Cashgate: Sithole Gets 9 Years Imprisonment

Plot To Plunder govt coffers

The Lilongwe Senior Resident Magistrate Court has on Tuesday sentenced one of the cashgate convict Victor Patrick Sithole to nine years imprisonment for being found guilty of money laundering, found in possession of foreign currency illegally and found in possession of property suspected to have been stolen.

Sithole was the first person to be arrested in September last year in connection to cashgate when police impounded in his house and found him with foreign currency, of South African Rand's R122, 200 and, US$31, 000, and was also found with MK112 Million cash.

From these three counts, Senior Resident Magistrate Patrick Chirwa before passing judgment said giving Sithole a non custodial sentence would be a mockery of justice because the convict committed very serious offenses to the effect that he he contributed to the shortage of public resources like drugs in hospitals.

Chirwa therefore sentenced Sithole to 7 years imprisonment for Money laundering, 1 year for being found in possession of property suspected to have been stolen and another 1 year for being found in possession of foreign currency illegally.

The lawyer for Sithole, Ted Loka says will consult with his client if he may need an appeal for the judgment.

But a lead state prosecutor Kamudoni Nyasulu said he is happy that this is a right punishment considering the nature of the offence Mr. Sithole committed and impact his offence brought to the country.

Now, Sithole has become a second person to be given a jail term sentence and a first person to receive a longer jail term sentence in relation to cashgate issues following a three year and nine month custodial sentence for former Principle Secretary for Tourism and Culture Tressa Namathanga Senzani in October this year. Senzani stole K63.5 Million which she restituted in full amount but the court also ordered forfeiture of her account used to withdrawal the government money. 

A Summary of Cashgate Transactions

Cashgate in Malawi was a well calculated plot to steal government money through the weaknesses of  Integrated Financial Management Information System (IFMIS) designed to enable Government of Malawi (GoM) to monitor its budget and cash position. In 2005 GoM appointed Soft-Tech Consulting Limited (Soft-Tech), an EPICOR Limited software solutions technology partner, to implement an EPICOR based IFMIS for supporting budgeting, accounting and reporting.

The GoM suspect that a number of perpetrators have exploited these weaknesses through collusion, resulting in financial loss to the government exchequer.

In the latest episode, it is alleged that the perpetrators were able to transfer funds from the government bank accounts to the vendor accounts for goods and services that were never supplied and then to delete these transactions from the IFMIS system. It is claimed that the system was manipulated to release funds without lawful authority, create and approve unauthorised payments, issue cheques through the Accountant General’s Department and transfer funds into supplier accounts without authorization.

Preliminary Baker Tilly Audit Report

According to a 21 February 2014 Forensic Audit Report on Fraud and Mismanagement of Malawi Government Finances by Baker Tilly reported that “at least MK 13,671,396,751 of GoM funds had been identified as being potentially misappropriated” after a defined testing criteria and a detailed analysis of 11 of the main Malawi Government bank accounts.

The report identified payments to 16 companies, valued at MK 6,096,490,705, where no evidence had been provided to support the provision of goods or services in relation to the payments made. The report therefore classified MK 6,096,490,705 as potential theft of Government Funds.

The Audit work also identified high value payments made to two newly formed companies. The report indicated that the contracts awarded “did not appear to represent value for money” and price verification with other suppliers enabled Baker Tilly to identify MK 3,619,539,979 that, “at best had been spent inappropriately or at worst, had been stolen.” Adding that, Additional payments totalling MK 3,955,366,067 were also made to the same two companies.

Therefore in summary of that report, related Cashgate transactions ware at MK6,096,490,705 representing 45%, Payments with no supporting documents was MK3,955,366,067 representing 29% and Inflated procurement prices was MK3,619,539,979 translating to 26%, and this sum up to MK13,671,396,751 which brings 100%

Final Baker Tilly Audit Report Findings

But a final Baker Tilly Audit report in period between 1 April 2013 to 30 September 2013, issued on 25^th September 2014, Audit work undertook a detailed analysis of 63 bank accounts relating to the 53 businesses in a process the report identified 202 individuals “who, either knowing or unknowingly, have been recipients of GoM funds.”

The report established that Specific Cashgate Related Findings totaled to 104 Government cheques, valued at MK 6,914,386,728, and were paid to 39 companies. Further accounting entries were found to have been deleted for more cheques that would have been payable to Cashgate business although these were not banked. Four of the businesses did not bank the prepared cheques, valued at MK 430,000,000.

These cheques were paid into at least ten different commercial banks throughout Malawi with the highest amount deposited in Standard Bank (49 %). In comparison the lowest amount (<1%) was deposited into OIBM.

A review of this data shows 22 cheques from 10 different businesses were banked at Standard Bank representing 49% of the ‘cashgate’ funds. Analysis of the cheques deposited into Standard Bank shows the majority of this amount relates to two businesses being; IPS and O&G Constructions who received MK 1,860,584,273 and MK 1,140,738,209, respectively. These amounts total MK 3,001,322,562 which is 43.4% of the total ‘cashgate’ cheques. Both businesses are owned by Osward Lutepo. Internet searches suggest Osward Lutepo was previously the Deputy Director of Recruitment and Sensitisation for the People’s Party in Malawi.

The report indicates that relationships existed between the various owners of these businesses; “the interlinked nature of these businesses would suggest that the owners were made aware the Cashgate fraud had been uncovered leading them to refrain from banking any further cheques.”

In the report, four individuals were noted as being the main beneficiary of ineligible funds where one owner was linked to at least 18 businesses with two of these businesses receiving a total of MK 4,428,316,582 in 17 cheques. “We also noted apparently unrelated individuals receiving or making payments into unrelated companies. Evidence of 13 individuals with links to the GoM and to the Cashgate businesses was also found whilst as part of this work we Identified businesses linked to nine individuals (or close relatives) listed in the Malawi Electoral Commission (MEC) List of Parliamentary Candidates 2014 Tripartite Elections.” Noted Baker Tilly report

Using bank statements provided for the period 1 April 2013 to 13 October 2013 Baker Tilly identified that a total of MK 7,354,818,077 was withdrawn in cash from businesses linked to Cashgate. Almost half (48%) of this (MK 3,513,898,540) was withdrawn over a period of ten days. The largest single day for withdrawal of funds was Thursday 5 September 2013, when MK 827,647,000, in cash, was withdrawn. This amount represented 11% of the total cash withdrawn and MK 751,367,000 was withdrawn from various branches of one bank. One company withdrew a total of MK 550,000,000 on that date.

The most popular denomination of notes withdrawn were MK 1,000 and MK 500.

“Whilst not of direct relevance to our findings if stacked on top of each other, 550,000 notes of MK 1,000 denomination would give rise to a tower of bank notes over 400 feet high. This graphically illustrates the scale of cash withdrawn, in just one day, by just one business.” says the report

The auditing work identified four companies who successfully benefited from contracts with the Malawi Police Service (MPS) and the Malawi Defence Force (MDF) for which MK 15,553,562,598 was paid with either limited supporting evidence of supply or no evidence at all. Moreover no bank guarantees were obtained where advance funding was provided and no evidence to support any attempt to recover the values paid has been made. “No evidence of action taken to debar the suppliers or prohibit them for bidding for government work in future could be found.” Indicates the report

“We also found that the same documentation, obtained from a genuine supplier, was presented on two occasions in different currencies; both were paid with no supply. The genuine supplier has confirmed that the goods would require arms release certificates and require multi jurisdiction approval prior to shipment. No evidence of this, or customs documentation relating to the shipment, could be traced. Documents provided suggest that these funds have been remitted to South Africa.”

Further documentation made available to the audit team shows that the Government of Malawi made at least 14 payments to two businesses based in Hong Kong but also quoting a Hamriyah FZE address. Hamriyah Free Zone is located in Sharjah, United Arab Emirates (UAE). These payments total an estimated USD $ 50,788,572.45 (MK 14,588,265,488) and were made into six different bank accounts.

However the report noted “actual payment relating to four of these documents (MK 3,915,007,791) can either not be traced to the Malawi Government Bank Accounts or relates to returned FTCs caused by incorrect banking information and includes payment made to different banks using the same FTC number”

Baker Tilly also found that one company was formed in April 2012 receiving its first government contract just two months later.

Current Loss in 53 case files

Cheque Signatories

The 104 cashgate cheques totalling MK 6,914,386,808 paid to 39 businesses were signed by six different individuals employed in the Accountant Generals Department

1 Clemence Madzi (Chief Accountant) signed 100 cheques which is 96.2%

2 Roosenelt Ndovi (Principal Accountant) signed 94 cheques which is 90.4%

3 Auzius Kazombo Mwale (Director, P2) signed 66 cheques which is 63.5%

4 David Kandoje (Accountant General, P2) signed 25 cheques which is 24.0%

5 Agness Kapokosa (Accountant) signed 9 cheques which is 8.7%

6 Benadetta Kauye (NK) signed 7 cheques which is 6.7%

The report indicates that the most common three signature combination was Clemence Madzi, Roosenelt Ndovi and Auzius Kazambo Mwale who together signed 65 of the 104 cashgate cheques (63%) and some sequentially numbered cheques were all signed by the same three individuals on the same dates.

Baker Tilly strongly recommend that a number of payments and procurements made by the Malawi Defence Force and by the Malawi Police Force require further comprehensive audit work to be undertaken, “at the earliest opportunity, in order to verify whether an amount of MK 4,519,633,746 has been misappropriated.”

Individuals and Companies benefited from Cashgate transactions

URN	Business	Business registered by / owner	Loss per our submitted file note (MK)
1	Business Advertising Agency	Ian Kaunda and RJ Chaguza	11,260,450
2	Carmu Civil Engineering	Caroline Savala	84,963,341
3	Clive Engineering	Dennis Mhango	123,865,679
4	Compu-Networks Limited	Greystone Chakhumata, Charles Chathumata and Francis Chavula	30,654,079
5	Covs Landscape Recreation and Nurseries	Omer Daudi Fane Chitipi	30,965,868
6	Cross Marketing Limited	Luke Kasamba	24,179,121
7	Dan Civil Engineering and Building Contractors	Daniel Ndembo	401,088,916
8	Explorations	Kettie Kamwangala	16,750,600
9	Faith Construction	Angela Katengeza	105,983,548
10	Fusion Limited	Jose Antonio De Jesus Mendes and Esnait Ndovi	12,988,950
11	Hardline Construction Company	Phyoka Oscar Kaunda	7,395,431
12	Hury Civil Engineering Contractors	Laura Savala	173,613,570
13	International Procurement Services	Osward Lutepo	1,860,584,273
14	Kanengo Building Contractors	Thokas Satema	195,151,333
15	Makhausi Constructions	Fatch Blamu Hassan Chungano	97,255,260
16	Mchemani Civil Contractors	Sympathy Chisale	117,530,501
17	Megan Construction	Doreen Nyirenda	64,425,401
18	Mundikhumbengi Building Contractors	Yohani Kaweche	36,479,656
19	Mwendayekha Building Contractors	Willy Kumwenda	186,336,000
20	Mzenga Construction Company	Ben Nsema	196,791,135
21	O&G Construction	Osward Lutepo	1,140,738,209
22	Pawooh Logistics	Limumba Karim	44,520,683
23	Protem Civil Contractors	Cecilia Ng'ambi	32,111,250
24	QST Projects	Christopher Zenengeya / Osman Mphozongo	189,247,244
25	Sky Blue Construction	Gerald Masikini Magaleta Phiri	42,656,788
26	Sky Civil Engineering	Steven Mwenitete	18,987,041
27	Stadal Building Contractors	Stafford Mpoola	729,461,523
28	Standard Freight Services	Andrews Chilalika	26,355,253
29	STC Civil Engineering	Sibonile Chimphango	60,656,034
30	STC Investments	Sibonile Chimphango	22,848,000
31	Stewarts Construction	Stewart Nkhata	30,720,344
32	Vhaima General Dealers	Minor Reuben Mwale / Mainala Mwala and Akiliyo Mwale	20,383,277
33	Visual Impact	Letus and Tressa Senzani	63,542,083
34	Walusako General Dealers	Ireen Nhlane	78,649,121
35	WEK Construction	William Kachingwe	21,860,466
36	WG Construction Ltd	NK but linked to Godfrey Placid Dzanjalimodzi	157,668,553
37	Wymbaso General Suppliers	Wyson Zinyemba Soko	40,953,287
38	Ziuya Construction	Mzipasi Moyo	283,539,967
39	Zozama Civil and Building Contractors	Mkhuzo Chirwa	131,224,494
			6,914,386,728

Individuals benefited most

Osward Lutepo	1,860,584,273
Osward Lutepo	1,140,738,209
Stafford Mpoola	729,461,523
Daniel Ndembo	401,088,916
Mzipasi Moyo	283,539,967
Ben Nsema	196,791,135
Thokas Satema	195,151,333
Christopher Zenengeya / Osman Mphozongo	189,247,244
Willy Kumwenda	186,336,000
Laura Savala	173,613,570
NK but linked to Godfrey Placid Dzanjalimodzi	157,668,553
Mkhuzo Chirwa	131,224,494
Dennis Mhango	123,865,679
Sympathy Chisale	117,530,501
Angela Katengeza	105,983,548
Fatch Blamu Hassan Chungano	97,255,260
Caroline Savala	84,963,341
Ireen Nhlane	78,649,121
Doreen Nyirenda	64,425,401
Letus and Tressa Senzani	63,542,083
Sibonile Chimphango	60,656,034
Limumba Karim	44,520,683
Gerald Masikini Magaleta Phiri	42,656,788
Wyson Zinyemba Soko	40,953,287
Yohani Kaweche	36,479,656
Cecilia Ng'ambi	32,111,250
Omer Daudi Fane Chitipi	30,965,868
Stewart Nkhata	30,720,344
Greystone Chakhumata, Charles Chathumata and Francis Chavula	30,654,079
Andrews Chilalika	26,355,253
Luke Kasamba	24,179,121
Sibonile Chimphango	22,848,000
William Kachingwe	21,860,466
Minor Reuben Mwale / Mainala Mwala and Akiliyo Mwale	20,383,277
Steven Mwenitete	18,987,041
Kettie Kamwangala	16,750,600
Jose Antonio De Jesus Mendes and Esnait Ndovi	12,988,950
Ian Kaunda and RJ Chaguza	11,260,450
Phyoka Oscar Kaunda	7,395,431
	6,914,386,728