CMED implicates MD in fuel scam

via CMED implicates MD in fuel scam | The Herald 8 August 2014

CMED Ltd has implicated its managing director Mr Davison Mhaka in the US$3 million fuel scam and accuses him of trying to conceal incriminating evidence, The Herald can reveal.
Also implicated is the parastatal’s fuels manager, Mr Brian Manjengwa.

The Herald can reveal that First Oil submitted an unsolicited bid to buy fuel from Petrotrade at US$1.27 per litre, which it intended to sell to CMED for US$1.21per litre. On Monday CMED lawyers, Musunga and Associates, wrote to the director of public prosecutions furnishing him with new evidence implicating Mr Mhaka and Mr Majengwa.

“Our client, CMED (Pvt) Ltd has unravelled new evidence, hence the company no longer wants the trial to proceed on the basis of the statement issued by its fuel manager, Mr B. Manjengwa. A closer analysis of the First Oil transaction has revealed that the CMED Fuels Manager, Mr Majengwa and the Managing Director Mr D Mhaka, appear to have colluded with the accused persons already identified in the current docket. As such, Mr Manjengwa is no longer suitable to stand as CMED witness in this case. The list of the accused persons has been enlarged to include Mr D. Mhaka and Mr B. Manjengwa,” reads the letter.

CMED said thorough investigations into the First Oil transaction, including the conduct of Mr Mhaka and Mr Manjengwa, were now required.

“The information given to the police during the previous investigations was not comprehensive as crucial correspondence was not availed to the police, e.g. the previous board had appointed the commission of inquiry chaired by prominent lawyer and former attorney general Sobuza Gula Ndebele. That report is crucial yet it was not handed over to the police. Our client has given you a copy of the report which clearly highlights the connivance by the aforementioned accused persons,” reads the letter from Musunga and Associates.

CMED loss control manager, Mr K Chigogo has been appointed the parastatal’s witness.

The CMED report is now premised on the following account and analysis of First Oil transaction — that at the beginning of 2013, the company secured a loan of US$3 million to procure bulk fuel. The board resolved that the fuel be procured from local companies with the product inland.

“Relying on internal information that CMED had secured a bank loan to make a bulk purchase of fuel, the accused hatched a plan for First Oil to respond to the CMED tender for the delivery of five million litres of diesel. First Oil submitted an unsolicited bid, which surprisingly was accepted and eventually won the tender.

“The bid price (per litre) of US$1,21 was clearly suspicious as it was way below the bid price of other suppliers, namely Comoil US$1,25, MAPS at US$1,26 and Sakunda at US$1,28, and points to fraudulent intentions,” said Musunga and Associates.

“Not only that, correspondence availed to you now reflect(s) an admission by First Oil that they would source fuel from Petrotrade at US$1.27 per litre yet they were prepared to sell the same fuel to CMED at US$1.21 per litre, which clearly does not make economic sense.”

CMED claims a fake and fraudulent due diligence was conducted on February 28 2014 and Mr T Sikwila wrote to Globe Investments confirming that they had reserved three million litres of fuel for First Oil at NOIC Msasa and the fuel was available upon payment.

The letter showed that the fuel belonged to Petrotrade, not Globe Investments.

“On the same day, Mr Manjengwa wrote a letter to NOIC seeking to confirm whether it was holding fuel for Globe Investments on the premise that CMED wanted to procure fuel from Globe Investments.

Mr Manjengwa’s letter shows that he had been in communication with Globe Investments yet Globe Investments had not been awarded a tender to supply the fuel. No due diligence had been conducted on Globe Investments.

It has since emerged from what the managing director, Mr Davison Mhaka, revealed in his Memorandum to the board chairman dated 28 July 2014, that management was aware at this stage that First Oil and Globe Investments were partners,” said Musunga and Associates.

NOIC then wrote a letter to ZB Bank on March 01, 2013 confirming that they were holding three million litres of diesel on behalf of Petrotrade reserved for First Oil at its Msasa storage tanks.

“On the strength of the fake and fraudulent NOIC letter, the accused Mr Davison Mhaka and Brian Manjengwa then authorised ZB Bank to transfer the US$2.7 million into the First Oil account purporting to pay for the fuel. The money was not utilised until March 2013,” the lawyers said.

“On 5th March 2013, armed with another fraudulent letter by T. Sikwila confirming that Petrotrade had reserved fuel on behalf of Globe Investments/ORSA and First Oil upon payment through a foreign company called Micro Petroleum, the accused Mr David Mhaka and Mr Brian Manjengwa wrote to ZB Bank advising that they had done adequate due diligence on the availability of fuel at NOIC Msasa.

On the basis of the fake confirmation letters by Petrotrade, NOIC and SOCOTEC, the two accused Mr Davison Mhaka and Brian Manjengwa thus authorised the bank to release funds to First Oil and that is how the money was lost.”

The lawyers are querying why payment was not made directly to Petrotrade instead of first externalising the funds only to bring them back again later.

They also note that the fuel tender was not processed through the CMED internal procurement committee in line with state procurement procedures and that the contract was not drafted by the corporate services department which handles legal matters. It was prepared by the fuels manager who edited an existing contract.

“The report made by Mr Brian Manjengwa on 28th June 2013 regarding this transaction should have been made by the loss control department. The department was by-passed because the accused, who are all part of the scam, wanted to mislead the police and the prosecutor general’s office into believing that the accused, Brian Manjengwa and Davison Mhaka, were not part of the scam whilst on the other hand the directors of First Oil are arguing that Globe Investments cheated them of the money.”

NOIC and Petrotrade argue that no payment was made to Petrotrade so no fuel could be delivered to CMED.

“The fake due diligence letters are being used to cover up the scam when in fact all the accused persons know each other and colluded to defraud CMED,” added the CMED lawyers.

The director of Public Prosecutions Mr Nelson Mutsonziwa on Tuesday said he had not yet received the letter from Musunga and Associates.

“Maybe it is on its way,” he said.