THE war of attrition between Finance minister Tendai Biti and Reserve Bank governor Gideon Gono has taken a dramatic twist with the central bank boss accusing the MDC-T secretary-general of pursuing a personal vendetta against him, after the bank probed allegations of “rampant” externalisation of foreign currency and money laundering in the law firm where Biti is a senior partner.
Gono, in a letter of complaint dated May 11 to Prime Minister Morgan Tsvangirai complaining about “personal victimisation” and “vilification” by Biti, alleged that the central bank investigated Honey & Blanckenberg and uncovered that it had externalised over US$1 million between October 2005 and May 2006.
The central bank chief said he was convinced that Biti’s fight to have him removed as governor of the Reserve Bank had its background in “self-interest and protection”.
“The background involves the bank’s investigation into alleged rampant externalisation of foreign currency resources and money laundering activities discovered at the minister’s legal firm Honey & Blanckenberg where he is (or was) a partner,” wrote Gono.
The governor said the case against the law firm was before the courts, adding that his team members who investigated the matter were now reluctant to testify after seeing the victimisation he was going through. But Biti yesterday denied that his fight with Gono was personal.
“I have not seen the letter, but I want to say that I do not have a personal fight with anyone,” Biti told the Zimbabwe Independent. “I was given a mandate by the government to carry out a job and that job will be done.”
Prime Minister Morgan Tsvangirai also denied seeing the letter which is addressed to him and was copied to former South African president Thabo Mbeki and other Sadc leaders.
Biti said his mandate was to stabilise the country’s micro- and macroeconomic fundamentals to revive the comatose economy, and he would use all the necessary measures to achieve the task.
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“We were more like in a post-conflict zone like Somalia, Rwanda and Sierra Leone as a result of poor monetary and economic policies,” Biti said. “I was appointed to stabilise the micro- and macroeconomic fundamentals of the country. I must put food on the table of Zimbabweans and I will not be diverted from doing my job by those who think I am fighting a personal war.”
He said the law should take its course if Honey & Blanckenberg externalised large sums of foreign currency as alleged by Gono, adding that the law firm was “known for its reputation and standards”.
Documents in the possession of the Independent show how the central bank’s Financial Intelligence, Inspectorate and Evaluation Division and the police investigated the law firm, including searches at its offices.
The Financial Intelligence Division was called by a whistleblower on February 23 2006 alleging that the law firm was externalising “all” legal fees charged in foreign currency for, mostly, external clients.
These were fees for registration of trademarks and patents for corporates domiciled outside Zimbabwe.On February 27 2006, a central bank team met the whistleblower again, who insisted that the law firm had external clients who paid in foreign currency that was banked externally and that documentation relating to the transactions were in the form of e-mails.
The whistleblower, the documents reveal, claimed the law firm was earning US$30 000 weekly from such services and that a password to a computer programme with the data was only known by Barry Brighton, a lawyer with Honey & Blanckenberg.
The whistleblower claimed that every month the law firm deleted records of the transactions from the computer.
Owing to the “nature and severity” of the alleged offence, the central bank called in the police to concentrate on the “criminal element of the dealings” and the Financial Intelligence Division on the “money laundering aspects”.
“It was agreed that the raid on the firm had to be well-timed given that it was manned by lawyers whose lifeline depended on defending criminals, and hence were expected to firm up against any move with potential to expose them,” reads one of the documents.
The same day, the offices of the law firm were searched and it was discovered, among other things, that all documentation for application and registration of patents and trademarks were under the custody of Brighton and Chris Kimberley and that the law firm had been registering patents and trademarks for companies domiciled outside Zimbabwe.
“The firm levied fees in foreign currency which they diverted to an off-shore account in the Isle of Man.”The documents reveal the law firm wrote two letters to the central bank on May 31 and June 5 2006 in relation to the payments received abroad.
The firm argued that the fees were received on behalf of an external company -– Vernon Consultancy – under a sweeping arrangement where funds would be moved from their external account.
But the central bank did not buy the explanation and insisted that available documents showed that they were in full control of the funds.
The firm also argued that they were subcontracted to register trademarks and patents by Vernon Consultancy, but the central bank insisted that e-mails it retrieved revealed that the legal practitioners had registered the patents and trademarks as principals and not agents.
In a memorandum dated June 12 2006 to central bank Financial Intelligence Division head, the principal legal advisor in the division, a Mr AJ Manase, said the law firm had submitted proof that they were paid a monthly commission of US$6 000 which was deposited into its local account and was converted into Zimbabwe dollars before they benefit from the proceeds.
“Clearly Honey & Blanckenberg have been in breach of the law since 2003 when they started depositing foreign currency into Vernon Isle of Man account,” Manase wrote.
He said the law firm was in violation of the Exchange Control regulations because they had placed the money to the credit of Vernon, a foreign resident.
Alternatively, Manase said, the firm made payment and incurred obligations outside the country without exchange control approval.
“Both sections 10 and 11 (of the Exchange Control regulations) have a proviso to the effect that such transactions will not be tainted by illegality if the foreign currency emanates from an FCA,” Manase wrote.
“It is thus important to also refer to Section 9 which states that an FCA holder who withdraws money from his FCA for purposes which require prior permission under these regulations has to obtain such permission before applying the money to that purpose. Payments outside Zimbabwe and or incurring obligations outside Zimbabwe require prior exchange control authority”.
BY CONSTANTINE CHIMAKURE
