Maputo — Maputo, 7 Jul (AIM) =96 The Mozambican Attorney-General=92s Office (PGR) ha= s stressed that the out-of-court settlement reached last week with the Port= uguese Commercial Bank (BCP) and VTB of Russia does not prevent Mozambican = prosecutors from bringing to justice those responsible for contracting illi= cit debts in the first place.

The PGR was responding, on Saturday to a claim by the NGO, the Centre for D= emocracy and Development (CDD), that the out-of-court settlement damages th= e interests of the Mozambican state and protects leaders of the ruling Frel= imo Party.

At the heart of this dispute are the loans contracted in 2013 and 2014 by t= hree fraudulent Mozambican companies, Proindicus, Ematum (Mozambican Tuna C= ompany) and MAM (Mozambique Asset Management), which were all run by the se= curity service, SISE. The loans, for over two billion US dollars, were guar= anteed by the Mozambican government of the day, under the then President Ar= mando Guebuza.

Guebuza=92s finance minister, Manuel Chang, signed the guarantees, which we= re entirely illegal since they smashed through the ceiling on state guarant= ees established in the 2013 and 2014 budget laws.

Predictably, the three companies could not repay the loans and soon went ba= nkrupt, leaving the Mozambican state liable for the full amount. Thus hidde= n loans became hidden debts.

The Constitutional Council, the country=92s highest body in matters of cons= titutional law, declared the loans illegal and unconstitutional.

The CDD based its stand on the Constitutional Council ruling. =93Bearing in= mind the non-recognition of the debts, declared null and void by the Const= itutional Council, the CDD believes that the position of the government in = entering into negotiations with the creditors is contradictory and damages = the State=94, it argued.

The PGR, however, insisted that the deal with the banks does not prevent pr= osecutors from bringing to court those responsible for contracting the ille= gal debts.

The out-of-court settlement, it said, =93does not affect the actions under = way which seek to hold criminally responsible those persons, Mozambican and= foreign, whose illicit acts resulted in contracting the undeclared debts a= nd issuing the corresponding guarantees=94.

Assistant Attorney-General Angelo Matusse told a press conference last week= that the ruling by the Constitutional Council is not sufficient =93to annu= l the burden borne by the Mozambican state, and the treatment of which is i= n the hands of foreign courts, notably English ones=94.

He pointed out that the jurisdiction of the Constitutional Council does not= extend beyond the borders of Mozambique. It could not be enforced in Engli= sh courts, and the contracts signed by the Mozambican companies state that = they will be governed by English law.

Matusse thought the agreement was a good deal for Mozambique, since it redu= ced the exposure of the Mozambican state to 220 million dollars =96 84 per = cent less than the original demand from the creditor banks.

There are various criminal cases under way in connection with the hidden de= bts. Thus former Finance Minister Manuel Chang will face criminal charges o= n his return to Mozambique. Currently he is in detention in New York, await= ing trial on fraud and money laundering charges.

The government is also suing the Abu Dhabi-based group, Privinvest, for 3.1= billion dollars. The fraudulent scheme was largely the brain child of Priv= invest which spent hundreds of millions of dollars in bribing Mozambican of= ficials, including Chang, and Credit Suisse bankers. Three of these bankers= (Andrew Pearse, Detelina Subeva and Surjan Singh), who played a key role i= n negotiating the loans, confessed to an American court that they had taken= bribes from Privinvest.

Privinvest became the sole contractor for Proindicus, Ematum and MAM, and g= rossly over-invoiced the three companies for the fishing boats, patrol vess= els and other assets it sold them. An independent audit of the companies in= 2016/17 calculated the amount of over-invoicing at more than 700 million d= ollars.

A further defendant in the Mozambican case is the founder of Privinvest, th= e Lebanese billionaire Iskandar Safa. However, he will not face justice for= his role in the scandal, since he died in January this year.