Directors of collapsed banks should be charged for looting public funds


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The Member of Parliament for Mazowe South Fortune Chasi, a former Deputy Minister of Justice, says directors of banks that collapse should be charged because they are essentially looting ordinary people’s money and getting away with it.

Depositors have so far lost about $1 billion after the collapse of about 10 banks, according to another MP, Eddie Cross.

Chasi, who once worked for the Reserve Bank of Zimbabwe, said 80 to 90 percent of a bank’s capital was depositors’ funds which meant that these were funds from ordinary people who were completely unrepresented in the governance of financial institutions.

“I suggest that there is a complete need to revise the duties of directors that sit on financial institutions boards,” he said in his contribution to the motion calling on the government to bring to book those who looted the Premier Services Medical Aid Society.

“As has been demonstrated, it is quite clear that they have either been active participants in the commission of crimes or they have aided and abated commission of crimes or they have simply been careless and reckless as to what happens in the financial institutions,” Chasi said.

“I am hopeful that as we begin to consider the amendments to the Banking Act, we will be able to recommend representation of depositors on these boards, and I think that the Minister of Finance and Economic Development should be able to appoint seasoned bankers who represent him as the representative of the public on those boards. I think that will help a lot.

“I also share the view that as a country, we have not done much in dealing with those who looted banks. I think the company law must be revised comprehensively in that it is known that individuals will form a bank so that it can take funds out of the bank and fund a subsidiary. I think that where that occurs, the law must oblige those responsible for running those institutions to make a report to the police where funds have been stolen, but not only that, to ensure that there is cross liability between a subsidiary that is a non financial institution which has benefited from funds looted from a bank, it must be made to pay to the bank rather than exposing the fiscus to meeting those payments to depositors.”

The mover of the motion Eddie Cross said depositors had so far lost about $1 billion following the collapse of 10 banks.

 “We have seen the collapse of banks. Since 2013, ten commercial banks have gone into liquidation. The worst of these was Interfin where over US$100 million of shareholders and depositors’ money was taken by the directors and absolutely no prosecutions have happened as a consequence. I do not believe that even the report on Interfin has been tabled with the relevant Committees in Parliament or with the House itself,” Cross said.

“In the case of Tetrad, there were US$19 million of insider loans to Directors which eventually led to the demise of the bank. Again, no action was taken…..

“We now have the maladministration which has been revealed in NSSA. More than a year ago, the Public Accounts Committee of this House reported to the House on the maladministration of the affairs of NSSA and called publicly for the dismissal of the Chief Executive. Absolutely no action was taken by either the Minister or the Chairman of the board at the time. It is only now that the Minister has appointed a new active board to NSSA, that the board has taken the steps which we called for more than a year ago and suspended the entire executive structure of NSSA.”

Cross said NSSA was the custodian of nearly $4 billion of national funds, more than the revenue that the country is getting this or next year, yet its executives have not been brought to book for mishandling public funds.

“The way in which these executives have behaved, gives me the sense that they feel they are immune, that they are protected from any kind of action which might call them to account….

“If you steal a cow worth US$400 from a farmer, you go to jail for a mandatory nine years. (Yet) we have these people who have been stealing public funds still on the loose, in fact, enjoying their ill gotten gains. The losses to the general public allowing the closure of ten commercial banks was in excess of US$1 000 million in depositors’ funds. Mr. Speaker, really, are we taking this kind of thing seriously?” Cross asked.

 

Full contribution:

 

HON. CHASI: Thank you very much Hon. Speaker. I would like to start by commending the mover of the motion Hon. Cross for a very robust and informative presentation on the situation as it obtained in the financial sector as well as the situation that relates to PSMAS. I am not going to regurgitate what has been said by the two previous speakers but I just want to add that with respect to the financial sector, I suggest that there is a complete need to revise the duties of directors that sit on financial institutions boards. As has been demonstrated, it is quite clear that they have either been active participants in the commission of crimes or they have aided and abated commission of crimes or they have simply been careless and reckless as to what happens in the financial institutions. Anyone who has a familiarity with the composition of a bank’s capital, they say 80% to 90% of a bank’s capital is composed of depositors funds, which means that in essence, it is funds that belong to ordinary people of this country, who are completely unrepresented in the governance of financial institutions.

I am hopeful that as we begin to consider the amendments to the Banking Act, we will be able to recommend representation of depositors on these boards, and I think that the Minister of Finance and Economic Development should be able to appoint seasoned bankers who represent him as the representative of the public on those boards. I think that will help a lot. I also share the view that as a country, we have not done much in dealing with those who looted banks. I think the company law must be revised comprehensively in that it is known that individuals will form a bank so that it can take funds out of the bank and fund a subsidiary. I think that where that occurs, the law must oblige those responsible for running those institutions to make a report to the police where funds have been stolen, but not only that, to ensure that there is cross liability between a subsidiary that is a non financial institution which has benefited from funds looted from a bank, it must be made to pay to the bank rather than exposing the fiscus to meeting those payments to depositors.

I now want to turn to the issue of PSMAS and I think it has been discussed on a number of occasions in this House. It is very disheartening. I know that the majority of members in this House are members of PSMAS. I think there is a misapprehension which suggests that PSMAS is a public institution. It is an institution that is owned by all of us here. I think that institution is crying out and I think ordinary people are crying out to this House that the governance of the institution be looked at with a view to ensuring that directors understand their positions and functions. When they do not operate in accordance with the law, they are made accountable to repay the money and where criminality is established, they must be able to answer. So, I have no hesitation in associating myself completely with the motion that has been suggested by Hon. Cross. I think if this House fails to take remedial action, both relative to the financial institutions and also with particular reference to PSMAS, it will be a very serious indictment on this House.

I am hopeful that an opportunity will arise where individuals who have looted funds from these institutions, clearly the figures that are being mentioned, I am sure they are not even sustainable en masse, if their Medial Aid Society is there and if the situation continues without rectification, then the whole thing will become a joke. I want to confirm that I am personally very indebted to Hon. Cross for the in-depth analysis and the effort that he put in this motion. I hope that each member of this House will be able to get a copy of this report and study it in its completeness. I thank you.

(36 VIEWS)

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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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