Tag: Bank

(Bloomberg) — The Chinese businessman had walked out of a bank in Kinshasa with 13,624 hundred-dollar bills, 10,001 fifties and 43,000 smaller U.S. notes, despite explicit instructions to prevent it from happening.

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“The account has finally been emptied,” Yvon Douhore, head of an in-house audit team in the capital of the Democratic Republic of Congo, wrote in an email that day, July 5, 2018, after noticing the withdrawal. “I’m at a loss for words,” a colleague replied the next day.

The previous month, Groupe BGFIBank’s compliance department in Congo had frozen accounts held by the businessman’s firm, Congo Construction Co., or CCC, because the client file was missing key documents, according to bank records. A history of transactions reviewed by Bloomberg News as part of the biggest leak of financial information from Africa showed an even bigger issue: its political connections.

Over a five-year period, tens of millions of dollars flowed through CCC’s accounts to people and companies closely associated with Congo’s then-president, Joseph Kabila, all at a bank partly owned by his sister and run by his brother, Selemani Francis Mtwale. But a series of scandals had forced the lender’s parent company in Gabon to reconsider its embrace of the presidential family. It removed Selemani as chief executive officer in May 2018 and then reclaimed a 40{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} stake held by Kabila’s sister, which it said she’d never paid for.

Douhore’s colleagues blocked the accounts while he conducted an autopsy of Selemani’s tenure. Yet someone at the bank was still authorizing transactions, right through to the final $2.5 million cash withdrawal in July 2018. The documents hint at why: Douhore was witnessing the closing act of CCC’s secret role as an intermediary between Chinese mining groups and the Kabila clan.

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For more than six months, Bloomberg has analyzed a trove of 3.5 million bank documents from BGFI that offer an unprecedented glimpse into how several individuals and companies operated in what would turn out to be a takeover of much of the Congolese mining industry by Chinese companies during Kabila’s presidency. The information was obtained by Paris-based anti-corruption group Platform to Protect Whistleblowers in Africa and the French news organization Mediapart and shared with media outlets coordinated by the European Investigative Collaborations network and five non-governmental organizations.

The consortium’s investigations, dubbed “Congo Hold-up,” demonstrate the extent to which the country’s most powerful family used the bank to serve its private interests and how at least $138 million in state funds transited BGFI to Kabila’s relatives and associates. The new information also casts a light on some of the previously unseen ways in which Chinese companies came to dominate the mineral riches of one of the poorest nations in the world.

The Sentry, a Washington-based anti-corruption group, used the banking data to write a report about the Kabila family’s financial ties to Chinese mining companies. Bloomberg was given access to the organization’s documents and findings before the report’s release. Over the course of several months, Bloomberg independently obtained additional documents and spoke with dozens of people on five continents to confirm and complement the information.

In a statement posted on its website on Nov. 23, after the first consortium stories appeared, BGFI said that while it decried the leak and questioned the authenticity of the documents, it “strongly condemns acts contrary to law and ethics that may have been committed in the past within its BGFIBank RDC SA subsidiary and of which its employees could possibly have been perpetrators or complicit.” The bank added that it had restructured its ownership of the Congo unit in 2018, conducted an internal audit to identify methods that may have been used to circumvent controls, put in new management and filed a complaint with the prosecutor’s office to determine who was responsible for the alleged acts and sanction them.

This isn’t the first time BGFI has been at the center of corruption allegations in Congo. Five years ago, a former compliance officer shared thousands of bank documents with media outlets including Bloomberg that showed how Selemani had directed millions of dollars in public funds to the bank and a company owned by some of Kabila’s closest allies. The new leak of documents shows that was only part of the story.

After replacing his assassinated father in 2001 and negotiating an end to a brutal civil war, Kabila opened the country’s vast reserves of copper and cobalt to international investors. Western firms, initially enthusiastic about Kabila’s Congo, have since beat a steady retreat. BHP Group, Anglo American Plc’s De Beers and Freeport-McMoRan Inc. have all sold mines or abandoned projects. Those that stayed often formed high-risk partnerships that are now the subject of corruption probes, including one by the U.S. Department of Justice into Glencore Plc and two others by the U.K.’s Serious Fraud Office into Glencore and Eurasian Natural Resources Corp. Glencore says it’s cooperating with the authorities. ENRC denies wrongdoing.

That’s increasingly left the field to companies from China eager to expand their control over the supply of two metals that are mined together in Congo and are at the heart of the nascent revolution in electric vehicles. In less than a decade, Chinese companies have gone from minor contributors to accounting for half of Congo’s cobalt output and about 70{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} of its copper production, according to Congo’s main business lobby.

The centerpiece of this transformation is a $6.2 billion minerals-for-infrastructure deal, the biggest investment in Congo’s history, spearheaded by China Railway Group Ltd. and Power Construction Corp. of China, known as Powerchina.

In 2008, the two countries agreed that the Chinese companies would finance $3 billion worth of infrastructure and build a $3.2 billion copper and cobalt project known as Sicomines, whose tax-free profits would repay both investments. Supporters hailed it as a proud symbol of China’s new “win-win” model of development financing, an alternative to the strict conditions attached to lending from the Western-dominated World Bank and International Monetary Fund.

Congo’s government also handed a no-bid contract to a subsidiary of China Railway to rebuild and maintain the road from the mining hub of Lubumbashi to the border with Zambia, with tolls charged to fund the work. The highway is the primary path to export for Congolese copper and cobalt, making it one of the most lucrative routes in Africa. Each year, tens of thousands of trucks laden with metal pay the concession fee, currently $300, to make the round trip. The toll road generated a total of $302 million between 2010 and 2020, according to an unpublished government audit seen by Bloomberg.

Kabila set up a government agency — the Bureau de Coordination et de Suivi du Programme Sino-Congolais — to oversee the Chinese relationship and appointed an ally, Moise Ekanga, to run it. Ekanga, it turns out, was also the chief operating officer of a private firm owned by the Kabila family, corporate documents and contracts reviewed by Bloomberg show. The company, Strategic Projects and Investments, or SPI, profited handsomely from China’s growing presence.

SPI held a 40{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} stake in the toll road business until 2015, and then took it over completely. The audit, by an anti-graft agency under the current government, claims that since China Railway’s exit six years ago, the toll company has misappropriated nearly $121 million. Bloomberg wasn’t able to independently verify the allegation.

Cong Maohuai, a Chinese businessman who owns the Kinshasa hotel in which CCC had an office, told the consortium that he acquired control of the toll company in November 2016. However, information available at Congo’s corporate registry still lists SPI as the sole shareholder. Cong declined to provide documentation proving the change of ownership, citing confidentiality requirements. He disputed the audit’s findings, saying, “I reaffirm that there was never any misappropriation” in the concession contract. Neither China Railway nor Kabila’s younger brother Zoe, SPI’s founding shareholder, responded to multiple requests for comment.

It’s not clear how much, if anything, SPI paid China Railway to take over the toll road firm in 2015. Minutes of a board meeting approving the share transfer don’t mention any compensation. But there are traces of what the company did with at least some of the money it made: It sent it to CCC.

From June 2013 to January 2016, BGFI records show, the toll venture made 41 transfers, worth $7.8 million, to CCC, almost all of which was taken out in cash.

CCC’s owner was an aspiring academic born in 1979 in Liaoning, China, named Du Wei. He began working in Africa in the early 2000s and in August 2016 wrote an article for Wuhan University’s Institute for International Studies bemoaning Chinese companies’ tendency to use “unscrupulous means” to win major projects, according to an article Du wrote that the Sentry cited in its report.

Du, who went by “David” in Congo, worked for Sicomines for three years until 2012, when he became a consultant for Kabila’s China agency, according to his LinkedIn profile. That’s also the year he incorporated CCC with Guy Loando, then a 29-year-old Congolese lawyer, and opened a company account at BGFI.

Between February and July 2013, CCC, which had no known construction projects, received $18 million from bank accounts in China and Hong Kong held by four offshore companies registered in the British Virgin Islands. The BGFI records list the justifications as “construction fee payment,” “other transfers” and “other.” The toll road business also wired $1 million to CCC that June. Du sent most of the $19 million on to Kabila’s China agency through a series of identical cash withdrawals and deposits, rather than direct transfers, the records show.

Ekanga, the agency’s head, then promptly paid off a $14 million loan his office had taken from BGFI for the benefit of companies that were or would be linked to Kabila. The agency had wired half of the borrowed funds to another BGFI account that advanced the same amount to a cattle business Kabila would shortly purchase. It also transferred $6 million to a building firm owned by two associates of the then-president, bank records show.

Neither Ekanga nor the agency’s spokesman responded to multiple emails, texts and phone calls from the consortium requesting comment. China Railway and Sicomines’ other Chinese shareholders didn’t respond to questions asking if they ultimately provided the funds to CCC or owned the BVI firms, which were created by the same Hong Kong-based corporate services provider that China Railway used to set up a subsidiary to hold shares in Congolese mines.

Sicomines later made three large payments to CCC, from June to September 2016, for a total of $25 million. Du distributed most of the money to companies and individuals linked to the president’s family, bank records show. This included $7.5 million for a firm whose shareholders were Kabila’s sister and Selemani’s wife, $1.6 million that went to the owner of a vessel that transported animals including zebras, giraffes and wildebeests to Kabila’s private nature reserve in 2017 and $1 million sent to a director of the shipping company. A lawyer representing the ship’s then-owner declined to respond to a request for comment.

CCC also forwarded more than $1.7 million to Du’s personal accounts in Congo and Hong Kong, BGFI documents show.

Sicomines didn’t respond to questions from the consortium. The Chinese embassy in Kinshasa said its government “always asks Chinese companies working in the DRC to strictly respect local laws and regulations” and to “conduct cooperation projects in a win-win manner.” Chinese investors should “never interfere in Congolese political affairs,” an embassy spokesman said by email.

Du didn’t respond to questions. His WhatsApp and one of his email accounts were deleted after the consortium made numerous efforts to contact him.

While Sicomines entered production in 2015, it won’t be able to reach its full capacity of 250,000 metric tons of copper a year until it has a reliable supply of electricity. To ensure that, the company proposed building a dam near the village of Busanga. The $600 million project was originally supposed to be part of the minerals-for-infrastructure deal. But in July 2016, China Railway and Powerchina created a new company with Congo’s state-owned miner Gécamines, which owns 32{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} of Sicomines, to hold the 240-megawatt hydropower plant. This time, 15{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} of the state’s share went to a previously unknown entity called Congo Management Sarl, or Coman.

Efforts to contact Coman’s two shareholders were unsuccessful, but the company does have close ties to people in Kabila’s entourage. Coman is represented by the ex-president’s former personal lawyer and managed by someone who was an employee of Kabila’s China agency. In addition, financial transactions that appear to mirror each other occurred in the accounts of Coman and CCC. In November 2016, CCC’s Du withdrew $430,000 from the company’s account. A deposit of equal size appeared in Coman’s account at BGFI on the same day. After remaining untouched for a year, a similar amount was withdrawn by the chairman of a company co-owned by Kabila’s sister and sister-in-law, records show.

A man who would shortly become the manager of a Coman subsidiary also received $1 million from CCC in May 2017 — money that, banking records show, originated from Sicomines.

Neither Norbert Nkulu, Kabila’s former lawyer and Coman’s legal representative, nor Claudine Paony, the company’s manager, responded to questions sent by the consortium. In 2018, Kabila appointed Nkulu, who is also a former minister, to serve on Congo’s constitutional court.

Du began restructuring CCC in March 2017. First, the company took over a phosphate mining permit owned by Allamanda Trading Ltd., whose representative co-owns several companies with the person who managed Kabila’s farming company. Du then acquired the 20{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} stake in CCC owned by Loando, the Congolese lawyer, and transferred all the firm’s shares to a company registered in the British Virgin Islands called Harefield Overseas Ltd.

In January 2018, China Molybdenum Co. purchased CCC and its phosphate license for $40 million. China Moly had recently arrived in Congo by buying control of the giant Tenke Fungurume copper-cobalt mine in a deal worth more than $3 billion. Last year, the Chinese firm paid $550 million to take over another large copper-cobalt deposit in Congo.

None of the parties to the deal responded to questions about whether CCC paid Allamanda for the permit or if any member of the Kabila family was a beneficiary of the company. China Moly said Du learned of its interest in the phosphate deposit at an unspecified time in 2017 and that he was the only shareholder of the offshore vehicle that held CCC at the time of the transaction. The company said it will develop the project “at an appropriate time in the future.”

By late 2017, as reports of corruption accumulated, BGFI realized that it needed to act to avoid potentially crippling U.S. Treasury sanctions, bank documents show. First, it distanced the Congo unit from the presidential family.

Next, the bank instructed Douhore, the chief auditor in Kinshasa, to review Selemani’s leadership of the Congo unit. Douhore’s assessment, completed in July 2018, concluded that governance had been “unacceptable” and characterized by a “lack of integrity and transparency in the declaration of conflicts of interest.” Multimillion dollar payments into and out of CCC’s accounts, including those from Sicomines and the toll road company, were executed either without essential paperwork or with documents of questionable authenticity, according to the audit. Douhore didn’t respond to a request for comment.

Even after China Moly’s purchase of CCC, Du continued to control its accounts at BGFI, records show. In May 2018, CCC received $7.7 million from a company partly controlled by Kabila’s sister and sister-in-law. In the same month, a BGFI account belonging to Congo’s central bank wired nearly $1.9 million to CCC.

Du transferred $1.5 million to a company registered in the United Arab Emirates in May 2018, before he and another individual removed the rest of the funds in cash, including the final withdrawal of $2.5 million in July of that year. At least two of the transactions took place after BGFI’s compliance team had tried to block CCC’s accounts.

Douhore blamed the then-CEO — who had worked closely with Selemani — for overriding the freeze, according to the documents. The audit department notified BGFI headquarters that two companies owned by Kabila family members were draining their accounts at the same time as CCC. Together, the firms took more than $23 million out of the bank in cash over two months in mid-2018.

China Moly said it’s “not aware of the existence of CCC’s bank account” and doesn’t have any knowledge of the activities executed by Du through its subsidiary. BGFI’s CEO, who has since retired, said he had no relationship with Du and that he couldn’t have authorized a cash withdrawal on a frozen account without required justifications. Deogratias Mutombo, the governor of the central bank from 2013 until earlier this year, didn’t respond to questions sent by the consortium.

In total, about $65 million flowed through CCC’s accounts between January 2013 and July 2018, of which $41 million was withdrawn in cash, making it impossible to track the beneficiaries of all the funds. Still, bank records show that at least $30 million was routed, via transfers or in cash, to people and entities directly linked to the Kabilas or companies owned by the presidential family.

Loando, Du’s former business partner, was elected in late 2018 to Congo’s senate as a member of Kabila’s coalition and has successfully navigated the deterioration of a pact between the former president and his successor, Felix Tshisekedi. In April, he became minister of regional planning. In response to questions about his role at CCC, Loando said he was simply a legal adviser and played no part in the daily management of the company. He said he wasn’t kept informed of the firm’s commercial activities and therefore had no knowledge of its transactions.

Kabila stepped down at the beginning of 2019, after 18 years in power, following delayed elections held under pressure from the U.S. and the African Union in which Tshisekedi was declared the winner.

What hasn’t changed is the control of Congo’s mines by Chinese companies. However, Tshisekedi has launched investigations into the minerals-for-infrastructure deal, including the Busanga hydropower plant, and whether China Moly is complying with its contractual obligations. It’s not clear when any conclusions from those probes will be announced.

Of the $3 billion in promised infrastructure financing from the Chinese companies, most of it still hasn’t arrived. Tshisekedi’s government said in September that projects worth only about $825 million have been built so far.

And the new president’s top anti-corruption official, Jules Alingete, has been examining alleged corruption scandals that have involved BGFI. Executives at the bank were “specialists in falsifying accounts,” he said in an interview with the consortium. “They fabricated, fabricated, fabricated, fabricated things.”

Douhore also criticized BGFI’s willingness to accept the explanations Du and an associate provided as they pulled nearly $10 million out of the bank in the middle of 2018. Those were just excuses “to allow unjustified withdrawals around suspicious [financial] movements,” he wrote in an email to his bosses. To another colleague in the Kinshasa office he wrote, “We really are in another world.”

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