LARGEST CONGOLESE BANK CLAIMS GROSS INJUSTICE

C O N F I D E N T I A L SECTION 01 OF 02 KINSHASA 001870

SIPDIS

DEPT PASS TO USTR (WJACKSON)

E.O. 12958: DECL: 11/06/2015
TAGS: EFIN ECON PGOV KCOR KJUS CG
SUBJECT: LARGEST CONGOLESE BANK CLAIMS GROSS INJUSTICE


Classified By: EconOff W. Brafman for reasons 1.4 b/d.


1. (SBU) Summary. The DRC's largest and oldest bank has
launched a lobbying campaign in opposition to a Supreme Court
decision that upheld a USD 5.7 million judgment against it.
The Commercial Bank of the Congo (BCDC) claims that the
October 28 decision is a gross miscarriage of justice and yet
another example of a corrupt justice system. The award arose
out of a lawsuit that a Lebanese-owned company filed against
BCDC in connection with a commercial transaction. A senior
bank official said the BCDC may consider closing as a result
of the case. End summary.

JUST THE FACTS
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2. (SBU) BCDC's Corporate Finance Advisor, Guy-Robert
Lukama, met with Econ Counselor and EconOff November 1 to
discuss a USD 5.7 million judgment entered against it. The
litigation arose out of a 1987 World Bank (WB) funded
economic development project with Sintimex, a company owned
and operated by a Lebanese businessman with what the local
media reports to be a long history of shady transactions in
the DRC, resulting in a government order to expell him in

1995. BCDC extended to Sintimex and a sister company about
USD 1.8 million in credit for the import of coffee processing
equipment, at the request of SOFIDE, a now essentially
defunct Congolese development parastatal. Sintimex alleged
that it fully paid BCDC and that the bank then refused to
turn over the documentation enabling it to recover the
equipment. Looting in 1991 and 1993 resulted in the
equipment's irreparable damage. Two appellate courts,
including the Supreme Court, have upheld the trial court's
judgment.


3. (U) BCDC is the Congo's oldest and largest bank, claiming
to hold forty percent of all national accounts, including
deposits of nearly USD 55 million (several times that of
Citigroup locally) and USD 80 million in credit extended.
Fortis, a Belgium-based multinational, is the primary
shareholder in BCDC's parent company, Belgolaise. BCDC has
several branches throughout the country, and is in the
process of reopening several offices, including one in
Kolwezi, near the copper-cobalt concessions of
American-owned Phelps Dodge and several other mining
entities. (Comment: Although the banking sector remains
extremely weak and currently acts as little more than a
transfer agent, it has growth potential, particularly should
an anticipated post-election investment boom occur. End
comment.)

THE BANK'S POSITION
--------------


4. (SBU) BCDC denies any malfeasance. Lukama told EconCouns
that he does not believe Sintimex ever intended to process
coffee, and that the entire endeavor was no more than a
money-making scam. He said that Sintimex represented the
coffee processing equipment as new, when in fact it was
secondhand and overvalued.


5. (C) Lukama said BCDC has no doubt corruption occurred at
all three court levels. He points as an example to a court
appearance before the Supreme Court President to discuss the
case. The Judge said that he would consider the matter and
rule on it, but several minutes later appeared with a
typewritten judgment that Lukama believes the Court had
already prepared after receiving a bribe. Lukama also said
that Minister of Justice Kisimba Ngoy may have a personal axe
to grind against BCDC, but he did not offer any details.
(Comment: It is widely known that justice is often for sale
in the DRC, so corruption in this specific case is certainly
possible. Congolese lawsuits can often be little more than
bidding contests to influence judges. End comment.)


6. (SBU) Lukama said that BCDC has little hope of any further
judicial recourse, its last possibility being an appeal based
on claims of malfeasance by individual judges. Lukama told
EconCouns that Vice President Azarias Ruberwa has the power
to overturn the judgment on the grounds of malfeasance.
(Comment: This in itself is an example of the lack of
separation of powers under the Transitional Government. End
comment.) Ruberwa has declined to do so, instead offering
only an oral assurance that the judgment will never be
executed. Lukama also said that Parliament is discussing
this matter but that the outcome is unlikely to be positive
for BCDC.

7. (C) Since it sees no solution through legal channels, BCDC
has begun lobbying other diplomatic missions, including the
French, British, Belgians and the European Union (EU) for
support, as well as President Kabila's staff. Lukama said
that the EU responded that it will raise this issue within
the framework of the CIAT/good governance discussions and
that the French may suspend a mission of its Chambers of
Commerce. (Comment: Post is not becoming directly involved
in this matter at this stage, particularly as there are no
direct American interests at stake. We believe it likely that
the Belgian Embassy will act, given the Belgian financial
interest involved. End comment.)

POSSIBLE RAMIFICATIONS
--------------


8. (SBU) Lukama said that the judgment could result in some
serious consequences beyond the impact of paying the
judgment. (He also explained that the WB is not a source for
recovery because it had already discharged its obligation
when it provided the original funding.) He said that the
judgment's payment could ultimately result in BCDC's closure,
as its primary international shareholder, Fortis, is in the
process of divesting itself of its sub-Saharan banking
business, and Belgolaise must now attract other investors.
BCDC justifibly fears that this current problem would be a
strong disincentive to potential investors. Short of
closure, Lukama said that the judgment threatens to end or
even reverse BCDC's current expansion. Lukama is also clearly
concerned about the potential precedential effect of this
judgment, as a solvent enterprise such as BCDC is an
attractive target for the unscrupulous.

COMMENT
--------------


9. (C) Even if BCDC turns out to be crying wolf about the
impact of the case on the bank's future, it is noteworthy
that it is taking a stand against what it sees as a corrupt
and broken justice system. In fact, this case may be the
final straw for the Justice Minister because his reported
overt interference in the case is creating a fairly strong
reaction against him.
MEECE