Friday, March 8, 2019
Three Former Mozambican Government Officials and Five Business Executives Indicted in Alleged $2 Billion Fraud and Money Laundering Scheme That Victimized U.S. Investors
BROOKLYN, NY – An indictment was unsealed on March 4, 2019, charging Najib Allam, an executive of the Privinvest family of maritime services companies, and Teofilo Nhangumele and Antonio do Rosario, former Mozambican government officials, for their roles in a $2 billion fraud and money laundering scheme that victimized investors in the United States and around the world. The indictment was previously unsealed on January 3, 2019 as to co-defendants Jean Boustani, a Privinvest executive, Manuel Chang, the former Finance Minister of Mozambique, and Andrew Pearse, Surjan Singh and Detelina Subeva, former high-ranking investment bankers at an international investment bank (the Investment Bank). Each defendant is charged with wire fraud conspiracy and money laundering conspiracy. In addition, Boustani, Allam, Chang, do Rosario, Pearse, Singh and Subeva are charged with securities fraud conspiracy. Pearse, Singh and Subeva are also charged with conspiracy to violate the anti-bribery and internal controls provisions of the Foreign Corrupt Practices Act (FCPA).
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Brian A. Benczkowski, Assistant Attorney General of the Justice Department’s Criminal Division, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the charges.
“As charged in the indictment, the defendants orchestrated an immense fraud and bribery scheme that took advantage of the United States financial system, defrauded its investors and adversely impacted the economy of Mozambique, in order to line their own pockets with hundreds of millions of dollars,” said United States Attorney Donoghue. “This indictment underscores the Department of Justice’s continuing efforts to end such fraudulent and corrupt practices and to hold those responsible to account for their crimes.”
“The indictment unsealed today alleges a brazen international criminal scheme in which corrupt Mozambique government officials, corporate executives, and investment bankers stole approximately $200 million in loan proceeds that were meant to benefit the people of Mozambique,” said Assistant Attorney General Benczkowski. “The Department of Justice and our law enforcement partners are dedicated to using all tools at our disposal to prosecute those who engage in money laundering, financial fraud and corruption at the expense of U.S. investors, wherever those individuals may be located.”
“Today’s indictment proves that no matter who you are, or what position of power you’re in, you’re not immune from prosecution,” stated FBI Assistant Director-in-Charge Sweeney. "The FBI will continue to use all resources at our disposal to uncover crimes of this nature and expose them for what they really are.”
The Fraudulent Scheme
The indictment alleges that between approximately 2013 and 2016, Boustani, Allam, Nhangumele, do Rosario, Chang, Pearse, Singh, Subeva and their co-conspirators ensured that the Investment Bank, and another foreign investment bank, would arrange for more than $2 billion to be extended, in three loans, to companies owned and controlled by the Mozambican government: Proindicus S.A. (Proindicus), Empresa Moçambicana de Atum, S.A. (EMATUM) and Mozambique Asset Management (MAM). The proceeds of the loans were intended to fund three maritime projects for which Privinvest was to provide the equipment and services. Specifically, Proindicus was to perform coastal surveillance, EMATUM was to engage in tuna fishing and MAM was to build and maintain shipyards.
Instead, the defendants and their co-conspirators illegally facilitated Privinvest’s criminal diversion of more than $200 million of the proceeds of the loans. These stolen funds included more than $150 million that Privinvest — at the direction of Boustani, Allam and others — used to bribe Chang, Nhangumele, do Rosario and other Mozambican government officials to ensure that companies owned and controlled by the Mozambican government would enter into the loan arrangements, and that the government of Mozambique would guarantee those loans. In addition, Privinvest diverted approximately $50 million in kickback payments to Pearse, Singh and Subeva, who assisted the co-conspirators to obtain financing for the loans through the Investment Bank and the other foreign investment bank. The loans were subsequently sold in whole or in part to investors worldwide, including in the United States. In doing so, the participants in the scheme conspired to defraud these investors by misrepresenting how the loan proceeds would be used, the amount and maturity dates of other financial obligations held by Mozambique and the ability of the government of Mozambique to repay the loans.
To date, the companies controlled by the government of Mozambique have failed to make more than $700 million of loan repayments that have become due.
Boustani, a citizen and resident of Lebanon and Antigua and Barbuda, was the lead salesperson and negotiator for Privinvest, and is charged for his role in coordinating the payment by Privinvest of more than $200 million in bribe and kickback payments to Mozambican government officials and investment bankers in order to facilitate the three loans. He is alleged to have personally received at least $15 million from the scheme. Boustani was arrested in Queens, New York on January 2, 2019 and arraigned later that day in federal court in Brooklyn. Boustani has pleaded not guilty to the charges, and a trial date has not yet been set.
Allam, a citizen of Lebanon, was the Chief Financial Officer of Privinvest, and is charged for his role in helping Boustani and others coordinate the payment by Privinvest of more than $200 million in bribe and kickback payments. Allam remains at large.
Nhangumele, a citizen and resident of Mozambique, acted in an official capacity on behalf of the President of Mozambique during the charged scheme, and is charged for his role in facilitating the payment by Privinvest of over $150 million to Mozambican government officials to gain approval for the maritime projects, and to cause Mozambique to borrow more than $2 billion from the two investment banks in government-guaranteed loans to finance the projects. Nhangumele has not yet been arrested on the charges in this indictment and Nhangumele is not currently in U.S. custody.
Do Rosario, a citizen and resident of Mozambique, held positions within the Mozambican government, including with the Mozambican state intelligence service, known as “SISE,” and managerial roles for each of the three state-owned entities formed to undertake the maritime projects that are the subject of the indictment. He is charged for his role in ensuring that Mozambique would undertake the maritime projects and award the contracts for those projects to Privinvest, and that Finance Minister Chang would issue government guarantees binding Mozambique to repay $2 billion in loans to undertake the projects. He is alleged to have personally received more than $12 million from the scheme. Do Rosario has not yet been arrested on the charges in this indictment and is not currently in U.S. custody.
Chang, a citizen and resident of Mozambique, was the former Finance Minister of Mozambique, and is charged for signing guarantees on behalf of Mozambique for the three corrupt loans. He is alleged to have personally received at least $5 million from the scheme. Chang was arrested on December 29, 2018, in South Africa, pursuant to a provisional arrest warrant issued at the request of the United States. The United States is seeking his extradition.
Pearse, a citizen of New Zealand, Singh, a citizen of the United Kingdom and Subeva, a citizen of Bulgaria, reside in the United Kingdom. At the time of the charged scheme, Pearse and Singh were managing directors, and Subeva was a vice president, of the Investment Bank. Each has been charged for facilitating bribe payments to government officials in Mozambique and for circumventing the internal accounting controls of the Investment Bank, which arranged two of the three loans. Pearse, Singh and Subeva were arrested on January 3, 2019, in the United Kingdom, pursuant to provisional arrest warrants issued at the request of the United States. The United States is seeking their extradition.
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The charges in the indictment are allegations, and the defendants are presumed innocent until proven guilty.
The investigation is being conducted by the FBI’s New York Field Office. The government’s case is being handled by the Business and Securities Fraud Section of the United States Attorney’s Office for the Eastern District of New York (EDNY), the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) and the Fraud Section. Assistant United States Attorneys Matthew S. Amatruda and Mark E. Bini of the EDNY, Trial Attorneys Margaret Moeser and Sean W. O’Donnell of MLARS and Trial Attorney David M. Fuhr of the Fraud Section are prosecuting the case.
The Criminal Division’s Office of International Affairs provided critical assistance in this case. The Department appreciates the significant cooperation and assistance provided by the United States Securities and Exchange Commission. The Department also appreciates the assistance provided by law enforcement authorities in the United Kingdom and in South Africa.
Lebanon, Antigua and Barbuda
ANTONIO DO ROSARIO
E.D.N.Y. Docket No. 18-CR-681 (WFK)