POLITICAL INSIDER WINS JUDGMENT AGAINST CITIBANK

C O N F I D E N T I A L LIBREVILLE 000619

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/26/2016
TAGS: EFIN KCOR PGOV EINV GB
SUBJECT: POLITICAL INSIDER WINS JUDGMENT AGAINST CITIBANK

REF: A. YAOUNDE 1331


B. LIBREVILLE 337

Classified By: DCM Katherine Dhanani. Reason: 1.4 (d).


1. (C) Summary: One of President Bongo's closest advisors won
an appeals court judgment of $5.4 million against Citibank.
Citibank reports that the manner in which the decision was
made shows that political influence can trump the rule of law
in the Gabonese court system. Coming hard on the heels of
difficulties American and Canadian investors have experienced
with Air Service (reftels),this case confirms that outsiders
need to be careful when negotiating Gabon's business climate.
End summary.


2. (C) On September 20 the Gabonese court of appeals issued a
judgment in a Citibank appeal of a lower court ruling. The
case, which is a complicated one, dates back to 1999, when
Citibank managed the private account of former Finance
Minister Jean Pierre Lempoumba Lepandou. Lempoumba parted
ways with President Bongo in the early 1990s, and ran for
president as an opposition candidate in 1993. Lempoumba sued
Citibank for allowing his wife to use her position as a
Citibank employee to withdraw funds from his personal
account. Lempoumba initially used his influence to secure
his wife a position at Citibank. When Lempoumba fell out
with Bongo and left for exile in France, his wife gradually
withdrew the majority of funds from his account--either
entirely without his approval, as Lempoumba claims, or at
least some of the time without his approval, as Citibank
believes. Either way, his wife sometimes forged his name on
documents in order to make the transactions.


3. (SBU) The court case languished for several years, until
Lempoumba came back from exile and became one of President
Bongo's closest advisors at the presidency in 2005. In
August 2005, the lower court issued a judgment awarding
Lempoumba about $5.2 million in principal, interest and
damages. Citibank appealed, arguing the decision was invalid
because the three judges who signed the decision (which was
issued at a time when most of the judiciary was on vacation)
were not the judges who had heard evidence. Gabonese law
clearly states that only the judges who have heard arguments
can issue a ruling. The appeals court agreed with Citibank
concerning the law, and nullified the lower court ruling.


4. (SBU) Normally, the nullification of a ruling would
require a return to the lower court. Anticipating this,
Citibank planned to use a favorable ruling in the appeals
court to enter into settlement negotiations. However, even
though the only issue formally before the appeals court was
the validity of the lower court ruling, the appeals court
took it upon itself to go further. The appeals court decided
to issue a judgment itself, instead of sending the matter
back to the lower court. The decision the court issued was
essentially identical to the lower court judgment, awarding
about $5.2 million to Lempoumba


5. (C) According to Ade Adjayi, Citibank's French and
Gabonese attorneys tell Citibank that the appeals court has
the authority to issue a ruling (and there is precedent),but
normally would only do so under exceptional circumstances.
The Gabonese attorney, however, strongly recommends against
an appeal, since he believes it is clear that in the current
political climate no different result can be anticipated.
Under Gabonese law, even if Citibank appeals, the judgment
must be paid now. If an appeal were successful, Lempoumba
would be required to return the money. If an appeal failed,
Lempoumba would be entitled to additional interest and costs.
Ade Adjayi reports that Citibank New York has decided to cut
its losses and drop the matter. She reports that Citibank
executives were surprised by the Gabonese judiciary's
vulnerability to political influence (as they considered
Gabon an honest place to do business).


6. (C) The Ambassador will continue to raise the Citibank
case with President Bongo and other high government
officials, emphasizing the effect it may have on limiting the
attraction of American investment to Gabon.


7. (C) Comment: Citibank is only the most recent North
American company to learn that it is not easy to protect
one's interests when they are opposed by Gabonese regime
insiders. From 2004 to 2005 Gabon's score on the
Transparency International Index dropped from 3.3 to 2.9. We
will not be surprised if Gabon slides further in 2006. Some
players in Gabon appear to believe now is a good time to rake
in the chips before the dealer (President Bongo) leaves the
table.
WALKLEY