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The former finance minister in Mozambique has gone on trial in the US over the so-called “tuna bond” scandal which came to light in 2016.
Manuel Chang, who was the country’s finance minister from 2005 to 2015, is charged with taking bribes to commit his country secretly to huge loans that prosecutors say were then looted.
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Bribes, fraud and money laundering
The loans were meant to buy a fleet of tuna fishing ships, but went bad, plunging Mozambique into a financial crisis when the government’s $2 billion in “hidden debt” was uncovered in 2016.
Prosecutors say huge portions of the loans went to bribes and kickbacks to bankers and government officials, including $7 million to Chang himself.
Chang “abused his authority to enrich himself through bribery, fraud and money laundering,” Assistant U.S. Attorney Peter Cooch said during opening statements this week in a federal court in Brooklyn.
Change has pleaded not guilty to the charges.
Defense lawyer Adam Ford told jurors there’s no evidence that Chang agreed to take payoffs, or received a penny, in exchange for having Mozambique guarantee that the loans would be repaid.
“Minister Chang signs these guarantees because that’s what his government wanted him to do,” Ford said Tuesday.
Financial crisis
The scandal had a seismic impact on the country’s economy, with experts estimating that it could ultimately cost Mozambique around $11 billion or around 60% of its current GDP.
Before the emergence of the $2 billion debt, Mozambique was one of the world’s 10 fastest-growing economies for two decades, according to the World Bank.
After the scandal emerged, growth stagnated, the currency lost value, inflation surged and foreign investors lost confidence. The International Monetary Fund (IMF) withdrew its support for the country.
The World Bank says that, as of last year, Mozambique is one of the 10 countries worldwide with the lowest GDP per capital
Aftermath of the scandal
Mozambique’s government has reached out-of-court agreements with creditors in an attempt to pay down some of the debt.
Last year, it paid $142 million back to Credit Suisse — in cash and local currency bonds — to cover original loans of about $522 million from the Switzerland-based banking giant, according to the World Bank. Mozambique also recently reached an agreement on a $220-million settlement with Russia’s VTB Bank and Portugal’s BCP Bank.
The scandal has led to court action in Africa and Europe, as well as the U.S.
In Mozambique, at least 10 people have been convicted and sentenced to prison over the scandal, including Ndambi Guebuza, the son of former Mozambican President Armando Guebuza.
South African courts dismissed the Mozambican government’s attempts to have Chang face charges there. Some Mozambican activists argued that he would be treated too leniently in his homeland and should be sent to the U.S. instead.
The U.S. criminal cases have had mixed results. Pearse and two other British bankers have pleaded guilty, but a jury in 2019 acquitted another defendant, Jean Boustani, a shipbuilding company executive who’s from Lebanon.
Three other defendants aren’t in U.S. custody. One is another Lebanese shipbuilding executive. The other two are Mozambican ex-officials.
Chang was arrested at Johannesburg’s main international airport in late 2018, shortly before the U.S. indictment became public. After years of fighting extradition from South Africa, he was brought to the U.S. last year.
His lawyers tried to get the case thrown out. Among their arguments: that prosecutors overshot the reach of U.S. securities law and that Chang is immune from prosecution as a former foreign official.
U.S. District Judge Nicholas Garaufis turned them down
