Police mess snares DPP

• Party got K145 million from supplier day after getting MPS payment
• Deal inflated by K466 million
• State House says it’s character assassination

An Anti-Corruption Bureau (ACB)probe suggests President Peter Mutharika may have benefitted from K145 million that a supplier deposited in a Democratic Progressive Party (DPP) account for which he is the sole signatory.

The money is suspected to be part of proceeds of payment from Malawi Police Service (MPS) to Pioneer Investments—a firm the ACB suspects fraudulently supplied food rations.

The bureau also alleges that the bill was inflated from the contract price of K2.327 billion to K2.8 billion days after it was signed in August 2015.

ACB director Reyneck Matemba yesterday confirmed the probe into allegations of fraudulent transactions in ration packs contract between the Police and Pioneer, but declined to reveal the bureau’s recommended way forward on the matter.

“I can confirm that ACB received a complaint in relation to the transactions you have referred to,” Matemba said in a text message response.

“We launched an investigation and we are about to conclude our investigations. With respect to the issue of recommendations that you have raised, I cannot comment on that matter as those are internal matters of the Bureau,” said Matemba.

Presidential spokesperson Mgeme Kalilani yesterday said the document is a coordinated and sponsored character assassination campaign against President Mutharika and the DPP from a disgruntled politician.

“This so-called leaked document is part of that scheme. Take a close look at it and you will notice that the document is not signed. It is a fabrication and the said politician is behind this scheme

“As regard to the transaction in the DPP account, there was nothing sinister about it and we will provide a detailed explanation about it in due course,” he said.

According to the November 2017 ACB report, a day after the supplier deposited K2.793 billion payment from Police for supplying 500 000 ration packs, the company transferred K145 million to the DPP  Standard Bank account 014003192200 on April 13 2016.

Mutharika—says the report—opened the account in 2015, a year after assuming office.

Between January and October 2016, the President “made cheque withdrawals amounting to K65 million from the said Standard Bank account,” the Bureau report says.

Before Pioneer deposited the Police cheque on April 12 2016 in the company’s National Bank account held at Henderson Street Service Centre in Blantyre, the account had K-30 426.66 as balance—meaning there was no money.

Police also—within days of signing the contract with Pioneer—inflated the price by K466 million from K2.327 billion agreed in the contract to the K2.793 billion through claims of exchange rate losses that the ACB report says were unjustifiable.

The move pushed the price for each ration pack from K3 995 to K4 795, much higher than any of the evaluated bid prices that Pioneer competitors submitted, although it was the lowest at the point of evaluation.

The increase followed a letter that Pioneer Investments owner Zameer Karim wrote to MPS director of finance Innocent Bottoman on August 10 2015, to request a 20 percent contract hike, citing depreciation of the kwacha as basis.

The letter came six days after the supplier had signed the contract on August 4 2015.

But during the six-day window, the kwacha had only softened by 1.6 percent, according to the report, citing Reserve Bank of Malawi exchange rates at the time.

Yet, on August 12 2015, Bottoman is said to have endorsed the adjustment.

For this decision, the ACB report accuses Bottoman of violating Public Procurement Regulation 132 and 155 as read together with the Public Procurement Act.

Public Procurement Regulation 132 (1) reads: “Unless otherwise provided in the procurement contract, the price of a procurement contract is considered to be a fixed price when the price may not be modified in response to changes in economic or commercial conditions.”

The contract did not cover compensation for any forex losses, according to the report.

And Procurement Regulation 155 states that any contract modifications should be formal, should not result in an alteration of the basic nature or scope of the contract and requires strong justification.

Apart from the inflated price, the ration packs procurement has also inflicted an even deeper wound on the taxpayer—who will now have to shoulder the burden of paying back more than K1.5 billion in loans to CDH Investment Bank that Pioneer borrowed with the backing of the Police to finance the contract, then defaulted, leaving government clutching the bill as guarantor.

 

Rotten from start

This procurement appears to have started stinking at least six months before police advertised the tender.

According to the report, Bottoman wrote CDH on February 10 2015, undertaking to remit around K970.3 million to CDH so that the investment bank recovers the loan it would extend to Pioneer to finance the supply of the ration packs.

“This undertaking was made six months before the ration pack contract was advertised and awarded to Pioneer Investments,” says the Bureau report.

It claims that Bottoman signed the letter “while the purported signature of the Police’s deputy director of finance Tadius Samveka was forged.”

The report alleges that in his witness statement, Samveka disowned the signature and the undertaking to CDH.

Then on July 16 2015, claims the report, Bottoman and Karim made another undertaking to CDH that the Police would remit K2.125 billion to the bank to enable Pioneer to obtain a loan from the same bank to finance a ration pack contract.

However, there was no    contract at that time between the Police and Pioneer to supply ration packs worth K2.125 billion, according to the ACB report.

“It should be noted that both undertakings to CDH were made before the contract was awarded to Pioneer Investments. The undertakings were made on 10th February and 16th July 2015 while the contract was awarded on 4th August 2015. Mr. Bottoman and Zameer Karim connived to award ration packs contract to Pioneer Investments,” alleges the report.

Section 63 of the Public Finance Management Act says it is only the Minister of Finance—with prior approval from Cabinet and a report to the National Assembly—who can give a guarantee or indemnity on behalf of the Malawi Government.

Even then, that guarantee can only be made if it is in the public interest because, among other reasons, any money given under such a guarantee constitutes a debt to the State and may be recoverable in any court.

That process of recovery has already started because last year, CDH sued Pioneer Investments and the Attorney General for failing to settle debts that the Police had guaranteed.

And on November 23 2017, the court entered consent judgement for Karim and the Attorney General to pay the bank over K1.5 billion—a burden to the taxpayer.

As if that was not enough, on June 30 2017, Pioneer claimed from government roughly K568 million as interest for late payment.

When Treasury sent the interest claim to the Auditor General for verification, the supreme auditing authority initially approved that government pays, but later reversed the decision and revoked the certificate of payment.

 

Hands clean?

Both Bottoman and Karim denied wrong doing in separate interviews yesterday.

Bottman described the issue as ‘witch hunting’.

He said: “This issue is an internal battle because, apparently, some people are trying to tarnish my image. What you should know is that my office as regional commissioner does not have all the powers to make such decisions as being alleged. There must be orders from above and in this case the company [Pioneer Investments] knows what they did.

“My signature was forged and I do not know who did it and for what purpose. What I know is that the government told the company to reimburse part of the money. But, like I said, some people within the system have an agenda against me. But I cannot explain further than that.”

Karim also dismissed the allegations.

“My friend, all this issue is politically motivated. None of the allegations made against me are true. As a company, we only got a written consent to increase the price. Even the issue against CDH Investment Bank is also not true.

“We conducted ourselves legally and we never forged any documents. We told this to ACB officers and we submitted documentary evidence to substantiate our claims. These stories are being made by some people for their own reasons,” Karim said.

 

Political fallout

ACB’s suggestion that the governing party and the President may have benefitted from what the Bureau suggests is ‘dirty money’ could weaken the party’s message of being committed to fighting corruption and, by extension, hamstring the administration’s graft fight.

And with the news coming just days before the grouping’s elective conference, the development could overshadow the ruling party’s messaging and halt any potential momentum from a convention bounce.

Asked why a supplier would deposit money into a DPP account, the party’s secretary general Greselder Jeffery said, in an interview yesterday, that she was not aware of the cheque in question.

“I do not know about the cheque that you are referring to. As party chief executive I am a signatory for all party cheques. The transaction you are talking about took place in April 2016 and I assumed this position in February 2016, so there is no way I could have missed it. This is just a lie by some people who do not wish the party well. We have not had such kind of money in our coffers; otherwise, we would not have been struggling with finances. Even our bank statements do not have that K145 million cheque registered.”