NAMIBIA: CORRUPTION CASES TO NET BIG FISH?

UNCLAS SECTION 01 OF 02 WINDHOEK 000302 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PGOV KCOR CH WA SUBJECT: NAMIBIA: CORRUPTION CASES TO NET BIG FISH? -------------- Summary -------------- ¶1. (SBU) Namibia's Public Services Commissioner Teckla Lameck and her two business partners (a Namibian and Chinese national) are alleged to have defrauded the Namibian government (GRN) of USD $4.2 million. The alleged corrupt acts are linked to a deal involving the GRN's purchase of x-ray scanning equipment from NucTech, a Chinese government-owned company. In a separate case, the Chief of the Namibian Defense Force (NDF) is alleged to have profited from a deal in which a Chinese businessman provided another senior ranking military officer USD 1 million to secure a mining exploration license, according to media reports. Both cases have emerged at a time of increasing scrutiny and criticism of Chinese business practices in Namibia. Namibia's Anti-Corruption Commission (ACC) is leading both investigations, but its failure to secure convictions in high-profile cases since its inception in 2006 has tarnished its image. A conviction in one or both of these cases might help restore the Namibian public's faith in the ACC and government's anti-corruption efforts. End Summary. -------------- NucTech Scandal -------------- ¶2. (SBU) According to the Namibian Anti-Corruption Commission, Public Services Commissioner Teckla Lameck, her Namibian business partner Kongo Mokaxwa, and Chinese National Yang Fan defrauded the government of 42 million Namibian dollars (approximately USD $4.22 million). The charge is in connection with the government's purchase of USD $55.3 million in X-ray scanning equipment from NucTech a Chinese company. Lameck and her co-defendants do not dispute receiving the money, but they argue the transaction was a commission for consulting services rendered to NucTech by their company Teko Trading. ¶3. (SBU) In early February, NucTech and Teko reportedly entered into a consultancy agreement. On February 27, two-and-a-half weeks later, the Ministry of Finance provided an advance payment of USD $12.8 million to NucTech for the X-ray scanners - an arrangement considered highly unusual for a GRN procurement. On March 11, NucTech paid Teko Trading USD $4.2M, although it is not clear what services were provided. Subsequently on April 10, NucTech and Teko entered into new consultancy agreements entitling Teko to another USD $8.6M, a sum equal to the difference between the USD $12.8M paid by the GRN to NucTech, and the $4.2M NucTech had already paid Teko. Fan allegedly was an employee of both NucTech and Teko Trading. In her defense, Lameck stated she had notified the president of her business interest in Teko Trading. ¶4. (SBU) The Chinese government provided a concessionary loan to fund most of the X-ray scanners, and President Hu Jintao's son Hu Haifeng was the CEO of NucTech when the Namibian government approved the deal. A tender for the equipment was not released publicly. The ACC has indicated that it wishes to interview Hu Haifeng, although it does not consider him a suspect. ¶5. (SBU) Lameck and her two business partners were released on bail August 11 after six weeks in detention. Lameck has been suspended, pending completion of the investigation, and her assets and those of her co-defendants have been frozen. In its ruling upholding the asset freeze, the High Court determined there was sufficient evidence that Lameck and her associates had violated two sections of Namibia's anti-corruption act. -------------- Another Corruption Case with Chinese Links -------------- ¶6. (SBU) A separate corruption scandal involving high-level military officials and alleged Chinese conspirators has also generated significant media attention in recent weeks. The Chief of the Namibian Defense Force (NDF),Lieutenant General Martin Shalli, has been suspended pending the completion of an investigation into an alleged fraud scheme where another (as yet unnamed) senior NDF officer facilitated the acquisition of an exploratory mining license. Press reports claim a Chinese national paid USD $1 million to the senior NDF officer, who in turn transferred USD $250,000 to Shalli. Shalli reportedly facilitated the deal. Shalli allegedly placed his cut in a Zambian bank account under another person's name while he was serving as Namibia's High Commissioner in Lusaka. WINDHOEK 00000302 002 OF 002 ¶7. (SBU) Military sources have been tight lipped about the case, noting that the investigation is ongoing. According to media reports, Shalli and the other military officer met the Chinese national in 2005 or 2006 on a trip to China to close a weapons purchasing agreement between the NDF and the Chinese company Poly Technologies. At that time, their Chinese contact reportedly approached Shalli for help in procuring a diamond license, but Shalli referred him to the other military officer. News reports that Poly Technologies paid Shalli USD $250,000 have been explained by Shalli as an up front payment to lease one of his properties for 10 years. ¶8. (SBU) Early speculation about Shalli's suspension was that it was instigated by SWAPO-party stalwarts who believed that the general was a closet sympathizer of the opposition party, Rally for Democracy Progress (RDP). Shalli has long been rumored to be an ally of RDP's Hidipo Hamutenya, and in recent months there have been calls from more radical elements within SWAPO (especially individuals connected to the SWAPO Party Youth League) to oust "non-loyal" party members from government. Public sentiment has generally been supportive of Shalli, however, as he is considered a strong contributor to the liberation movement. Nevertheless, his suspension has not elicited any unrest in the military ranks or any significant fears of instability among the general public. -------------- Comment -------------- ¶9. (SBU) Both the NucTech/Teko and Shalli cases have emerged at a time of increasing scrutiny and criticism of Chinese business practices in Namibia. Chinese construction companies are often criticized for skirting labor regulations and winning government tenders despite, some allege, not complying with all the requirements for submission of bids. Chinese business people are frequently accused publicly (but until now without concrete examples) of bribing public officials to win government contracts. In fact, the perception that Chinese business people bribe government officials is so pervasive that the leading guide book on anti-corruption contains a cartoon of a Chinese man handing a bag of cash to a government official during a ceremony celebrating the award of a construction tender. ¶10. (SBU) While Teckla Lameck is reportedly close friends with the Minister of Finance Saraa Kuugongelwa-Amadilha, and the Ministry of Finance signed the contract with Nuctech, there are no allegations that the Minister is linked to the NucTech/Teko scandal. The scanners, destined for the Customs Service, have arrived in country. It is possible that the Ministry availed itself of a loan offered during President Hu's visit to Namibia in early 2007. Concessionary loans from China often have conditions attached to them, including certain procurement conditions. ¶11. (SBU) Since its founding in 2006, the ACC has yet to secure a conviction in a high profile corruption case. In fact, the ACC has been strongly criticized for only going after "small fish." Some observers argue that the recently implemented Financial Intelligence Act (FIA) and the Prevention of Organized Crime Act (POCA) regulations give the ACC more tools to go after the "big fish." It remains to be seen if Lameck and/or Shalli will be ACC's first big fish. A conviction in one or both cases would bolster the public's faith in the ACC and the government's anti-corruption efforts. It could also strengthen the hand of President Pohamba, who made the fight against corruption a central tenet of his 2004 campaign. The President is generally perceived to be clean, but that is not the case for most other government officials. According to the November 2008 AfroBarometer survey, 49 percent of those questioned expressed their view that all or most national government officials are corrupt, whereas only 16 percent viewed the president and his inner circle as corrupt. End Comment. MATHIEU