New Kroll report on Mozambique’s debt “still contains material inaccuracies” – Palomar

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New Kroll report on Mozambique’s debt “still contains material inaccuracies” – Palomar

9:16 CAT | 03 Aug 2017

Business consultant Palomar said yesterday that the Kroll report on Mozambique’s ‘hidden debts’ “still contains material inaccuracies”, regretting that documents made available were not taken into account in the second version of the document.

“We welcome Kroll’s admission that it ‘did not interview Palomar or any employees or directors of Palomar’ prior to the initial publication of its Mozambique report on 23 June 2017. However, we are disappointed that the updated and republished report still contains material inaccuracies regarding Palomar,” a statement released by the company consultant reads.

The second version of the audit report executive summary, released this week by the Mozambique Attorney General, spells out some of the criticism that the audit attracted when the executive summary was presented at the end of June.

“Had Kroll agreed to Palomar’s repeated offers to meet, or had taken into account the documents Palomar provided to it, these material inaccuracies could have been avoided. Instead, Kroll has re-published information that it knows to be inaccurate or incomplete,” says Palomar, adding that “Kroll has disregarded the documentation provided to it by Palomar, which makes clear Palomar’s position”.

Also Read: Kroll did not request information to Palomar, resulting in a misleading and incomplete Report: Spokesperson – Unabridged

In the statements sent to Lusa, Palomar states that it provided Kroll with the legally binding mandate agreements entered into between it and the Ministry of Finance (along with Ernst & Young and BNI) and with Proindicus respectively, which were “ignored in the report”, and says that it also delivered a document “dated 4 December 2014 terminating Palomar’s assistance to Proindicus. This is referred to only in a footnote”.

In addition, the Kroll report “does not make clear that no monies were or will be paid to Palomar pursuant to this (now terminated) agreement.”

Palomar was one of the entities that complained the executive summary of the audit report published on 23 June containing inaccuracies and wrong data, and it was not alone: banks VTB and Credit Suisse also said the report contained incorrect or incomplete data.

Kroll did not respond to any of the criticisms pointed out to it in the report for more than a month, and only this week presented a new version of the audit, in which it answers some of the criticisms made by other consultants involved in the hidden loans to Proindicus and Mozambique Asset Management (MAM).

Also Read: Russia’s VTB: Kroll audit on fees earned in Mozambique was wrong

“Following the publication by the Attorney General of the Republic of the Executive Summary, dated June 23, 2017, Abu Dhabi Sea and Privinvest and Palomar Capital Advisors Ltd/Palomar Consultants LLC (jointly” Palomar “) wrote to Kroll (through their respective lawyers) regarding the content of certain parts of the Executive Summary,” the new version of the document reads.

The realisation and disclosure of an external and independent audit of the $1.4 billion undisclosed loan was one of the requirements of international donors to resume their financial involvement with Mozambique following the debt crisis that plunged Mozambique in a currency and economic crisis.

Also Read: Credit Suisse disputes fees shown in Kroll Mozambique audit

Kroll’s changes to the document are minimal and serve mainly to accommodate the criticisms made by Privinvest and Palomar, namely lack of information about the role of both entities in the loans contracted by Proindicus and MAM.

As regards Palomar, who complained that Kroll had never contacted the company in the preparation of the report, the audit now states that “Kroll also requested that Proindicus request relevant Palomar documentation on the basis of the contractual relationship between the parties”.

Also Read: Kroll amends Mozambique audit report: PGR republishes new summary – Unabridged communique

It is thus clear that Kroll instructed Proindicus to request information from Palomar, assumed that Proindicus had contacted the consultant as requested, and therefore that Palomar had not provided any additional information.

When it submitted the report in June, consultant Kroll complained of a lack of information on the fate of US$2 billion in hidden debts contracted by three public companies in Mozambique, with discrepancies of hundreds of millions of dollars outstanding.

The Kroll summary announced that even, after the audit, “gaps remain in the understanding of how exactly US$2,000 million were spent”, this comprising loans from Credit Suisse to Ematum (US$850 million) and Proindicus (US$622 million), and from the VTB bank to MAM (US$535 million), granted in 2013 and 2014.

Please see below, the full statement from Palomar:

Palomar welcomes admission by Kroll but is disappointed by remaining inaccuracies

A Palomar spokesperson issued the following statement:

“We welcome Kroll’s admission that it “did not interview Palomar or any employees or directors of Palomar” prior to the initial publication of its Mozambique report on 23 June 2017.

However, we are disappointed that the updated and republished report still contains material inaccuracies regarding Palomar.

Had Kroll agreed to Palomar’s repeated offers to meet, or had taken into account the documents Palomar provided to it, these material inaccuracies could have been avoided.

Instead, Kroll has re-published information that it knows to be inaccurate or incomplete. Kroll has disregarded the documentation provided to it by Palomar, which makes clear Palomar’s position.

In particular, Palomar has provided Kroll with the legally binding mandate agreements entered into between it and the Ministry of Finance (along with Ernst & Young and BNI) and with ProIndicus respectively. These mandates are ignored in the report.

Palomar has also provided Kroll with a binding agreement dated 4 December 2014 terminating Palomar’s assistance to ProIndicus. This is referred to only in a footnote and the report does not make clear that no monies were or will be paid to Palomar pursuant to this (now terminated) agreement.

Regrettably, these and other inaccuracies with respect to Palomar’s role have not been corrected by Kroll in the re-published report.”

Source: Lusa / Portland Communications / Press Release