On the trail of the SME millions

The Windhoek High Court has granted David Bruni and Ian McLaren the right to pursue any proceedings, as required, in the high courts of South Africa and that of Zimbabwe, to track and trace the missing SME Bank millions. Following an urgent application on Friday, Deputy Judge President Hosea Angula ruled that the pair, acting as the official liquidators of the SME Bank, are authorised to institute any proceedings, including that of the recovery of movable and immovable assets, and seek any interdictory relief, as is necessary for the winding up of the bank.

Just under N$175 million is missing, invested dubiously in South Africa, and the liquidators now have the authority to secure any information, including that which may lead to criminal charges.

In his founding affidavit, Bruni told the court that there were major discrepancies between what the SME Bank had said it invested in South Africa to what was invested, and where.

Bruni said that N$196 million had been invested into Mamepe Capital, of which N$150 million was disinvested at Mamepe, and invested into VBS Mutual Bank, both in South Africa.

However, statements received from VBS showed that three investments were made, totalling N$185 million - which already exceeded the approval limit of Tawanda Mumvuma, the CEO of SME Bank, and the financial manager could not provide any proof that board approval for the transfer of these funds was ever made.

“By 30 September 2016, N$50 million was expected from VBS and only on 14 October of that year, was N$37 million received,” Bruni wrote.

However, by mid-December 2016, no confirmation could be established of the investments made by SME Bank at either Mamepe or VBS.

An account statement from VBS showed that from 1 January 2014 to 22 March 2017, only N$10 million was transferred from SME Bank to VBS, on 11 August 2016, but, that this amount was withdrawn six days later, on 17 August.

Bruni said that “significant discrepancies” exist between this account statement and that provided by SME Bank to its auditors, BDO, for exactly the same account. That statement, dated 8 September 2016, shows a balance of N$185.3 million. However, another statement, dated just over three months later, shows a balance of N$153.8 million.

By 23 March 2017, it was confirmed that only just under N$459 000 was available for SME Bank at VBS.

And things do not get better.

Quoting from Ipumbu Shiimi, the governor of the Bank of Namibia's affidavit in the liquidation application last year, Bruni wrote that the SME Bank invested N$10 million into Tulive Capital and some N$6.7 million of this was invested into a “speculative equity investment” in South Africa.



N$6.2 million lost



“The losses [in this investment] resulted in a retrievable balance of a mere N$48 296.45,” Bruni wrote, adding that the investment also transgressed certain provisions of the Banking Institutions Act of 1998.

Total funds invested with South African institutions amounted to N$207.6 million, as at 28 February 2017 – N$52.4 million in Mamepe and N$155.2 in VBS.

The Bank of Namibia, Bruni said, found that the total funds invested in South Africa only amounted to N$199.7 million and of this, N$32.7 million was with Mamepe and a staggering N$167 million “was paid into various accounts belonging to other beneficiaries, namely Asset Movement Financial Services, DMA Consultants, Moody Blue and Transparency.com”.

Bruni said the amount invested with VBS was confirmed to be zero.

To add fuel to the fire, it was found, during a criminal investigation in South Africa, that a director of Mamepe, Mauwane Kotane, told those proceedings that N$175 million of the SME Bank monies was invested into fertiliser, held under a product consignment note, on behalf of Mamepe Capital, by the suppliers of the product, Rawfert Offshore Sal, a company based in Lebanon.

“Until date hereof, not a single cent has been repatriated to Namibia by Mamepe,” Bruni told the court.



Overstated records



The Bank of Namibia prepared a report on the investment recoverability and insolvency assessment of the SME Bank. What they found is that the financial records of the bank were overstated and that the Mamepe investment should down-written by N$19.7 million, from N$52.4 to 32.7 million, and that the investment balance at VBS should be down-written with a staggering N$154.7 million, from N$155.2 million to a paltry N$459 000.

Bruni said not only was the investment unsound and questionable, but further, that it is doubtful whether the monies can be recovered. He added that the bank had misrepresented to the board and the auditors “where and with whom, and precisely what funds were invested”.

The Bank of Namibia had found that N$167 million was paid to beneficiaries who are not investment entities and this was never disclosed.

According to Bruni, “funds paid to other beneficiaries cannot be recognised in financial records as an investment, as there are no contracts with these persons or entities”.

VBS confirmed only just under N$459 000 was invested and Bruni told the court that thus, N$154.7 million is gone. He continued by saying: “Mamepe had not properly confirmed the nature of the assets the funds were purportedly invested in or even if the investments are held in the name of SME Bank.”

Expected losses amount to N$174.4 million, of which N$154.7 is with VBS and N$19.7 with Mamepe.

A banker who spoke to Namibian Sun on the condition of anonymity said that he believes that 'cut flying' was employed. When an account holder 'cut-flies', he or she will transfer funds electronically, but before the funds reach their destination account, the money, or a portion of the total, is diverted. It is said to be a common occurrence in fraudulent transactions.

The SME Bank was liquidated on 29 November last year.

YANNA SMITH