US, SA cooperation sees former Mozambique FM in Jozi jail – The Wall Street Journal

DUBLIN — The US has had it with Western banks' corrupt collusion with emerging market politicians. The US has a series of laws that make it illegal for US companies or businesspeople to engage in corrupt practices, such as paying bribes, outside of the US. Lately, after a spate of corruption cases involving international investment banks, the US is trying a new tactic: arresting individuals instead of fining institutions. In the latest example of this, the US worked with authorities in South Africa to arrest former Mozambique finance minister Manuel Chang on charges of alleged involvement in a $2bn corruption scheme in Mozambique. Chang reportedly found himself in a cosy cell in Joburg with 20 other prisoners – he apparently paid a gang leader to endure his safety. Other targets include Lebanese businessman Jean Boustani, arrested in the Dominican Republic, and three former Credit Suisse bankers, arrested in London. The increase in cases of global bankers helping politicians and business leaders in poor countries steal from citizens over recent years is a sign of how much more integrated the world has become. The efforts by British and US authorities to hold malefactors personally responsible is a positive development for all of us. – Felicity Duncan.US Casts Global Dragnet in Mozambique Corruption Probe.By Matt Wirz, Gabriele Steinhauser and Thandi Ntoleba.Mozambique's former Finance Minister Manuel Chang boarded a plane two weeks ago, planning to celebrate New Year's Eve with his girlfriend in Dubai. Instead, he was arrested during a layover in South Africa and spent the holiday in a crowded Pretoria holding cell, awaiting potential extradition to the U.S..___STEADY_PAYWALL___.A few days later, Lebanese shipbuilding executive Jean Boustani flew to the Dominican Republic for a beach vacation with his wife. Dominican authorities arrested him at the airport and expelled him to New York, where he is being held in a Brooklyn detention centre..The men were detained as part of a global effort by the US Justice Department to capture alleged conspirators in a $2bn corruption scheme in Mozambique, one of the poorest countries in the world. Mr. Chang and Mr. Boustani deny the charges against them, which include fraud..Authorities in London last week arrested three former Credit Suisse Group AG bankers who allegedly helped plan and finance the fraud, and other suspects have yet to be apprehended, according to court documents. The former bankers, Andrew Pearse, Surjan Singh and Detelina Subeva, have been released on bail. A lawyer for Ms. Subeva declined to comment. Lawyers for Messrs. Pearse and Singh couldn't be reached for comment..The arrests on three continents — planned weeks ahead to occur in countries that have extradition treaties with the US — are part of a widening effort by US authorities to police what bond investors say is a growing intersection of high finance and corruption in emerging markets..The Justice Department is investigating Goldman Sachs Group Inc.'s role in a multibillion-dollar scandal involving a Malaysian sovereign-wealth fund known as 1MDB. Goldman has denied wrongdoing..Pursuing foreign executives and government officials — Mr. Chang is now a member of Mozambique's parliament — is part of a new Justice Department strategy to curb corruption by going after individuals, according to lawyers specialising in international corruption cases who aren't involved in the case..An indictment filed in the case by the Justice Department in a New York federal court also refers to an unnamed, un-indicted co-conspirator matching the description of Iskandar Safa, a wealthy Lebanese defense contractor who owns the company Mr. Boustani works for, according to a person familiar with the matter..The Justice Department started investigating the situation in 2016, after The Wall Street Journal reported irregularities in $2bn of debt deals Credit Suisse and Russian bank VTB Group arranged for Mozambique to make purchases from Mr. Safa's shipbuilding company, Privinvest Group..According to the recent indictment, Mr. Boustani conspired with Mr. Chang and other Mozambican officials to create government maritime projects as fronts to borrow the money, which was used to pay at least $200 million in bribes and kickbacks..The conspirators identified Mr. Chang by the code name "pantero," or panther, in emails and in some cases tried to disguise their scheme by describing bribe payments as chicken deliveries, according to the indictment..Mr. Pearse and his former colleagues arranged the debt deals by concealing their true nature from Credit Suisse's compliance department, which had flagged the Privinvest executive said to match Mr. Safa's description as a "master of kickbacks" in early due diligence, according to the indictment..Credit Suisse received about $107m in fees from the deals, according to Kroll Inc., which donors to Mozambique retained to conduct a forensic audit of the transactions. The bank has said it has cooperated with the Justice Department and hasn't been indicted..Credit Suisse has increased employees in its global compliance department by 42% since October 2015, hiring over 800 additional compliance specialists, a person close to the firm said.."Neither VTB nor any of its employees are involved in the current proceedings," a spokeswoman for VTB said. The Russian bank collected approximately $89 million in fees from the deals, according to the Kroll audit..The US alleges that the bribes included at least $12m to Mr. Chang, about $15m to Mr. Boustani and about $50m to the three former Credit Suisse bankers..Privinvest received about $1.8bn of the debt proceeds and delivered some naval boats and surveillance equipment but over-billed Mozambique by at least $713m, according to the Kroll audit. "We do not accept the partly constructed evaluation," Privinvest said about Kroll's analysis in a 2017 press release..Neither UK nor Swiss authorities have charged anyone in relation to the alleged fraud. Mozambican authorities have also been slow to react, partly, analysts say, to avoid further scandal tainting the ruling party in an election year.."Our domestic prosecutors were complacent," said Adriano Nuvunga, head of ADS, a civil-society think tank in Mozambique. "We always hoped that since they used the U.S. financial system in the wrongdoing, the Americans would come for them.".After the arrests, Mozambique's national prosecution authority said in a press release that it had identified 18 suspects in its own investigation. US authorities haven't shared information with Mozambique's government, according to the statement..The US Justice Department said it has jurisdiction because the defendants allegedly used correspondent banks in New York to transfer bribes and because the debt was sold to investors in the US. The indictment charges the alleged conspirators with wire fraud, securities fraud and money laundering and with violating the Foreign Corrupt Practices Act..The Justice Department has asked U.S. and South African courts to deny bail requests by Mr. Chang and Mr. Boustani because it considers them to be flight risks, which lawyers for the men deny..Mr. Chang was transferred to a Johannesburg cell he shared with 20 other detainees, where he paid a gang leader to ensure his protection, according to Willie Vermeulen, one of his lawyers. On Wednesday, Mr. Chang was moved into solitary confinement at his lawyers' request..Mr. Boustani has been in Brooklyn's Metropolitan Detention Center with limited access to visitors or telephone calls because of a power outage and a reduction of inmate services caused by the partial US government shutdown, his lawyer said in a court filing last week..– Write to Matt Wirz at matthieu.wirz@wsj.com and Gabriele Steinhauser at gabriele.steinhauser@wsj.com.

US, SA cooperation sees former Mozambique FM in Jozi jail – The Wall Street Journal

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