in hospitals.
Chirwa therefore
sentenced Sithole to 7 years imprisonment for Money laundering, 1 year for
being found in possession of property suspected to have been stolen and another 1 year
for being found in possession of foreign currency illegally.
The lawyer for Sithole,
Ted Loka says will consult with his client if he may need an appeal for the
judgment.
But a lead state
prosecutor Kamudoni Nyasulu said he is happy that this is a right punishment
considering the nature of the offence Mr. Sithole committed and impact his
offence brought to the country.
Now, Sithole has become
a second person to be given a jail term sentence and a first person to receive
a longer jail term sentence in relation to cashgate issues following a three
year and nine month custodial sentence for former Principle Secretary for
Tourism and Culture Tressa Namathanga Senzani in October this year. Senzani
stole K63.5 Million which she restituted in full amount but the court also
ordered forfeiture of her account used to withdrawal the government
money.
A Summary of Cashgate Transactions
Cashgate in Malawi was a
well calculated plot to steal government money through the weaknesses of Integrated
Financial Management Information System (IFMIS) designed to enable Government
of Malawi (GoM) to monitor its budget and cash position. In 2005 GoM appointed
Soft-Tech Consulting Limited (Soft-Tech), an EPICOR Limited software solutions
technology partner, to implement an EPICOR based IFMIS for supporting budgeting,
accounting and reporting.
The GoM suspect that a
number of perpetrators have exploited these weaknesses through collusion,
resulting in financial loss to the government exchequer.
In the latest episode,
it is alleged that the perpetrators were able to transfer funds from the
government bank accounts to the vendor accounts for goods and services that
were never supplied and then to delete these transactions from the IFMIS
system. It is claimed that the system was manipulated to release funds without
lawful authority, create and approve unauthorised payments, issue cheques
through the Accountant General’s Department and transfer funds into supplier
accounts without authorization.
Preliminary Baker Tilly Audit Report
According to a 21
February 2014 Forensic Audit Report on Fraud and Mismanagement of Malawi
Government Finances by Baker Tilly reported that “at least MK 13,671,396,751 of
GoM funds had been identified as being potentially misappropriated” after a
defined testing criteria and a detailed analysis of 11 of the main Malawi
Government bank accounts.
The report identified
payments to 16 companies, valued at MK 6,096,490,705, where no evidence had
been provided to support the provision of goods or services in relation to the
payments made. The report therefore classified MK 6,096,490,705 as potential
theft of Government Funds.
The Audit work also
identified high value payments made to two newly formed companies. The report
indicated that the contracts awarded “did not appear to represent value for
money” and price verification with other suppliers enabled Baker Tilly to
identify MK 3,619,539,979 that, “at best had been spent inappropriately or at
worst, had been stolen.” Adding that, Additional payments totalling MK
3,955,366,067 were also made to the same two companies.
Therefore in summary of
that report, related Cashgate transactions ware at MK6,096,490,705
representing 45%, Payments with no supporting documents was MK3,955,366,067
representing 29% and Inflated procurement prices was MK3,619,539,979
translating to 26%, and this sum up to MK13,671,396,751 which brings 100%
Final Baker Tilly Audit Report Findings
But a final Baker Tilly
Audit report in period between 1 April 2013 to 30 September 2013, issued on 25th September
2014, Audit work undertook a detailed analysis of 63 bank accounts
relating to the 53 businesses in a process the report identified 202
individuals “who, either knowing or unknowingly, have been recipients of GoM
funds.”
The report established
that Specific Cashgate Related Findings totaled to 104 Government
cheques, valued at MK 6,914,386,728, and were paid to 39 companies. Further
accounting entries were found to have been deleted for more cheques that would
have been payable to Cashgate business although these were not banked. Four of
the businesses did not bank the prepared cheques, valued at MK 430,000,000.
These cheques were paid
into at least ten different commercial banks throughout Malawi with the highest
amount deposited in Standard Bank (49 %). In comparison the lowest amount
(<1%) was deposited into OIBM.
A review of this data shows
22 cheques from 10 different businesses were banked at Standard Bank
representing 49% of the ‘cashgate’ funds. Analysis of the cheques deposited
into Standard Bank shows the majority of this amount relates to two businesses
being; IPS and O&G Constructions who received MK 1,860,584,273 and MK
1,140,738,209, respectively. These amounts total MK 3,001,322,562 which is
43.4% of the total ‘cashgate’ cheques. Both businesses are owned by Osward
Lutepo. Internet searches suggest Osward Lutepo was previously the Deputy
Director of Recruitment and Sensitisation for the People’s Party in Malawi.
The report indicates
that relationships existed between the various owners of these businesses; “the
interlinked nature of these businesses would suggest that the owners were made
aware the Cashgate fraud had been uncovered leading them to refrain from
banking any further cheques.”
In the report, four
individuals were noted as being the main beneficiary of ineligible funds where
one owner was linked to at least 18 businesses with two of these businesses
receiving a total of MK 4,428,316,582 in 17 cheques. “We also noted apparently
unrelated individuals receiving or making payments into unrelated companies.
Evidence of 13 individuals with links to the GoM and to the Cashgate businesses
was also found whilst as part of this work we Identified businesses linked to
nine individuals (or close relatives) listed
in the Malawi Electoral Commission (MEC) List of Parliamentary Candidates 2014
Tripartite Elections.” Noted Baker Tilly report
Using bank statements provided for
the period 1 April 2013 to 13 October 2013 Baker Tilly identified that a total
of MK 7,354,818,077 was withdrawn in cash from businesses linked to Cashgate.
Almost half (48%) of this (MK 3,513,898,540) was withdrawn over a period of ten
days. The largest single day for withdrawal of funds was Thursday 5 September
2013, when MK 827,647,000, in cash, was withdrawn. This amount represented 11%
of the total cash withdrawn and MK 751,367,000 was withdrawn from various
branches of one bank. One company withdrew a total of MK 550,000,000 on that
date.
The most popular denomination of
notes withdrawn were MK 1,000 and MK 500.
“Whilst not of direct relevance to
our findings if stacked on top of each other, 550,000 notes of MK 1,000
denomination would give rise to a tower of bank notes over 400 feet high. This
graphically illustrates the scale of cash withdrawn, in just one day, by just
one business.” says the report
The auditing work identified four
companies who successfully benefited from contracts with the Malawi Police
Service (MPS) and the Malawi Defence Force (MDF) for which MK 15,553,562,598
was paid with either limited supporting evidence of supply or no evidence at
all. Moreover no bank guarantees were obtained where advance funding was
provided and no evidence to support any attempt to recover the values paid has
been made. “No evidence of action taken to debar the suppliers or prohibit them
for bidding for government work in future could be found.” Indicates the report
“We also found that the same
documentation, obtained from a genuine supplier, was presented on two occasions
in different currencies; both were paid with no supply. The genuine supplier
has confirmed that the goods would require arms release certificates and
require multi jurisdiction approval prior to shipment. No evidence of this, or
customs documentation relating to the shipment, could be traced. Documents
provided suggest that these funds have been remitted to South Africa.”
Further documentation made available
to the audit team shows that the Government of Malawi made at least 14 payments
to two businesses based in Hong Kong but also quoting a Hamriyah FZE address.
Hamriyah Free Zone is located in Sharjah, United Arab Emirates (UAE). These
payments total an estimated USD $ 50,788,572.45 (MK 14,588,265,488) and were
made into six different bank accounts.
However the report noted
“actual payment relating to four of these documents (MK 3,915,007,791) can
either not be traced to the Malawi Government Bank Accounts or relates to
returned FTCs caused by incorrect banking information and includes payment made
to different banks using the same FTC number”
Baker Tilly also found
that one company was formed in April 2012 receiving its first government
contract just two months later.
Current Loss in 53 case files
Cheque Signatories
The 104 cashgate
cheques totalling MK 6,914,386,808 paid to 39 businesses were signed by six
different individuals employed in the Accountant Generals Department
1 Clemence Madzi (Chief
Accountant) signed 100 cheques which is 96.2%
2 Roosenelt Ndovi
(Principal Accountant) signed 94 cheques which is 90.4%
3 Auzius Kazombo Mwale
(Director, P2) signed 66 cheques which is 63.5%
4 David Kandoje
(Accountant General, P2) signed 25 cheques which is 24.0%
5 Agness Kapokosa
(Accountant) signed 9 cheques which is 8.7%
6 Benadetta Kauye (NK)
signed 7 cheques which is 6.7%
The report indicates
that the most common three signature combination was Clemence Madzi, Roosenelt
Ndovi and Auzius Kazambo Mwale who together signed 65 of the 104 cashgate
cheques (63%) and some sequentially numbered cheques were all signed by the
same three individuals on the same dates.
Baker Tilly strongly
recommend that a number of payments and procurements made by the Malawi Defence
Force and by the Malawi Police Force require further comprehensive audit work
to be undertaken, “at the earliest opportunity, in order to verify whether an
amount of MK 4,519,633,746 has been misappropriated.”
URN | Business | Business registered by / owner | Loss per our submitted file note (MK) |
1 | Business Advertising Agency | Ian Kaunda and RJ Chaguza | 11,260,450 |
2 | Carmu Civil Engineering | Caroline Savala | 84,963,341 |
3 | Clive Engineering | Dennis Mhango | 123,865,679 |
4 | Compu-Networks Limited | Greystone Chakhumata, Charles Chathumata and Francis Chavula | 30,654,079 |
5 | Covs Landscape Recreation and Nurseries | Omer Daudi Fane Chitipi | 30,965,868 |
6 | Cross Marketing Limited | Luke Kasamba | 24,179,121 |
7 | Dan Civil Engineering and Building Contractors | Daniel Ndembo | 401,088,916 |
8 | Explorations | Kettie Kamwangala | 16,750,600 |
9 | Faith Construction | Angela Katengeza | 105,983,548 |
10 | Fusion Limited | Jose Antonio De Jesus Mendes and Esnait Ndovi | 12,988,950 |
11 | Hardline Construction Company | Phyoka Oscar Kaunda | 7,395,431 |
12 | Hury Civil Engineering Contractors | Laura Savala | 173,613,570 |
13 | International Procurement Services | Osward Lutepo | 1,860,584,273 |
14 | Kanengo Building Contractors | Thokas Satema | 195,151,333 |
15 | Makhausi Constructions | Fatch Blamu Hassan Chungano | 97,255,260 |
16 | Mchemani Civil Contractors | Sympathy Chisale | 117,530,501 |
17 | Megan Construction | Doreen Nyirenda | 64,425,401 |
18 | Mundikhumbengi Building Contractors | Yohani Kaweche | 36,479,656 |
19 | Mwendayekha Building Contractors | Willy Kumwenda | 186,336,000 |
20 | Mzenga Construction Company | Ben Nsema | 196,791,135 |
21 | O&G Construction | Osward Lutepo | 1,140,738,209 |
22 | Pawooh Logistics | Limumba Karim | 44,520,683 |
23 | Protem Civil Contractors | Cecilia Ng'ambi | 32,111,250 |
24 | QST Projects | Christopher Zenengeya / Osman Mphozongo | 189,247,244 |
25 | Sky Blue Construction | Gerald Masikini Magaleta Phiri | 42,656,788 |
26 | Sky Civil Engineering | Steven Mwenitete | 18,987,041 |
27 | Stadal Building Contractors | Stafford Mpoola | 729,461,523 |
28 | Standard Freight Services | Andrews Chilalika | 26,355,253 |
29 | STC Civil Engineering | Sibonile Chimphango | 60,656,034 |
30 | STC Investments | Sibonile Chimphango | 22,848,000 |
31 | Stewarts Construction | Stewart Nkhata | 30,720,344 |
32 | Vhaima General Dealers | Minor Reuben Mwale / Mainala Mwala and Akiliyo Mwale | 20,383,277 |
33 | Visual Impact | Letus and Tressa Senzani | 63,542,083 |
34 | Walusako General Dealers | Ireen Nhlane | 78,649,121 |
35 | WEK Construction | William Kachingwe | 21,860,466 |
36 | WG Construction Ltd | NK but linked to Godfrey Placid Dzanjalimodzi | 157,668,553 |
37 | Wymbaso General Suppliers | Wyson Zinyemba Soko | 40,953,287 |
38 | Ziuya Construction | Mzipasi Moyo | 283,539,967 |
39 | Zozama Civil and Building Contractors | Mkhuzo Chirwa | 131,224,494 |
6,914,386,728 |
Individuals benefited most
Osward Lutepo | 1,860,584,273 |
Osward Lutepo | 1,140,738,209 |
Stafford Mpoola | 729,461,523 |
Daniel Ndembo | 401,088,916 |
Mzipasi Moyo | 283,539,967 |
Ben Nsema | 196,791,135 |
Thokas Satema | 195,151,333 |
Christopher Zenengeya / Osman Mphozongo | 189,247,244 |
Willy Kumwenda | 186,336,000 |
Laura Savala | 173,613,570 |
NK but linked to Godfrey Placid Dzanjalimodzi | 157,668,553 |
Mkhuzo Chirwa | 131,224,494 |
Dennis Mhango | 123,865,679 |
Sympathy Chisale | 117,530,501 |
Angela Katengeza | 105,983,548 |
Fatch Blamu Hassan Chungano | 97,255,260 |
Caroline Savala | 84,963,341 |
Ireen Nhlane | 78,649,121 |
Doreen Nyirenda | 64,425,401 |
Letus and Tressa Senzani | 63,542,083 |
Sibonile Chimphango | 60,656,034 |
Limumba Karim | 44,520,683 |
Gerald Masikini Magaleta Phiri | 42,656,788 |
Wyson Zinyemba Soko | 40,953,287 |
Yohani Kaweche | 36,479,656 |
Cecilia Ng'ambi | 32,111,250 |
Omer Daudi Fane Chitipi | 30,965,868 |
Stewart Nkhata | 30,720,344 |
Greystone Chakhumata, Charles Chathumata and Francis Chavula | 30,654,079 |
Andrews Chilalika | 26,355,253 |
Luke Kasamba | 24,179,121 |
Sibonile Chimphango | 22,848,000 |
William Kachingwe | 21,860,466 |
Minor Reuben Mwale / Mainala Mwala and Akiliyo Mwale | 20,383,277 |
Steven Mwenitete | 18,987,041 |
Kettie Kamwangala | 16,750,600 |
Jose Antonio De Jesus Mendes and Esnait Ndovi | 12,988,950 |
Ian Kaunda and RJ Chaguza | 11,260,450 |
Phyoka Oscar Kaunda | 7,395,431 |
6,914,386,728 | |
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