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Mabasa Sasa
TODAY we lift the lid on industrial scale corruption which brought Air Zimbabwe to its knees. In a four-year period between 2009 and 2013, the national flag carrier lost nearly $11 million through an elaborate aviation insurance scam involving senior managers. Those who could have stopped the swindle were either incompetent or simply looked aside, including Munesu Munodawafa, the Permanent Secretary for Transport and Infrastructural Development.
A forensic audit report on Air Zimbabwe’s aviation insurance released on December 28, 2013, points to shocking corruption and recommends the prosecution of top managers.
At the heart of the scam was Grace Pfumbidzayi, Air Zimbabwe’s manager (legal) and company secretary, who authorised “fraudulent” payments to Navistar Insurance Brokers, says the audit.
BCA Forensic Audit Services recommends not only criminal proceedings to be instituted against those implicated, but also says the corruption must be brought to the attention of President Mugabe due to its magnitude.
For a period of about two months in early 2009, Air Zimbabwe’s planes took to the skies without any insurance after Navistar – which had been hired by Pfumbidzayi to provide insurance brokerage services to the national airline without going to tender – received but failed to remit premiums.
Further, the report makes reference to oblique payments made by the Zimbabwe National Road Administration (Zinara) on behalf of Air Zimbabwe.
Air Zimbabwe is 100 percent owned by the government, and a new board headed by Ozias Bvute, asked BCA to conduct the forensic audit after becoming suspicious of insurance premiums paid out between April 2009 and April 2013.
The damning audit report, now with the Air Zimbabwe board and new Transport Minister Dr Obert Mpofu, is signed off by Budhama Chikamhi, the chief forensic investigator at BCA Forensic Audit Services.
In the audit, BCA looked only into Air Zimbabwe’s aviation insurance – but further audit reports looking at other areas like fuel and procurement will unearth further corruption.
“Investigations established that at a time when the economy of Zimbabwe was depressed and when all companies including Air Zimbabwe were struggling to sustain operations due to an acute shortage of foreign currency, the current manager legal and company secretary of Air Zimbabwe Grace Pfumbidzayi appears to have connived with Navistar and executed transactions which according to available evidence are fraudulent,” the auditors said.
“The transactions resulted in the airline losing material amounts of foreign currency… On the basis of the available evidence, Grace Pfumbidzayi and Innocent Makore (acting group chief executive officer) who are senior employees of the airline appear to have acted in cahoots with Navistar Insurance Brokers resulting in the airline being prejudiced of a total of 5,895,695.49 euros (about $8.1 million) and $1,298,827.88 which amounts were paid out to Navistar by Air Zimbabwe allegedly for services rendered which services are not supported by any documentation from Navistar other than the debit notes (invoices) from Navistar.
“The investigation also established that the airline was exposed to a potential prejudice of $1,862,370.52 being a total for which paper trail which appear fraudulent were prepared, and had it not been for this investigation the amount was going to be paid to Navistar by the airline.”
Prior to 1980, Air Zimbabwe (then Air Rhodesia) received its brokerage services from Marsh Insurance Brokers. This arrangement subsisted until March 18, 2009.
From that date, Pfumbidzayi “unprocedurally, illegally and in violation of the tender procedures appointed Navistar as Air Zimbabwe’s provider of brokerage services”.
At that time, Marsh Insurance Brokers was charging Air Zimbabwe an average of 125,000 euros (about $171,000) per annum as brokerage fees. Navistar, however, was paid 300,000 euros (about $410,000) per quarter, translating to 1.2 million euros (about $1.6 million) annually – nearly ten times what Marsh was charging.
“While the amount which was being charged to Air Zimbabwe by Navistar Insurance Brokers increased by 86 percent, the premiums charged by the international reinsurers remained more or less constant … The charges have been described by many of Air Zimbabwe’s current and former executives as fraudulent, a position which is supported by findings of this investigation,” BCA says.
The auditors say the increase in charges was not matched by any commensurate increase in Air Zimbabwe’s fleet size or expansion of its route network. In fact, some of its planes were actually grounded at the time.
“In addition to paying a fraudulent flat broker’s fee of 300,000 euros per quarter for the period April 4, 2009, to April 3, 2013, some of Air Zimbabwe’s executives made several other fraudulent payments to Navistar Insurance Brokers, which resulted in the airline suffering actual financial prejudice of 5,895,695.49 euros and US$1,298,827.88 and potential financial prejudice of US$2,227,570.22…”
While Navistar was taking the 300,000 euros per quarter payments from Air Zimbabwe, it was also taking commission from Air Zimbabwe’s insurers in the United Kingdom.
The Air Zimbabwe CEO when Navistar was roped in, Dr Peter Chikumba, told the auditors that he had never approved the deal — which is not supported by any standard legal contract — and BCA concludes that Pfumbidzayi entered into the arrangement by herself.
Working with other senior managers, Pfumbidzayi actively pushed through the payments to Navistar.
Once, when there was a delay of a US$305,000 payment to Navistar, Munodawafa, who is Pfumbidzayi’s uncle and a former managing director of the National Railways of Zimbabwe (NRZ), wrote to Air Zimbabwe asking them to expedite the payment.
The auditors concluded: “Consideration should be made not to involve Munodawafa in decisions to be made in connection with issues arising from this investigation as he is conflicted…
“During the course of the investigation, we held a meeting with Munodawafa in which meeting he expressed his view that the payments of 300,000 euros per quarter by Air Zimbabwe to Navistar are not fraudulent.
“All other executives of Air Zimbabwe (including the former group chief executive officer Dr Peter Chikumba) with the exception of Grace Pfumbidzayi accepted that the payments of 300,000 euros per quarter were baseless and fraudulent.”
The Transport Secretary — who was a principal director at Vice President Joyce Mujuru’s Office between 2008 and 2012 — also stands accused of on three occasions failing to assist BCA in getting Zinara, which also falls under his brief, to explain suspicious payments it has made on behalf of Air Zimbabwe.
In several cases, money transmitted to Navistar was supposed to be forwarded to international insurers. However, there is a disparity of millions of euros between what the international insurers actually charged and what Navistar received from Air Zimbabwe.
BCA concludes that the difference was converted to personal use by management at Air Zimbabwe or Navistar or both.
Navistar board chair, Patrick Chingoka, told BCA he was not aware of the payments and recommended that criminal proceedings be instituted against management at the insurance brokerage.
BCA says it identified possible criminal acts and calls for police investigations targeting the airline’s former CEO Innocent Mavhunga, Pfumbidzayi, Nicholas Mujere (Air Zim acting general manager), Norbert Machingauta (Air Zim strategy and economic manager), Patience Tichagwa (Air Zim finance and administration manager), Oswell Matore (former Air Zim finance and corporate services general manager), Givemore Nderere (Navistar managing director), Vukile Hlupo (Navistar director) and Orton Mawire (Navistar finance director and company secretary).
Pfumbidzayi, BCA says, on several occasions tried to justify payments to Navistar by claiming the airline was trying to “bust sanctions”.
However, Air Zimbabwe was not under sanctions and insurance companies interviewed by BCA said they could not comprehend how the economic embargo could have interfered with the insurance sector and the national carrier.
The forensic report also reveals how Pfumbidzayi authorised a payment of US$360,448 to Navistar for insurance cover for two Airbus planes leased by Air Zimbabwe – in the full knowledge that they were already insured by the lessor.
The report also reveals how Zimre, now BaobabRe, took US$422,304.56 from Air Zimbabwe but failed to remit it to Willis Limited, Air Zimbabwe’s International Insurance broker, resulting in Air Zimbabwe’s insurance cover being cancelled.
“On the basis of available evidence, it appears to us that during the period February 1, 2009 to March 31, 2009, Air Zimbabwe was flying with no aviation insurance cover as the underlying risk carriers cancelled the cover,” the auditors said.
“The premium in question was also not refunded to Air Zimbabwe.”
The auditors also accused Navistar of “theft by conversion” over payments for the hanger property by Air Zimbabwe totalling US$796,079.80.
“The premiums were not remitted by Navistar to the insurer resulting in the airline suffering a double exposure as they lost the US$796,079.80 at the same time as its hangar property were not insured for the period April 2009 to March 2013 as no payments were made to the insurer in respect of the premiums.”
In that scam, the auditors said Navistar would, at the beginning of every year, approach Altfin Insurance Company and request for policy documents for Air Zimbabwe’s hangar property.
“We understand that Tafadzwa Nderere who is employed by Altfin would print policy documents and release them to Navistar. We understand that Tafadzwa Nderere is Givemore Nderere’s brother [CEO of Navistar].”
Armed with the policy document, Navistar would surrender it to Air Zimbabwe together with their debit note for the annual premium of US$205,000 – but no premiums would be forwarded to Altfin and consequently no insurance existed,
Online Reporter