A special audit report at National Economic Empowerment Fund Limited (Neef) has exposed deep-rooted rot where officers gave loans to wives, ex-wives, relatives and friends.
The investigation conducted from August 3 2020 to September 25 2020 by the government’s Central Internal Audit Unit (Ciau), uncovered what the report calls “a criminal syndicate” comprising officers from various departments at the head office in Lilongwe and Liwonde branch.
At least 21 members of staff implicated in the report at Neef—formerly Malawi Enterprises Development Fund (Medf)—have been arrested in connection with fraud and forgery, but are out on bail, according to the institution’s board chairperson Cornelius Majawa.
The syndicate, according to the report, defrauded Neef K53.3 million through loan disbursements to fraudulent beneficiaries, but it was expected the amount would go up.
The report has named all members of staff involved and how the cartel executed its operations. As part of the investigation auditors sourced call logs from mobile firms, which further revealed that officers involved made phone calls to the beneficiaries each time the fraudulent loans were being disbursed.
It says sampled fraudulent loan beneficiaries from Lilongwe gave false information of where they came from, and preferred to indicate they were from Phalombe, Thyolo and Mulanje, apparently on advice from officers involved at a time the former governing Democratic Progressive Party was widely accused of nepotism.
The investigation report also reveals that almost all fraudulent loan files went missing.
The report claims that some Neef officers attempted to obstruct the investigation and literally issued threats, a development which prompted suspension of seven members of staff on October 16 2020 to pave the way for smooth investigations.
The report, detailing how Neef officers facilitated loans to their relations and business groups, listed them one-by-one. It starts with one internal auditor at the head office who facilitated a loan for his wife who was at the time living in Lilongwe, but indicated that she was from Thyolo. She also gave a false contact phone number.
The same officer is said to have facilitated a loan for his ex-wife, at that time living in Lilongwe, but falsely stated that she was from Thyolo; and also gave false phone contact, according to the report. The call log book shows that the officer made calls to her on the day the loan was disbursed.
Another Neef employee also facilitated a loan to his Lilongwe-based wife who had indicated she was from Phalombe and call logs showed she received phone calls from her husband on the loan disbursement day. The loan file is missing. This officer also gave another loan to a relation of his wife, also from Lilongwe, but indicated was from Thyolo.
This officer, with assistance from his colleagues that always worked together on these fraudulent loans, also facilitated a loan to his Lilongwe-based ‘good friend’, but gave false information that he was from Thyolo.
Another officer also facilitated a loan for her ‘best friend’ who works as a nurse at Nkhoma Hospital. The friend lives in Lilongwe but she indicated that she was from Machinga. Immediately she received a K1.5 million loan, she transferred K100 000 through National Bank’s MO626 with a description ‘Thank You’.
A sister to this officer also received a loan with her help. She also gave false information about her physical address that she was from Balaka, yet she lives in Lilongwe. The officer made calls to her sister on the day the loan was disbursed. The report states that on missing files, the Ciau auditors sampled 1 003 loan beneficiaries for analysis and found that 58—which is six percent—received a combined loan of K89 101 176.38, had no files at Neef head office. After a search, 25 files were found.
The report says some officers deleted from computers office documents and e-mails in order to destroy evidence of fraud, with one officer deleting all e-mails for the month of June 2020.
Some officers, the report reveals, also forged signatures of their colleagues from branches and processed loans at the Head Office.
Things changed at Neef after the DPP was booted out of government by the Tonse Alliance administration. Following appointment of the new board at Neef, government, through Secretary to the Treasury, commissioned an audit at the institution, leading to these issues unfolding now.