New BoT 40bn/- rip-off revelations:What exactly the auditors said

THISDAY REPORTER
Dar es Salaam

SENIOR officials at the Bank of Tanzania (BoT) are reported to have colluded in orchestrating a massive fraud involving foreign exchange funds to the tune of almost $30.8m (approx. 40bn/-), it has now been verified.

According to the findings of a BoT audit conducted by the international firm Deloitte & Touche last year, the rip-off is believed to have been facilitated through clear falsification of key documents.

As already reported by THISDAY, the uncovered fraud was with regard to payments made by the central bank to a certain, little-unknown Dar es Salaam-based company going by the name of Kagoda Agriculture Limited.

This company was paid by the BoT a total sum of $30,732,658.82 on the basis of 12 deeds of assignment it had purportedly signed with the government's foreign creditors.

Deloitte & Touche, which up to last year was the central bank’s regular external auditor, are understood to have stumbled upon the irregularities in the BoT’s external payment arrears account number 99915091 01.

At the time of the audit for the year ending June 30, 2006, this particular account had a balance of 131.95bn/-.

Following are excerpts (quoted verbatim) from a four-page letter from Deloitte & Touche to the BoT governor Dr Daudi Ballali, dated September 4, 2006, highlighting a catalogue of perceived anomalies in the payments made to Kagoda Agriculture Limited:

There are 12 deeds of assignment all signed between September 10, 2005 and November 5, 2005. The above time period appears too short to have negotiated and signed assignments of debts with 12 different foreign creditors from across the globe.

All the deeds of assignment were signed in Dar es Salaam before the same B.M. Sanze, an advocate & notary public & commissioner of oaths. Five of these deeds were signed on October 19, 2005 and four were signed on October 18, 2005. This implies that all the foreign creditors travelled to sign these deeds on more or less the same day. A search of the immigration records might be necessary to determine whether or not this was so.

There are two deeds of assignment signed on October 18 (2005) relating to two German companies, viz, Lindeteves J Export BV and Hoechst for a total amount of 1,164,402.76 euros. However, this currency was incorrect and the BoT wrote to Kagoda Agriculture Limited informing them that the correct currency should be Deutsche Marks. The same letter also advised of the release of 8,196,673,600.53/- to Kagoda Agriculture Limited. The latter company (Kagoda) submitted new deeds of assignment dated November 3, 2005, two days after being notified.

We find it highly unusual and doubtful that a foreign creditor assigning such significant amounts of money would sign off for the wrong currency. In addition, it appears the bank (BoT) failed to institute an investigation when it picked up an anomaly with the currency. Instead, the same (BoT) later went on and released 8.2bn/- to the said (Kagoda) company. It is also striking that the foreign creditors’ directors allegedly were either still in the country or returned to Tanzania within two days to sign the revised guarantees. Again, a search of the immigration records might be necessary to verify this claimed chain of events. All 12 deeds of assignment have the same terms and wording for all the different foreign creditors. This does not appear normal or realistic as different companies are likely to insist on different clauses.
None of the deeds of assignment are on company letterheads or have the contact details for the company representatives.
All agreements were signed only on the last page by the alleged representative of the 12 global creditors. This is not normal practice as legal documents are usually signed or initialled on each page for identification.

The 12 deeds are supposed to have the common seal of the foreign creditor company, as well as that of Kagoda Agriculture Limited. Our examination of the seals for the 12 foreign creditors from all over the world shows the seals to be identical to that of Kagoda Agriculture Limited except for the names of the companies. This appears highly unusual and suspicious.

Fiat Veicoli Industriali (Italian company), Valmet (USA company), Adriano Gardella S.P.A (Italian company). All the deeds of assignment for these three companies had the common seal missing despite the agreements indicating that they had been affixed.

The deeds of assignment for Valmet, a USA company was for $2,398,439.96 but the agreement was signed for by Patrick Kevin, whose position in the company was given as ’’accountant.’’ This appears highly implausible that such a large contract would be signed by the company’s accountant.

The deed of assignment for Daimler Benz AG was signed by a director by the name Christopher Williams. However, his signature was signed W Christopher.
A company search of the public records conducted by us (Deloitte & Touche) on the 12 companies mentioned above revealed that a number of them had ceased to exist in the format set out in the agreements before the dates mentioned in the agreements. For example, Hoechst AG became Aventis in 1999, Daimler Benz AG became Daimler Chrysler AG in 1998, Fiat Veicoli Industriali became Industrial Vehicle Corporation (IVECO) on January 1, 1975, Mirrlees Blackstone became MAN B&W Diesel Limited from 2002/03 and Valmet became Metso Paper from May 10, 2000. It is highly doubtful that these companies would sign deeds of assignment in 2005 in the names of the old companies.

The search did not reveal any companies under the names NS Boma and Lindeteves J. Export BV, although this might not necessarily be conclusive. None of the names mentioned on the deeds of assignments could be linked to the companies found in the company search. Direct phone calls to Valmet (now Metso Paper) in the USA, Mirrlees Blackstone (now Man B&W Diesel Limited) in the UK and Daimler Benz AG (now Daimler Chrysler) in the USA revealed that they were not aware of any individuals who had the names stated in the agreements.

The letter to Ballali, signed by one Samuel Sithole in his stated capacity as lead audit and engagement director of Deloitte & Touche in South Africa, further notes that ’’the use of old names for companies, and the speed with which the transactions were approved, could also suggest collusion with senior employees within the bank (BoT).’’ Deloitte & Touche also expressed concern over how the Kagoda company, formed on September 29, 2005, was ’’able to be paid $30.8m within five to six weeks of its formation.’’

’’We are not aware of any background checks performed by the bank (BoT). It is also difficult to accept that the same company was able to negotiate and conclude contracts worth $30m with separate foreign creditors from Germany, Italy, Yugoslavia, England, France, USA and Japan in this brief period,’’ said the letter.

The auditors advised Ballali to order ’’an immediate and thorough investigation’’ of the matter and suspend the BoT employees involved in the transactions for the period of the investigation, to avoid the possibility of files being tampered with.

However, no central bank employee has ever been suspended over the issue, and it was not until a year later that another auditing firm, Massawe Ernst & Young, was hired to audit payments made from the same BoT external payment arrears account during 2005/06.

The findings of this much-anticipated ’special audit’, conducted as a result of much prodding from the International Monetary Fund (IMF) and various donor countries, are yet to be made public.
source :jamiiforum