EMBEZZLING PLAGUES MADAGASCAR'S CENTRAL BANK

UNCLAS ANTANANARIVO 000520

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR AF/E - MBEYZEROV, AF/FO DAS JSWAN AND EAP/CM
DEPT FOR EB/IFD/OMA - ABESMER
TREASURY FOR FBOYE
PARIS FOR D'ELIA

E.O. 12958: N/A
TAGS: EFIN ECON PGOV EAID MA
SUBJECT: EMBEZZLING PLAGUES MADAGASCAR'S CENTRAL BANK

REF: ANTANANARIVO 599


1. (SBU) SUMMARY. The Central Bank of Madagascar (BCM) faces growing
concerns about its competence following recent cases of
embezzlement. Three weeks ago evidence came to light that USD six
million was missing at the BCM's Manakara agency. Local press
reported last week another case of theft of USD 60,000 at the
Toamasina branch of the BCM. A total of fifteen people are under
investigation in connection with the two cases. Rumors implicate
the brother of Minister of Foreign Affairs Marcel Ranjeva, branch
manager of the Manakara agency, in the first case. A third case,
involving USD 150,000 was already reported last March/April at
Antananarivo BCM headquarters, which resulted in the arrest of seven
persons. In the midst of ongoing scandals, the GOM extended the
mandates of the board of directors and assessors of the Central
Bank. END SUMMARY.


2. (SBU) Local press first reported an embezzlement case in the
Manakara (eastern coastal city) branch of the BCM during the 2006
presidential campaign, alleging that the embezzled sums were
destined to partly finance the Ravalomanana campaign. In
February/March 2007, the newly appointed BCM Governor, Frederic
Rasamoely, proceeded with a financial audit which revealed a gap of
about USD six million in the accounting of its Manakara branch.
According to the BCM, the crime was carried out by fraudulent
subtraction of banknotes from their original packing spread out over
approximately a year. An investigation carried out jointly by the
Independent Anti-Corruption Bureau (BIANCO),the Economic Police
Force and the Central Service of Criminal Affairs resulted in the
arrest of four people. The Branch Manager of the Manakara agency,
reportedly the brother of Minister of Foreign Affairs Ranjeva, is
currently on a mission out of the country. His departure came a few
days before the beginning of the audit investigation raising
suspicion of his implication in the case.


3. (U) The Toamasina case seems not to have anything to do with
politics. The BCM of Toamasina routinely collects old banknotes
which should be destroyed. Profiting from a temporary break down of
a machine, some agents withdrew approximately USD 60,000 in old
Ariary bills. One of the culprits turned on the others leading to
several arrests.


4. (U) In April, seven people were arrested in connection with yet
another case of embezzlement at the BCM headquarters in Antananarivo
in which USD 150,000 went missing. Investigations discovered
several cases of forgery of records and checks.


5. (U) Amid this series of scandals, the GOM tried to reinforce
confidence in the BCM by extending the mandate of all members of the
Board of Directors and of all Bank Assessors. When opposition
members in the National Assembly asked Finance Minister Benjamin
Radavidson about the ongoing investigations and the extensions for
Bank leaders, he replied, "these are internal Central Bank
affairs."


6. (SBU) COMMENT: The BCM already had a reputation as a relatively
weak institution. With the Ariary steadily appreciating, export
manufacturers would like to see the Bank intervene to stabilize the
currency. An ongoing IMF audit of the TIKO company is investigating
tax liabilities estimated close to USD 10 million (Septel). The
massive Rio Tinto and Dynatech investments should bring millions of
dollars of revenue to the government. The infusion of their early
investment funds is considered the main driver of the Ariary's
appreciation. Economic policy management and governance remain top
challenges for the GOM. END COMMENT.

MCGEE