What CAG found out in escrow deal

Mr Harbinder Singh Sethi

By The Citizen Reporters

IN SUMMARY

PAP is owned by Kenyan tycoon Harbinder Singh Sethi, who claims that he did not come to Tanzania to make money but to help end chronic electricity problems in the country.

Dar es Salaam/Dodoma. Pan African Power Solutions (T) Limited (PAP) did not legally acquire 70 per cent of Independent Power Tanzania Limited (IPTL) from Malaysia-based company Merchmar Berhad, an investigation by the Controller and Auditor General (CAG) has established.

PAP is owned by Kenyan tycoon Harbinder Singh Sethi, who claims that he did not come to Tanzania to make money but to help end chronic electricity problems in the country.

The CAG has also established that all money in the Tegeta escrow account was supposed to be paid back to Tanzania Electric Supply Company (Tanesco) because the state-owned power utility had been overcharged a total of Sh321 billion by IPTL between 2002 and 2012.

According to two senior officials from the CAG’s office, who were among investigators who probed the multibillion-shilling scandal, Mr Sethi presented forged documents to the Tanzania Revenue Authority (TRA) and Business Registration and Licencing Authority (Brela) in an attempt to hide the dubious nature of the transactions.

The Citizen exclusively reported last month that documents submitted by PAP to TRA show that Mechmar purportedly sold its 70 per cent stake in IPTL in September 2013 for a paltry Sh6 million.

Mr Sethi and his son own 50 per cent of PAP, while the rest is owned by a company called Simba Trust that is said to be incorporated in Australia, according to investigations conducted by The Citizen.

What brings the transaction into question is the fact that at the time of the purported sale of shares, IPTL had power plants located in Tegeta, Dar es Salaam, worth millions of dollars plus cash totalling $250 million—including $122 million sitting idle in an escrow account that was under the custody of the Bank of Tanzania (BoT).

Billions of shillings were paid to Mr Sethi from the account after he convinced the relevant officials he had acquired the 70 per cent stake in IPTL from Mechmar, which enabled him to reach out-of-court settlements with VIP Engineering and Marketing, a local firm that owned 30 per cent of IPTL.

To reach a deal with VIP, Mr Sethi had to pay a whopping $75 million to acquire 30 per cent of IPTL in order to have full control of the Tegeta escrow billions as well as the power plants.

What does not add up, however, is 70 per cent of IPTL being acquired for only $3,750 (Sh6 million) and, a few weeks later, 30 per cent of the same company being bought for $75 million (Sh120 billion).

The documents show that Piperlink, a British Virgin Island offshore company, bought the 70 per cent IPTL stake for Sh6 million before transferring it to Mr Sethi for $300,000 (Sh480 million).

Investigators who spoke to The Citizen yesterday on condition of anonymity said a section of the media was waging a relentless propaganda war in support of a questionable transaction. “The CAG’s office acted professionally, and we established that PAP didn’t buy 70 per cent of IPTL as it claims…we were not tasked with taking anyone to court but to conduct a forensic audit to establish whether the deal was aboveboard or shady. We concluded that it was shady,” one of the officials said.

The CAG investigation has also established that Attorney General Frederick Werema erred by granting a tax exemption to PAP, which was paid $122 million (Sh207 billion) from the escrow account.

Details gathered by The Citizen show that the AG’s role is bigger than just unlawfully granting a tax waiver to PAP because he also acted as the lead legal counsel and facilitated payment of billions of shillings to Mr Sethi. For instance, in September, last year, the AG wrote to Tanesco’s former chief legal counsel, Mr Godwin Ngwilimi, instructing him to travel to Malaysia on a fact-finding mission related to the PAP’s purported acquisition of the 70 per cent stake in IPTL.

Mr Ngwilimi, who was later forced to resign by the Tanesco board, travelled to Malaysia and established that the purported acquisition did not take place, but the AG overruled him and advised that the escrow billions be paid to PAP.

PAP was supposed to pay tax as directed by TRA, but Mr Werema wrote a letter instructing that the company should not pay value added tax (VAT). The AG has no legal mandate to grant tax exemption as this is the preserve of the Finance minister.

The CAG team has also established that the Ministry of Energy and Minerals failed to obtain proof that PAP had actually acquired the IPTL stake.

Energy and Minerals Permanent Secretary Eliakim Maswi facilitated the release of the escrow billions to PAP without having concrete proof of the purported acquisition.

As a result, Tanesco incurred a loss of Sh306 billion in inflated charges by IPTL between 2002 and 2012.

In fact, according to the CAG team, IPTL still owes Tanesco an extra Sh15 billion because the total amount the state-owned utility has been overcharged is Sh321 billion.

The Tanesco board of directors rescinded its earlier decisions, allowing PAP to be paid billions of shillings as well as being granted a contract extension despite the fact that all the money in the escrow account was supposed to be returned to the state utility.

Earlier, the Tanesco board raised queries about the deal, but the very same board later rescinded its decisions and endorsed the deal in a questionable move, according to details gathered by the CAG team.

Contacted yesterday, Public Accounts Committee chairman Zitto Kabwe did not deny or confirm the details, only saying, “The public shouldn’t worry because everything is under control.”

.Also read: http://www.zanzibarnikwetu.blogspot.ca/2014/11/familia-ya-jk-yahusishwa-na-ufisadi.html

12 Comments
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- mishipayasimba Be Fair
  Highfiving Kabwe and his buddies does not help anything. Kabwe always exposes scandals that sparks anger, outrageous comments, back-talkings and hardfeelings in our communities. This scandal of ESCRO-Tegeta carry with it the message of impeaching the president, freedom of TAKURU and High court to be included in the new constitution. The problem is that we all scared to be like Ken Saro-Wiwa and his movement to support Ogoni people-MOSOP!
Nkwazi .N Mhango
This isn't he first time this bugger to have fleeced a country. He did the same in Kenya. Such robbers are supposed to be touched in the public so that it can be a lesson for others. The guys is not even a tycoon as many media like to refer to him. Instead, the punk is a thief that is supposed to be jailed for life. Again, is this puta alone in this criminality? He is used by our homegrown thugs in power. It is time that we kick their assess (forgive me). This SOB with James Rugemalaya should be hanged for the sake of our integrity and prosperity.
Mogulsaurus
What a joke....."under control" you've got to be kidding! As is typical, the government of Tanzania is once again OUT of CONTROL. Why would any one want to do business in an environment where corruption is like an incurable cancer! These people need to put in prison and the key needs to be thrown away!
kasome
Here we have a clear case of a government utterly out of control. All previous shenanigans, EPA, Richmond, etc., were successfully camouflaged. However, this time around, their hand has been successfully caught while in the cookie jar. For all of this, lets thank the steadfast and unwavering stand of our youthful trio Kigoma parliamentarians, Kafulila, Zitto, and Selukamba, plus a few others in parliament who stood up against these corrupt leaders in government. More importantly, the CAG report would not have been possible had it not been for the support from development partners who contribute to the budget. Their threat to withhold funds has made it possible for the report to be released in parliament. It is now upon parliament to go further and reveal who exactly are responsible for this corruption. If it goes all the way to statehouse, so be it, people have the right to know who is responsible for the misappropriation of funds.
Alex Kakala
Indians have always taken advantage of East African citizen by always engaging in businesses hinged on cheating and manipulating local black citizen, by bribing the government of the day till end.
Most Indians have enriched themselves through unlawful deals which disadvantages local blacks.

East African government continue to impoverish their own black citizen by sidelining them and selling everything to these manipulators who in turn continue to sack the blood of poor black citizen.
For example this Sethi, look at formation of his companies, normally they will ensure the business is fenced up against local blacks, only within their families or communities. That enables them to play dirty games of cheating, corrupting government leaders without information going outside the circle.

Which East African black citizen want such a company , which is actually using public funds to enrich itself at the expense of poor people, huge tax holidays while selling electricity to poor people at exorbitant prices.

When Idd Amin fired all Indians to leave Uganda and confiscated their wealth them l criticized him as unfair, yes it was unfair.
But if you look the other side of the coin, you will find out that they have never realize how important is to engage local blacks and do business together as part of fully integrating in the community, and stop bribing government to secure deals which continue to suck poor people's blood, as they pile up tons of money becoming kings surrounded by black slaves in blacks own nations.
I find this very disturbing.

Sethi case is a tip of ice berg. We saw how another Indian company from Indian opened a university hospital, in the same way, and started throwing body parts
inn the streets to avoid incurring cost for proper disposal of human body parts used for experiments. Did they bring those bodies from India or were Tanzania bodies may be obtained in unlawful way, by bribing money. When this case was highlighted, the owners of institution Indians were arrested and letter released.
The case no news.

Recently so may Tanzania children were sent to India by Indians hospitals for heart surgery as charity, nobody knows if these children really needed surgery or not. They could have been used for medical training of Indians cardiology surgery etc.

After that we have seen mushrooming of Indian hospitals in the country, and local blacks have to pay huge bills.

We are not anti Indians or foreigners, however the truth is no one from Tanzania can go to India and do all these changelings or manipulation or even open medical hospital, etc. No one from East Africa blacks can do that. Why? Because they control their economy for their local citizen, now the question is why Tanzania government are so blind by accepting stupid bribes and destroying their own people? And why Indians come to East Africa and provide bribes to entice government leaders in order to cheat poor blacks?

This dangerous game has to stop immediately, otherwise you want be surprised one day local blacks turning against all these cheating!
- kasome Alex Kakala Alex Kakala, you are only looking at one side of the coin. The worst culprit in all that is the black compatriots who allow all this to happen. Our Weremas are our worst enemies, more than the Singasingas, for without them, none of this would be happening.
  - Alex Kakala kasome
    
    Read history, there was no bribes in most of East African communities , especially Tanzania which we can understand very well. We know how they bribes came to flourish. However we can not rellly on history alone, human must be ready to change and get rid off bad behavior.
    Chinese president his persecuting and sentencing communist party leaders who used to take corruption as a norm.
  - Alex Kakala kasome
    
    I already commented below, proposing AG to be arrested, charged, sacked, prosecuted, sentenced with highest punishment and his ill gotten wealth confiscated, including loosing pension money. While the side is done, we have to turn back to those ho offer these bribes to secure illegal business or to turn illegal business to be legal! They should be dealt with severely including revoking their citizenship and deporting them if possible, once they complete serving their sentences. I am not of fearing Asians or White man whatever! Whoever commit such crimes must be punished and we must send clear message, to them, if they lining up from India to put hand on this country by bringing in the culture of bribing, must stop immediately period!.
kilim
Attorney General Frederick Werema, Minister for energy, TANESCO board of Directors and Managing Director and IPTL cronies including Harbinder Singh Sethi need to be in jail as soon as possible and pay back our money. IPTL SHOULD BE SOLD AND MONEY OBTAIN SHOULD PAY THE TAX AND VAT FOR WHAT THEY HAVEN'T PAID SINCE 2002 TODATE. Prosecute whoever involved in this scandal, PM Pinda should resign.
Alex Kakala Can the speaker of the parliament order the police to confiscate mining, oil and gas contracts from the minister of energy and minerals prof. Muhongo and TPDC?
We knew the minister is not credible, he has no trust of Tanzania people to keep those contracts. Please handle over the contracts to PAC.
We don't want the speaker to continue playing the game of wait and see to protect criminals. Release public documents to the people, that is all we asking you madam speaker, if you can't do the job, just issue a letter authorize PAC and police to do it. the country is already under water due to mismanagement, and you all instead of trying to lift it up, your dragging it further to fall completely. This is not acceptable. It is better entire government to resign rather than tarnishing image of every Tanzania citizen and crippling the economy on the country.
Alex Kakala We have heard enough of criminals government leaders hiding in beautiful offices provided by poor Tanzania citizen to them so that that can execute their duties for public, but instead they have been running amok to steal everything from poor citizen.

How many of Tanzania poor citizen have been paying electricity bills through their noses? only to find that all the funds have been stolen by these criminals.
Now is time for action not atlking!
1) Arrest IPTL, PA, nd other companies owners involved inthis IPTL -ESCROW
case with immediate effect, charge them under country law of maximum
panishment
2) Confiscate all their companies assets immediately including those in offshore
accountsrrest

3) Arrest Tanzania Attorney General (AG), Minister of enrgy and minerals (Prof. Muhongo), secretary of the same ministry (Maswi) and others involved in the case

4) Arrest TANESCO top leaders involved in the case, including the purchasing of electricity from these criminal companies

5) Confiscate all assets belongs to AG, Minister and secretary of ministry of energy and minerals.

6) AG, minister and secretary of ministry of fiance, BOT, TANESCO and all those involved, their services or employment should be terminated with immediate effect and their pensions cancelled!
7) The arrest and change of all above should take place immediately, and all should be charged under the section of stealing public funds, criminal breach of trust, and treason for attempting to destroy the nation!

8) May we should think of hiring FBI and other reputable intentional investigators.

9) We all already know that the minister of energy and minerals is a liar, thief, criminal and has caused so much loss to the nation till to date, but was kept in the job as protection among government criminals, this warrant an immediate confiscation of all mining, oil and gas contract documents and end them over to PAC.

10) Mining, Oil and Gas, TPDC, STAMICO, TANESCO should be taken out of ministry of energy and minerals , as there is no law compelling the nation that these public owned companies should remain in the same ministry, instead place them under special committee.

11) Dissolve ministry of energy and minerals and place section under ministry of works under Dr. John Maghufuli, he has proven to be capable of standing up to Japanese when they screwed up the Klwa road construction, he can stand up against manipulative wazungu of whom prof. Muhongo is very scared to death, kissing their feet!

12) If above not complied with by the government, it is then clear that time is running out, Tanzania citizen have to take to the streets and demand the government be dismissed and appoint care taker government until next elections. Care taker government should be by Tanzanians including oppositions.

TANZANIAN AT LEAST SHOW OUR POOR FARMERS IN THE VILLAGES, THOSE UNEMPLOYED, STUDENTS STRUGGLING TO PAY SCHOOL FEES, WORKERS WORKING DAY AND NIGHT AT LOW PAY AND THE WHOLE WORLD THAT WE CAN BE SEROUS TO PUT OUR HOUSE IN ORDER.