via $305k payment haunts Perm Sec | The Herald December 6, 2014
MUNESU Munodawafa — a former principal director in Vice President Joice Mujuru’s office and now permanent secretary in the Ministry of Transport and Infrastructural Development — should be suspended to allow corruption allegations against him involving $305 000 to be investigated “to a logical conclusion,” Air Zimbabwe auditors have advised the Government.
The auditors have written to the minister Obert Mpofu and the Air Zimbabwe board reminding them that a year after their findings, nothing had been done “despite the severity of the issues raised and the quantum of potential financial prejudice to the Government”.
Half-a-dozen former Air Zimbabwe executives have been arrested and charged with corruption after a forensic audit report by BCA Forensic Audit Services linked them to a US$11 million aviation insurance scam.
At the heart of the fraud was Munodawafa’s niece, Grace Pfumbidzayi, Air Zimbabwe’s manager (legal) and company secretary, who authorised million-dollar “fraudulent” payments to Navistar Insurance Brokers, according to the audit.
For a period of two months in early 2009, Air Zimbabwe’s planes took to the skies without any insurance after ZimRe Reinsurance Company (now Baobab), received but failed to remit premiums.
The airline also paid inflated premiums to Navistar, a company which the audit found had a generally corrupt relationship with some Air Zimbabwe executives, particularly Pfumbidzayi.
Navistar was appointed when Peter Chikumba was CEO. He told the auditors that he had never approved the deal — which is not supported by any standard legal contract — and BCA concluded that Pfumbidzayi entered into the arrangement by herself.
Working with other senior managers, Pfumbidzayi actively pushed through the payments to Navistar. Once, when there was a delay of a US$305 000 payment to Navistar, Munodawafa, wrote to Air Zimbabwe asking them to expedite the payment. The auditors concluded Munodawafa was “conflicted”.
“During the course of the investigation, we held a meeting with Munodawafa in which meeting he expressed his view that the payments of 300 000 euros per quarter by Air Zimbabwe to Navistar are not fraudulent,” the auditors said in the findings which were shared with Mpofu and the Air Zimbabwe board in December last year.
They added: “All other executives of Air Zimbabwe, including the former group chief executive officer Peter Chikumba, with the exception of Grace Pfumbidzayi, accepted that the payments of 300 000 euros per quarter were baseless and fraudulent.”
But exactly a year on, the auditors say their recommendations have largely been ignored.
A day after they presented their audit findings, the Air Zimbabwe board led by Ozias Bvute – which commissioned the investigation – was booted out of office by Minister Mpofu without explanation. An interim board led by Valentine Sinemani was appointed, but soon replaced by the Abdulman Erick Harid board.
In a November 6, 2014, letter seen by The Herald and addressed to Harid, BCA chief forensic investigator Budhama Chikamhi expressed his disappointment that his key recommendation that individuals connected to the fraud be “specified” under the Prevention of Corruption Act had been ignored.
An investigation in terms of the Act gives the auditor wider powers than an ordinary investigation, and allows authorities to freeze assets of individuals. Only this way, the auditor says, can they follow the money and establish who were the other beneficiaries of the corrupt payments.
In his letter, Chikamhi says following his submission of the audit report, a “high level review” had established that Munodawafa “was advised by a technocrat in the insurance industry, whom he personally consulted for advice”, that there was “no basis… for payment of the US$305 000”, yet he “proceeded to write a letter to Air Zimbabwe asking the airline to pay Navistar.”
“The permanent secretary Munesu Munodawafa should answer a number of questions involving this transaction which according to available evidence appears fraudulent,” Chikamhi says.
He adds that if the current board “wants the truth to be unravelled and have the culprits brought to book, which culprits would most likely include the Permanent Secretary Mr Munodawafa as he played a pivotal role in this transaction… it is our view that for this matter to be investigated without interference, Mr Munodawafa should be suspended as the investigation will entail interacting with heads of parastatals under the ministry, which exercise we tried to do when we were investigating the scam involving the aviation insurance with no success as we could not get the necessary cooperation.”
The auditor also told of his disappointment that former Air Zimbabwe staffer Godknows Maravanyika, now the general manager of National Handling Services (NHS), had not been put before a disciplinary committee. Instead, he had won a promotion after being transferred from Air Zimbabwe to NHS, which also falls under the Transport Ministry.
“Mr Godknows Maravanyika authorised the payment of inflated invoices from Navistar resulting in financial prejudice,” Chikamhi says in his letter.
He added that while presenting their report to Minister Mpofu, the auditors “highlighted the fact that while disciplinary hearings had been instituted for all the employees of Air Zimbabwe implicated in the report, no action had been taken against Maravanyika as he was now working for the National Handling Service”.
He concludes: “In the interests of justice, it is our view that appropriate action should be taken against Mr Godknows Maravanyika.”
On Thursday, Minister Mpofu referred all questions to board chairman Harid – who, however, has no authority to act against a permanent secretary, who is his boss. When this was pointed out to the minister, he insisted Harid could deal with our questions. Minister Mpofu then said he was “watching news” and hung up his phone.
Harid said: “All media enquiries about Air Zimbabwe are handled by the minister. I’m sorry I can’t be of any help to you.”
Air Zimbabwe is 100 percent owned by the Government, and a board headed by Bvute asked BCA to conduct the forensic audit after becoming suspicious of insurance premiums paid out between April 2009 and April 2013.
In the audit, BCA looked only into Air Zimbabwe’s aviation insurance, but further investigations into other areas like fuel and procurement are expected to unearth more corruption.
Pfumbidzayi and Innocent Mavhunga, the acting group chief executive officer, who were senior employees of the airline appear to have acted in cahoots with Navistar resulting in the airline being prejudiced of a total of 5 895 695.49 euros (about $8.1 million) and $1 298 827.88 which amounts were paid out to Navistar by Air Zimbabwe allegedly for services rendered which services are not supported by any documentation from Navistar other than the debit notes (invoices) from Navistar.
“The investigation also established that the airline was exposed to a potential prejudice of $1,862,370.52 being a total for which paper trail which appear fraudulent were prepared, and had it not been for this investigation the amount was going to be paid to Navistar by the airline,” the audit report said.
Prior to 1980, Air Zimbabwe (then Air Rhodesia) received its brokerage services from Marsh Insurance Brokers of the United Kingdom. This arrangement expired on March 18, 2009.
From that date, Pfumbidzayi “unprocedurally, illegally and in violation of the tender procedures appointed Navistar as Air Zimbabwe’s provider of brokerage services”.
At that time, Marsh Insurance Brokers was charging Air Zimbabwe an average of 125 000 euros (about $171 000) per annum as brokerage fees. Navistar, however, was paid 300 000 euros (about $410 000) per quarter, translating to 1.2 million euros (about $1.6 million) annually – nearly 10 times what Marsh was charging.
“While the amount which was being charged to Air Zimbabwe by Navistar Insurance Brokers increased by 86 percent, the premiums charged by the international reinsurers remained more or less constant … The charges have been described by many of Air Zimbabwe’s current and former executives as fraudulent, a position which is supported by findings of this investigation,” BCA said.
The increase in charges was “not matched by any commensurate increase in Air Zimbabwe’s fleet size or expansion of its route network. In fact, some of its planes were actually grounded at the time.”
In addition to paying a fraudulent flat broker’s fee of 300 000 euros per quarter for the period April 4, 2009, to April 3, 2013, some of Air Zimbabwe’s executives made several other fraudulent payments to Navistar Insurance Brokers, which resulted in the airline suffering actual financial prejudice of 5 895 695.49 euros and US$1 298 827.88 and potential financial prejudice of US$2 227 570.22.
BCA said it identified possible criminal acts and called for criminal prosecutions targeting the airline’s former CEO Innocent Mavhunga, Pfumbidzayi, Nicholas Mujere (then Air Zim acting general manager), Norbert Machingauta (then Air Zim strategy and economic manager), Patience Tichagwa (then Air Zim finance and administration manager), Oswell Matore (former Air Zim finance and corporate services general manager), Givemore Nderere (then Navistar managing director), Vukile Hlupo (then Navistar director) and Orton Mawire (then Navistar finance director and company secretary).
Pfumbidzayi, BCA said, on several occasions tried to justify payments to Navistar by claiming the airline was trying to “bust sanctions”.
However, Air Zimbabwe was not under sanctions and insurance companies interviewed by BCA said they could not comprehend how the economic embargo could have interfered with the insurance sector and the national flag carrier.
The forensic report also showed how Pfumbidzayi authorised a payment of US$360,448 to Navistar for insurance cover for two Airbus planes leased by Air Zimbabwe – in the full knowledge that they were already insured by the lessor.
It also revealed how Zimre, now BaobabRe, took US$422,304.56 from Air Zimbabwe but failed to remit it to Willis Limited, Air Zimbabwe’s International Insurance broker, resulting in Air Zimbabwe’s insurance cover being cancelled.
The report went on: “On the basis of available evidence, it appears to us that during the period February 1, 2009, to March 31, 2009, Air Zimbabwe was flying with no aviation insurance cover as the underlying risk carriers cancelled the cover.
“The premium in question was also not refunded to Air Zimbabwe.”
The auditors also accused Navistar of “theft by conversion” over payments for the hanger property by Air Zimbabwe totalling US$796,079.80.
“The premiums were not remitted by Navistar to the insurer resulting in the airline suffering a double exposure as they lost the US$796,079.80 at the same time as its hangar property was not insured for the period April 2009 to March 2013 as no payments were made to the insurer in respect of the premiums.”
In that scam, the auditors said Navistar would, at the beginning of every year, approach Altfin Insurance Company and request for policy documents for Air Zimbabwe’s hangar property.
Tafadzwa Nderere, who is employed by Altfin, would print policy documents and release them to Navistar. Tafadzwa is Givemore Nderere’s brother [former CEO of Navistar].
Navistar would surrender the documents to Air Zimbabwe together with their debit note for the annual premium of US$205,000 – but no premiums would be forwarded to Altfin and consequently no insurance existed.
In his letter to Harid, Chikamhi notes that while criminal investigations were being pursued against former Air Zimbabwe and Navistar bosses, their recommendation was in fact that the probe should be done under the Prevention of Corruption Act, which would allow authorities to seize assets of the criminal cabal.
The audit report said: “In light of the amounts which Air Zimbabwe lost as a result of fraudulent transactions and in full view of the need to trace how the funds were applied and assets purchased using proceeds from fraudulent transactions, consideration should be made to specify Pfumbidzayi, Mavhunga, Nderere, Hlupo, Mawire and companies Navistar, Steik Enterprises and Natflo Investments so that investigations can be carried out in terms of the Prevention of Corruption Act.”
The report pointed out that the benefits were that assets purchased by the perpetrators could be identified; the investigator could recover the funds and the Act gave investigators a “wide range of powers” including calling on any party to provide information in connection with the investigation.
“It was not possible to get information in connection with some fraudulent transactions as Navistar was not willing to co-operate with the investigator. This hurdle will be overcome if the parties are specified as the investigator will access all information.”