The “ tuna bond ” scandal that shook Mozambique's economy is washing into a US court, where a former Mozambican finance minister is being tried on charges that he took bribes to commit his country — secretly — to huge loans that prosecutors say got looted.
When the loans — supposed to go in part to tuna fishing ships — went bad and the government's $2 billion in “hidden debt” came to light in 2016, a financial crisis erupted in Mozambique, one of the world’s poorest countries.
Jurors began hearing the case this week against Manuel Chang, the African nation's top financial official from 2005 to 2015.
Chang “abused his authority to enrich himself through bribery, fraud and money laundering," Assistant US Attorney Peter Cooch said during opening statements this week in a federal court in Brooklyn.
Not guilty plea
Chang has pleaded not guilty to conspiracy charges. Defense lawyer Adam Ford told jurors there's no evidence that Chang agreed to take payoffs, or received a penny, in exchange for having Mozambique guarantee that the loans would be repaid.
“Minister Chang signs these guarantees because that’s what his government wanted him to do,” Ford said Tuesday.
A key prosecution witness was on the stand Wednesday as Chang followed along closely via a Portuguese language interpreter.
Between 2013 and 2016, three Mozambican-government-controlled companies quietly borrowed $2 billion from major overseas banks — and the government, with Chang's signature, assured repayment.
The money was supposed to go to tuna fishing ships, a shipyard, and Coast Guard vessels and radar systems to protect natural gas fields off the country's Indian Ocean coast.
Bribes and kickbacks
But prosecutors say huge chunks of the loan proceeds went to bribes and kickbacks to bankers and government officials — including $7 million to Chang himself, wired through US banks to accounts in Europe that were under an associate's name.
Prosecutors contend Chang was just trying to cover his tracks by sending the money to a friend's account. Chang's defense maintains there's no proof that he actually got the money.
Before the emergence of Mozambique's $2 billion debt — about 12% of the nation's gross domestic product at the time — it was one of the world’s 10 fastest-growing economies for two decades, according to the World Bank.
The scandal had a seismic impact on the country’s economy. Growth stagnated, the currency lost value, inflation surged and foreign investors lost confidence. The International Monetary Fund withdrew its support for the country.
As of last year, Mozambique was among the 10 countries worldwide with the lowest GDP per capita, according to the World Bank.
Out-of-court agreements
Mozambique’s government has reached out-of-court agreements with creditors in an attempt to pay down some of the debt. Last year, it paid $142 million back to Credit Suisse — in cash and local currency bonds — to cover original loans of about $522 million from the Switzerland-based banking giant, according to the World Bank.
Mozambique also recently reached an agreement on a $220-million settlement with Russia's VTB Bank and Portugal’s BCP Bank.
The scandal has led to court action in Africa and Europe, as well as the U.S.
In 2021, Credit Suisse agreed to pay at least $475 million to British and U.S. authorities to settle bribery and kickback allegations stemming from the bank's involvement with the corrupt loans.
In Mozambique, at least 10 people have been convicted and sentenced to prison over the scandal, including Ndambi Guebuza, the son of former Mozambican President Armando Guebuza.
Extradition from South Africa
South African courts dismissed the Mozambican government’s attempts to have Chang face charges there. Some Mozambican activists argued that he would be treated too leniently in his homeland and should be sent to the US instead.
Chang was arrested at Johannesburg’s main international airport in late 2018, shortly before the US indictment became public. After years of fighting extradition from South Africa, he was brought to the US last year.
His lawyers tried to get the case thrown out. Among their arguments: that prosecutors overshot the reach of U.S. securities law and that Chang is immune from prosecution as a former foreign official.
US District Judge Nicholas Garaufis turned them down.
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