Attorney General Charles Mhango authorised payment of K3 billion compensation to Leston Mulli-owned firms when his own chambers was challenging the claims in the Supreme Court of Appeal, Weekend Nation can reveal.
The hurried decision to effect payment came even as government is failing to collect K4.9 billion in loans that Mulli-owned companies obtained from the defunct State-controlled Malawi Savings Bank (MSB).
According to a Release Agreement signed by Mhango on behalf of the Malawi Government and lawyer Tamando Chokoto representing Sunrise Pharmaceuticals and Chombe Food Limited—companies under Mulli Brothers Holdings Limited (MBHL)—the payment was authorised on April 13 2018.
The agreement says the payoff is just a “compromise” and does not entail that government accepts responsibility for the damages the companies claim to have suffered during the July 20 2011 demonstrations.
The agreement cites a previous High Court default judgement in favour of the two Mulli companies—but which the Attorney General appealed—as the premise for the payment.
The agreement reads in part: “The agreement is made for the purposes of compromise only, and neither the Release Agreement nor anything done or said in connection herewith shall be an admission or evidence of any liability, fact or matter concerning the disputes settled by the Release Agreement.”
As a result of the settlement, says the agreement, government resolved to issue coupon bonds of K3 048 557 708. 71 maturing in a year.
In an interview, Mhango confirmed that the case was still in court when the payment was made and that no ruling had been made.
“We made the decision to mitigate the loss government could have suffered. Right now, the company is asking for damages for loss of business in court, which we are contesting,” he said.
On his part, Mulli declined to comment on the matter, saying he was unaware of any payment.
But Chokotho, the lawyer representing the beneficiary companies, confirmed the payments.
However, private practice lawyer Bright Theu on Tuesday questioned the payment and the conduct of the Attorney General on the matter.
He described the payment as “dubious” and “questionable.”
Said Theu: “I think the decision to pay the amount is dubious, in the sense of questionable. The Release Agreement under which the sums were paid clearly acknowledges that it is a mere compromise and not an acknowledgement of liability on government’s part. So, among others, what tantalised the Honourable Attorney General to compromise? His office lodged an appeal, which the Supreme Court found to be arguable and to have reasonable prospects of success.
“That appeal was pending at the time of the compromise. It probably is still pending, though the same Attorney General may not be expected to pursue it having paid out under the dubious compromise.”
He also described as unreasonable government’s failure to offset Mulli’s MSB loans through payments government owe MBHL, arguing the State’s business relations with Mulli “smacks of zero probity and is on its face a scandalous betrayal of the public trust.”
MBHL is the largest beneficiary of the K6 billion toxic loans government took over from MSB, a then wholly State-owned commercial bank, sold in July 2015 to FDH Financial Holdings Limited.
Mulli obtained K4.9 billion from the bank while other firms owed over K660 million.
Three years after government set up the special recovery vehicle to collect the K6 billion, no single tambala has been recovered.
According to a senior Justice Ministry official, the K3 billion compensation payment could have been stopped on the premise of Mulli’s K6 billion debt.
The Attorney General too conceded in an interview on Tuesday that government could have stopped the K3 billion payment on the basis of the old debt.
But he said government could only have stopped the claim payment if there was an agreement between Mulli and the MSB Debt Collection Company to that effect.
Mhango said he was not aware of any effort that was made to ensure the debt company was informed about the payment prior to its execution.
Former Solicitor General and Secretary for Justice Janet Banda in an interview last month [August] said the Ministry of Justice did not stop the payment as only the company established to reclaim the loan had the mandate to do so.
“I can concede that the advice we gave Ministry of Finance for the toxic debts was to form a separate vehicle, a company for specific purpose of collecting debts. The company that was formed is MSB Debt Collection Company with full mandate to do so,” said Banda.
MSB Debt Collection Company chairperson, Chadwick Mphande confirmed in an interview that the company has failed to reclaim money from Mulli and other debtors.
As a result, he said the government company has launched legal action to force Mulli pay the debt.
Patricia Kaliatia and Noel Masangwi, both former Mutharika allies and now his political rivals, claimed during United Transformation Movement (UTM) political rallies that payments were made to Mulli as a way of silencing the businessman after he launched a movement in the ruling DPP to oust Mutharika, 78, from power.
Mulli has strong links to President Peter Mutharika through their shared membership of Mulhakho wa Alhomwe heritage group.
Currently, Mulli Group is seeking K8 billion in interests on the amount paid, an action the Attorney General has said will challenge.
State advocate Neverson Chisiza told The Nation on August 26 that the State was challenging the fresh claim as government had already settled about K3.1 billion in claims over the same case—having last been heard in 2013.