Tag Archives: Malawi cashgate

Malawi – growing evidence that cashgate funded election campaigns

Mail and Guardian

A leaked audit has hardened suspicions that Cashgate funded election campaigns

A British government-funded forensic audit has provided hair-raising new details of Malawi’s Cashgate scandal, suggesting that it may have cost the government nearly twice as much as initially thought, and deepening suspicions that much of the money was used for electioneering.

The latest report by United Kingdom-based auditors Baker Tilly, which was leaked to ama­Bhungane, indicates that at least 24?billion kwacha (about R540?million) was paid to 202 individuals by government departments, particularly the police and army.

This includes about K8.7?billion said to be “at risk” – including questionable foreign exchange transactions and payments to the Malawi police that lie outside the scope of the audit.

The report suggests that the theft had been going on for years but reached a climax in 2013, in the build-up to the presidential and parliamentary elections in May last year. The government is also investigating fraud cases amounting to K92?billion that it believes took place before Cashgate.

The auditors say their inquiry suggests “the proceeds of Cashgate may have been used to support electoral campaigns, though it is not possible to confirm the source of the funding”.

It says nine individuals who received government money, either directly or through close relatives, without providing goods or services, were listed by the Malawi Electoral Commission as election candidates.

Political connections
Four of them, all linked to former president Joyce Banda’s People’s Party (PP), received about K8?billion between April 1 and September?30 2013.

The alleged looting reached fever pitch between August 30 and September 6 2013, when K2.3?billion was withdrawn, amounting to 32% of the total withdrawals. About a third of this amount was cashed on a single day, September 5.

One of the principal beneficiaries, the report alleges, was the PP’s former recruitment director, Oswald Lutepo, whose companies accounted for K4.4?billion of the total.

Lutepo was fired by Banda after the scandal broke and ran unsuccessfully as an independent candidate. He would not speak to amaBhungane about the latest revelations, saying through his wife that he is ill.

Four candidates from other parties also received government cash, but on a much smaller scale. Three Malawi Congress Party candidates received a total of K88-million, and a Democratic Progressive Party candidate landed K36?million.

In their latest report the auditors examine 48 companies allegedly involved in the scandal, having looked at 16 in the initial probe. It follows earlier findings, released by the government following media pressure in February last year, indicating that the scandal had cost the Malawian government about K13?billion.
Banks fingered in the scandal
The report suggests that the companies were in league with officials of Malawi’s eight commercial banks who are said to have processed suspicious transactions, and with senior staff in the accountant general’s department who allegedly rubber-stamped government payments.

It shows that the scam was based on over-invoicing, double payments and payments for items that were not supplied or for which there was no supporting documentation.

A total of 32 cheques worth K1.3?billion were paid to 18 companies without supporting evidence, K3.8?billion flowed from inflated procurement prices, and the sum of K1.9?billion related to payments for which there was no evidence of goods or services being provided.

Eight businesses were identified as opening new bank accounts or reopening dormant accounts and within three months depositing at least one cheque, with no supporting records or evidence of supply available.

One company received its first state contract two months after allegedly being registered – despite no company registration particulars being found and no evidence of a due diligence, supply history or tendering. Many suspect transactions were deleted from the government’s integrated financial management system.

The auditors discovered evidence suggesting that fraudulent cheques were written out in large, sequential batches on 22 dates between April and September 2013.

They advised the government to claw back irregular payments “with immediate effect”. However, very little seems to have been done to recover the money.

Findings damaging
The findings are particularly damaging to the accountant general’s office, where six officials, whom the report names, are singled out as having signed the 104 Cashgate cheques. Three of them approved 65% of the payments.

The auditors say they could find no documentary evidence “which would help determine the legitimacy of these transactions”, and ask why civil servants who signed multiple cheques to the same businesses over a short period failed to raise the red flag.

The report finds that the six officials breached their fiduciary duty under treasury instructions, and calls for legal and disciplinary steps to be taken against them.

They were briefly arrested last year and released on bail, but there appears to have been little further development in the case.

Banks criticised
The banks also get a hammering, with the auditors finding that they suffered from “significant control failures”.

Particularly in the spotlight is Standard Bank, which processed K3.8?billion of the Cashgate payments – a much larger sum than any other institution.

The auditors point out that Lutepo’s O&G Construction withdrew K150?million on a single day from Standard Bank’s Balaka branch.

As this is a regional operation in an area with low commercial activity, the scale of such a transaction would have been unusual.

The auditors say internal mechanisms such as paywalls and passwords were overturned, probably as a result of management overrides.

They found that the withdrawal of large sums of cash, particularly Malawian kwacha, and the resources required to transport such large sums should have raised suspicions among bank staff.

The auditors add that they would have expected advance requests for cash to be made to the Reserve Bank of Malawi, “as we understand the amounts withdrawn would have led to some branches exceeding their daily insurance limits”.

Weaknesses exposed
Other control weaknesses included honouring cheques with the incorrect number of official signatories, failure to complete cheque deposit slips and the inability to locate cheque images and supporting documents for high-value receipts and payments.

The banks have also been unable to provide mandates for businesses, and the auditors found the filing of suspicious transaction reports with the financial intelligence unit had been limited.

The report calls for the regulatory authorities to investigate the role of the banks “to assess whether it would have been reasonable to expect [them] to raise concerns at the very large sums of money being deposited and then withdrawn”.

“If it is concluded that the banks had not acted in accordance with banking norms and related legislation, appropriate action should be taken.”

In addition to Lutepo’s IPS and O&G Construction, the auditors identified the main beneficiary companies as:

• Top Prima and Rummage Pace, based in Dubai and Hong Kong respectively, which allegedly received a total of K12?billion.

Their owner, Anil Lalwani, could not be traced for comment this week.

• The South African-based Thuso Group, owned by Alexander Banda and Nelson Kauwa, which allegedly received K1.9?billion. This included K920?million in August 2013 for 5 000 rounds of blank 88mm ammunition at 2.33 times the market price, and for which there was no evidence of delivery.

The auditors also found paperwork indicating that Thuso deposited R30?million into its South African Standard Bank account.

• Stadal Building Contractors and Image Invest, owned by Stafford Mpoola, which together allegedly landed the sum of K1.2?billion.

Kauwa is a former PP official who was expelled after Cashgate hit the headlines and who also ran unsuccessfully as an independent election candidate. Mpoola was a low-level PP official who was also expelled from the party.

They could not be reached, despite attempts to contact Kauwa through his Facebook page.

Pointing out that the kwacha has a limited tradeable value outside Malawi, the auditors say it is unclear what happened to the cash that was withdrawn.

They point out that the banks issued cash with no recorded serial numbers, making tracing a challenge.

The auditors also uncovered evidence of collaboration among the beneficiary companies and of cash that was moved between them after it was withdrawn. One example of this was a K480?million transfer from Thuso to Lutepo’s company IPS after the ammunition “deal”.

They said these transfers, and the movement of money between different companies under the same owner, suggested “layering” – a money-laundering technique designed to obscure the origins of “hot” money.

The auditors said they had identified 13 transfers of sums greater than K1-million between the different businesses.

“To date no documentation proving these … transfers were for legitimate business purposes has been provided,” the report says.

The auditors recommend that the funds paid to these companies should be recovered.

Only two low-level government officials, both from the energy department, have been convicted in connection with Cashgate.

Standard Bank Malawi spokesperson Thoko Unyolo said she was new in the job and could not comment on the audit findings. She said the bank’s chief executive, Andrew Mashanda, was in a board meeting and could not be reached.

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Malawi government closes the anti-corruption body and judicial investigation of graft

Malawi 24


Malawi Government has indefinitely suspended the works of the Anti Corruption Bureau (ACB) and the judiciary with effect from Tuesday this week, Malawi24 has established.

Police to seal court offices on Tuesday (this week)

A well placed source confided to Malawi24 that to effect the suspension, government has issued a directive to the Malawi Police to seal off all office building belonging to the ACB and Judiciary respectively and stop people from getting in the premises.

The directive, our source understands, follows the recent decision by judiciary to snub government’s proposed 20% pay rise.

“The Judiciary does not accept the ‘offer’ from Central Government to increase Judicial Officer’s salaries up to 20% beyond that which is received by corresponding grades in the Civil Service. Or that the Judiciary Support Staff salaries be increased to the extent that they are harmonised with those of corresponding grades in the Civil Service” reads part of the letter signed by chairperson of the Working Committee on Terms and Conditions of Service of the Judiciary, Justice Lovemore Chikopa directed to the Chief Secretary, George Mkondiwa.

“The Judiciary’s position remains that such an ‘offer’ is against the express dictates and spirit of the Laws of Malawi and is therefore incapable of acceptance. Certainly not by the Malawi Judiciary whose mandate is inter alia to without discrimination protect, safeguard and be a custodian of the laws of this Republic.” Chikopa added

The source further revealed that Government has suspended salaries for the judicial workers from December until the standoff is resolved.

“The directive is aimed at forcing the striking officers to accept government’s proposed pay rise rather than the one demanded by the workers themselves” alleged our source who asked for anonymity.

While addressing the media last week, Minister of Finance and Economic Planning, Goodall Gondwe, maintained that the government has no intentions of increasing the pay for the judicial staff and that the strike was illegal.

The strikes by ACB and judicial workers have stalled some top cases in the courts including those to do with the Cashgate scandal.

ACB offices to be sealed

– See more at: http://malawi24.com/breaking-malawi-government-closes-acb-judiciary-indifinately/#sthash.wGbN2avf.dpuf

Malawi – first senior government official jailed over Cashgate


Malawi’s Treza Senzani jailed over ‘Cashgate’

US dollars (file photo)

Malawi has jailed its first senior official for the so-called “Cashgate” affair – the worst financial scandal in the country’s history.

A court in Lilongwe sentenced former tourism official Treza Senzani to three years’ imprisonment with hard labour.

She pleaded guilty to stealing $150,000 (£93,000) of government money.

At least 70 people have been arrested over “Cashgate” after an audit revealed that about $30m had been skimmed from the government payment system.

Businessmen and politicians are alleged to have connived with civil servants to make payments for goods and services that were never delivered.

Western donor nations and agencies, which provide 40% of Malawi’s budget, pulled the plug on vital aid worth around $150m in reaction to the scandal.

Allegations of the massive looting of government money became public following the shooting of the finance ministry’s then budget director Paul Mphwiyo in September 2013.

Malawi – President Mutharika to seek aid outside West, from Russia and China

Mail and Guardian

Malawi to seek new aid relationships outside the West

02 Jun 2014 15:46 AFP

Newly inaugurated Malawian President Peter Mutharika has said he will seek to build relationships with countries such as Russia and China.

Peter Mutharika won the recent elections in Malawi amid controversy. (AFP)

Malawi, traditionally dependent on Western aid donors, will look for “new friends” in countries such as China and Russia, newly elected President Peter Mutharika said at his inauguration Monday.

The ceremony at a stadium in the commercial capital Blantyre was boycotted by outgoing president Joyce Banda, who was soundly beaten by Mutharika in disputed elections held on May 20.

Mutharika, who takes power in one of the world’s poorest countries, where 40% of the budget comes from aid, said the donor nations were “welcome to stay here”.

Foreign policy would be based on what is best for Malawi, he said.

“We will continue with traditional relationships, but we are now looking for new friends in emerging economies such as Brazil, China, India, South Africa and Russia.”

Britain and the United States have pledged to work with his government.

“The UK government looks forward to working with President Mutharika and his government on our shared goals of strengthening Malawi’s democracy, food security, prosperity and its positive role within the region,” Foreign Office Minister for Africa Mark Simmonds said in a weekend statement.

The US State department also “looks forward to continuing our close partnership with the government of Malawi in the advance of our mutual interests of supporting Malawi’s development.”

No official invitation
Mutharika said he regretted Banda’s absence, saying she had “declined to come here and hand over power to me.”

“I was looking forward to shaking her hand and burying the past. I have an olive branch in my hands.”

A spokesman for Banda said, “She was not officially invited and her official presidential convoy was withdrawn early hours of Saturday as soon as it was announced that Peter Mutharika had won the presidency.

“It would have been difficult for the outgoing president to travel to Blantyre.”

Mutharika takes over despite facing treason charges for attempting to conceal the death in office two years ago of his brother, Bingu wa Mutharika, in an alleged bid to prevent Banda – then vice-president – from assuming power.

“It’s been a long journey,” Mutharika said of his ascent to power. “We didn’t know we would reach this far and be here today.”

“I have been imprisoned and tried on flimsy charges of treason,” he said.“I have been teargassed three times. But that’s all in the past.”

He said he had no intention of “vengeance”.

The treason charges against Mutharika are likely to be dropped as Malawian presidents have immunity from prosecution while in office.

But there has been speculation that Mutharika might now try turn the tables on Banda and have her charged with corruption over a $30-million graft scandal dubbed “Cashgate”.

Banda has claimed the credit for uncovering the fraud, which saw aid money syphoned into top government officials’ pockets. But critics, including Mutharika, suggest the funds went into her party’s election war-chest.

“Those who have broken laws of this country will meet the full course of justice,” he warned in his speech.

Banda had alleged anomalies in the election and sought to have the vote nullified.

Legal attempts to force a recount failed and the electoral commission declared Mutharika winner with 36.4% of the votes cast against Banda’s 20.2%.

Banda on Saturday congratulated Mutharika on his victory.

Mutharika, wearing a black suit with a white shirt and blue tie, entered the stadium in a Landrover, waving a blue hat to a cheering crowd. – AFP M&G

Malawi – as election results awaited government minister shoots himself


Malawi’s Godfrey Kamanya kills himself as results awaited

Hundreds of residents from the Ndirande township queue to vote on 21 May 2014, in Blantyre, Malawi Preliminary results will only be announced after 30% of votes have been counted

A Malawian minister has killed himself, police say, as results are still awaited from Tuesday’s general elections.

Outgoing deputy Local Government Minister Godfrey Kamanya shot himself in his home, according to police.

His spokesman denied reports that his suicide was linked to him apparently losing his parliamentary seat.

Official results have not yet been declared in what was expected to be a tight presidential race.

The BBC’s Raphael Tenthani in Malawi says the electronic counting system has broken down in some areas and votes are being collated manually in these places.

Buckets used

Mr Kamanya left a suicide note at his home in the capital, Lilongwe, asking President Joyce Banda to take care of his daughter and provide for her education, our reporter says.

A Malawian woman casts her ballot as voting procedures resume on 21 May 2014 in Blantyre, Malawi This was the fifth poll since one-party rule ended in 1994
Malawian Electoral Commission workers count voted ballots on 20 May 2014 in Blantyre, Malawi Counting is being done manually because the electronic system has broken down
A Malawian Electoral Commission officer checks the stub of the used ballot papers on 20 May  2014 in Blantyre, Malawi In some places, there was no electricity and lamps, causing delays

Eleven candidates ran against Mrs Banda, but her main challenger is seen as Peter Mutharika, the brother of former President Bingu wa Mutharika.

The Malawi Election Commission (MEC) will announce results when 30% of votes have been counted, its chairman Maxon Mbendera said on Wednesday.

The MEC was “not anywhere in the neighbourhood” of that figure, he added.

Counting was being done manually because the electronic system was “refusing to take the information from the ground where our data clerks are stationed to send the results,” chief elections officer Willie Kalonga told the AFP news agency.

Voting spilled into a second day at 13 voting stations, and thousands queued to cast their ballot.

In some places, voting boxes or lids did not arrive, so officials used buckets and plastic wrap, correspondents say.

In their preliminary assessment of the election, Commonwealth observers said it had been “peaceful, orderly and transparent”, although there had been “serious shortcomings” in the distribution of election material and “isolated incidents of violence” because of the delays.

Around 7.5 million people were eligible to vote in the fifth elections since the end of one-party rule 20 years ago. BBC

Mail and Guardian

Malawi elections: Soldiers quell voter unrest after delays

Malawi’s military has backed up police following reports of voting materials set alight and roads being blocked by angry voters.

People flee after angry voters torched down a voting station in the Chiwembe district on May 20 in Blantyre. (AFP)

Soldiers deployed in Malawi’s commercial capital Blantyre on Tuesday after voters, angered by delays and mishaps at polling stations in a hotly contested presidential election, torched voting materials and blocked roads.

Incumbent President Joyce Banda, southern Africa’s first female head of state, faces 11 challengers, some of whom had already cried foul in the election run-up, saying they had unearthed plots to skew the ballot.

Foreign diplomats say they have seen no credible evidence of vote-rigging, but delays and other difficulties are likely to fuel urban distrust of Banda and her government after a recent $15-million corruption scandal.

“There’s no ink. We’re still waiting for the consignment,” one election official told a frustrated crowd waiting for hours to vote at a Blantyre school.

At another polling station in Blantyre, an angry crowd torched election materials when they arrived hours late and in other constituencies they blocked roads with rocks before the military arrived to back up police.

Banda: Keep calm
In the absence of reliable opinion polls, most analysts rank People’s Party leader Banda as favourite because of her popularity in rural areas where she has been rolling out development projects and farm subsidies.

After casting her ballot in the southern village of Malemia, Banda urged all sides to keep calm.

“I’m thankful that the campaign period was peaceful and am urging all Malawians to vote peacefully today without any incident or loss of life,” she told reporters.

Banda came to power in the landlocked, impoverished nation two years ago after her predecessor, Bingu wa Mutharika, died in office.

She initially enjoyed huge goodwill from the many who hated Mutharika’s autocratic style, and won the backing of foreign donors and the International Monetary Fund when she pushed through austerity measures, including a sharp devaluation of the kwacha, to stabilise the farming-dependent economy.

But more recently her administration’s reputation has been hit by a $15-million graft scandal, dubbed Cashgate after the discovery of large amounts of money in the car of a senior government official.

More than 80 people have been arrested and a former Cabinet minister has been dismissed and put on trial for money laundering and attempted murder.

But urban voters have criticised Banda’s response as ponderous and relations with donors have soured.

Banda’s main challenger is Lazarus Chakwera, an evangelical pastor who retired from the church last year to lead the Malawi Congress Party, the rejuvenated party of the late Hastings Banda, who ran the former British colony with an iron fist in its first three decades of independence.

Mutharika’s younger brother Peter is also running as the head of the Democratic Progressive Party. Another prominent contender is Atupele Muluzi, son of former president Bakili Muluzi, who took over from Hastings Banda in 1994. – Reuters  M&G

Malawi – former Justice Minister arrested over cash scandal


Cape Town — Former Malawian Justice Minister Raphael Kasambara and a senior civil servant were arrested on money-laundering charges on Monday, report the country’s newspapers.

The Maravi Post said a senior official in the Cabinet and president’s office, Joster Njanji, was also held following a probe into “how millions of dollars were allegedly looted in government in dubious deals.”

The Nyasa Times said five police vehicles arrived at Kasambara’s home at 5.30 am and towed away a car allegedly used in the shooting last September of a former government budget director, Paul Mphwiyo. Kasambara was previously arrested on charges arising from the shooting.

The Times said Kasambara at first refused to admit police to his home but was eventually arrested and taken first to police headquarters, then to a police station.

The Times also reported that Justice Minister Fahad Assani on Sunday told a radio station that there was “overwhelming” evidence implicating Kasamabara in the budget director’s shooting.

The Nation newspaper reported the former minister dismissed his arrest, saying, “It’s a joke of a charge.”

Related story: Banda Battles With Graft  http://allafrica.com/stories/201401272061.html

Donors block $150m in aid over Malawi cashgate scandal

Mail and Guardian

Malawi in middle of $100m ‘cashgate’ scandal

Foreign donors have suspended £150-million of aid until a scandal allegedly involving civil servants, MPs and businesspeople is cleared up.

Malawi's president Joyce Banda, who is allegedly part of the scandal. (AFP)                    
Malawi’s president Joyce Banda, who is allegedly part of the scandal. (AFP)


Malawi is bracing for the mass trial of 100 civil servants, politicians and businesspeople involved in the alleged looting of more than $100-million from government coffers, a case that has become a litmus test for foreign donors backing the government of Joyce Banda.

The “cashgate” trial is scheduled to start on Wednesday under pressure from donors who bankroll 40% of the government’s budget and who have said they will withhold some aid until it is clear that it is not being misused.

“We are under extreme pressure” to prosecute the cases, says Bruno Kalemba, the director of public prosecutions.

“There are lots of files on my desk that need to be dealt with. There are warrants of arrest and a lot of follow-ups. This has become an emotional issue.”

The pressure for swift action has come from donors, who have suspended pledged aid worth $150-million until Banda, who came to power in 2012 following the sudden death of president Bingu wa Mutharika, “cleans up the mess” of corruption and speedily prosecutes all suspects.

“We will not be able to resume support through government systems until we have a clear assurance, independently verified, that our resources are all being used for their intended purpose,” said Sarah Sanyahumbi, a British diplomat who heads the donor grouping, which includes European countries, the European Union and the World Bank.

Budget Britain has withheld £17-million of budget funds.

The British high commissioner to Malawi, Michael Nevin, says withholding of the aid “is not about punishing Malawi … we want government to put its house in order by implementing systems that will not allow pilferage of public funds.”

The case comes just four months ahead of elections in Malawi.

Some political pundits are hoping that among the suspects some will be bold enough to link the president to the public looting.

Speculation about her involvement has been rife here since the scandal was revealed following the shooting of budget director Paul Mphwiyo in September.

Mphwiyo is reported to have been on the verge of exposing a corruption ring when unknown gunmen shot him outside his home on September 3.

He survived the shooting and went for specialised treatment in South Africa.

Mphwiyo will be the number one state witness during the trials.

Billy Banda, director of rights group Malawi Watch, said: “What Malawians can conclude is that the president’s hands are not clean in this issue … somewhere and somehow the president’s hands are there in this scandal.”

Banda said Malawians would be interested to know how much the president knew about the looting, which her government has blamed on loopholes in the payment system. “There are so many questions that need to be answered.”

Evidence A Catholic rights group has accused Banda of being “part and parcel” of the fraud scandal.

Peter Chinoko, an outspoken head of the Catholic Commission for Justice and Peace in the Lilongwe archdiocese, said: “We have concrete evidence about the president’s involvement and being part and parcel of the scandal.”

Chinoko said the looting was aimed sponsoring the campaign of Banda’s ruling People’s Party, which was only formed a year ago with no national grassroots support, ahead of May 20 local, national and presidential elections.

Information Minister Brown Mpinganjira, a key backer of Banda’s policies, has dismissed the claims by Chinoko, saying this was a “plan to blackmail the president so that she stops the investigations currently under way”.

“The president is being threatened to embarrass and frustrate her efforts to fight corruption,” Mpinganjira, a veteran politician said.

“This is a well planned and calculated strategy by those that are trying to run away from the full force of the law to try and smear as many individuals as possible.”

Joyce Banda has said she took a “political risk to launch a fight against corruption five months before the elections”.

She says the fight against corruption “must come first, winning elections comes second to me”.

Lutepo One prominent figure on trial is businessperson Oswald Lutepo, a senior official in Banda’s party, who is accused of theft and money laundering and is alleged to have pocketed more than $6-million from government coffers through ghost companies which did not provide any services to the state.

Lutepo is said to have donated 22 vehicles to Banda’s party and paid a record bail bond of $100 000.

Malawians will also follow with keen interest the evidence in court of former justice minister Ralph Kasambara, who has been charged with attempted murder of Mphwiyo although police have yet to establish the link between the shooting incident and the scandal.

The president has publicly claimed that Mphwiyo’s shooting was “a planned and targeted attack aimed at silencing him and the government in the fight against high levels of corruption and fraud”.

She has often insisted Mphwiyo will give the correct version of events leading to his shooting.

She has conceded that corruption is deeply entrenched in Malawi, but insists that it predates her tenure by years.

Nonetheless, the case represents a threat to her hopes of winning the presidency in May.

Billy Mayaya, director of the National League for Democracy and Development, told the Guardian the scandal means her chances of winning are “very slim”.

She said: “Malawians are angry at the massive looting of government resources and want answers as who is really behind this rot.” –​ guardian.co.uk © Guardian News and Media 2014  M&G