Mozambique: Former LAM managers deny over-invoicing – AIM report

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Mozambique: Former LAM managers deny over-invoicing – AIM report

6:56 CAT | 04 Mar 2020

Photo: Noticias

Former members of the management of Mozambique Airlines (LAM) on Tuesday told the Maputo City Court they did not believe there had been any over-invoicing in the sale of two aircraft from the Brazilian company Embraer to LAM in 2008.

The former chairperson of LAM, Jose Viegas, stands accused of agreeing to pay inflated prices for the planes as a way of disguising a bribe of 800,000 US dollars paid by Embraer.

Called to the witness stand, Ernesto Matsenguana, who was LAM’s interim financial director in 2008, said the initial price proposed by Embraer, in May 2008, was 30.85 million dollars for each plane, and the sales contract should have been signed in June.

When the contract was not signed in June, the price rose to 31.1 million dollars per plane, said Matsenguana, with Embraer justifying this on the grounds that market conditions had changed.

The technical-operational director of LAM at the time, Joao de Abreu, said a further 100,000 dollar was added to bring the planes into line with the LAM standard layout. These alterations pushed the price of each plane to 31.22 million dollars.

None of this alters the fact that Embraer, in 2016, confessed to paying bribes in several countries, including Mozambique, and Embraer executives signed off on detailed accounts of the bribes contained in documents from Brazilian prosecutors and from the United States Department of Justice. The bribery scandal led to Embraer paying a total of 225 million dollars in fines.

The 800,000 dollar bribe was paid through a shell company, Xihivele, which another of the accused, Mateus Zimba, at the time the representative in Mozambique of the South African petro-chemical company Sasol, had set up in Sao Tome and Principe.

Like Viegas, Matsenguana and Abreu denied having any dealings with Zimba. They said they knew nothing of Zimba’s involvement in purchasing the planes.

But there is no doubt that 800,000 dollars from Embraer did go to the Xihivele bank account, and the greater part of this money was then transferred to the third accused, the then Transport Minister, Paulo Zucula.

Further LAM financial scandals bubbled to the surface in the courtroom on Tuesday. Advance payments of 25.3 million dollars were made to Embraer and Boeing to acquire more aircraft for LAM, but the planes never arrived and there is no sign that the money was ever returned.

Matsenguana said that in 2012 LAM paid Embraer an advance of 315,000 dollars, as an “expression of interest” in buying another plane. But the plane never arrived and Matsenguana said “I have no information as to whether the money was lost or not”.

The failed deal with Boeing dates from 2015, when LAM borrowed 25 million dollars from one of Mozambique’s commercial banks, Moza Banco, as a 20 per cent down payment for the purchase of three Boeing 737s.

Jeremias Tchamo, LAM financial director at the time, said “It was intended that this project should be financed by a state guarantee. But other strategies were used. It was intended to sell the Embraer planes to raise the money that would contribute to buying new planes”.

But LAM never managed to pay Boeing the remaining 80 per cent, and Tchamo, who left the company in 2016, said he did not know what had happened to the money.

These advance payments to Embraer and Boeing were included in the initial charge sheet from the Public Prosecutor’s Office, but were later excluded because they took place at a time when Viegas and Zucula no longer had any connection with LAM.

Source: AIM