HARARE – A forensic audit report on Air Zimbabwe’s aviation insurance has implicated senior managers in the looting of nearly US$11 million over a four-year period between 2009 and 2013.
The report, compiled by BCA Forensic Audit Services and which was released as far back as December 28, 2013, exposed the industrial scale corruption at the national carrier and recommended the criminal prosecution of senior managers.
So far no arrests have been made.
It’s alleged that AirZim (Private) Limited acting managing director, Grace Pfumbidzayi, who was suspended last year, authorised “fraudulent” payments to Navistar Insurance Brokers, a firm given the contract without going to tender.
The Air Zim fleet, which has eight planes, is insured for US$750 million per aircraft per incident, but for a period of about two months in early 2009, its planes took to the skies without any insurance after Navistar, received but failed to remit the premiums.
“Grace Pfumbidzayi appears to have connived with Navistar and executed transactions which according to available evidence are fraudulent,” the auditors said.
“The transactions resulted in the airline losing material amounts of foreign currency… On the basis of the available evidence, Grace Pfumbidzayi and Innocent Makore (acting group chief executive officer) who are senior employees of the airline appear to have acted in cahoots with Navistar Insurance Brokers resulting in the airline being prejudiced of a total of 5,895,695.49 euros (about $8.1 million) and $1,298,827.88 which amounts were paid out to Navistar by Air Zimbabwe allegedly for services rendered which services are not supported by any documentation from Navistar other than the debit notes (invoices) from Navistar.
“The investigation also established that the airline was exposed to a potential prejudice of $1,862,370.52 being a total for which paper trail which appear fraudulent were prepared, and had it not been for this investigation the amount was going to be paid to Navistar by the airline.”
The company who served Air Zimbabwe before March, 2009, Marsh Insurance Brokers, charged an average of 125,000 euros (about $171,000) per annum as brokerage fees. Navistar, however, was paid 300,000 euros (about $410,000) per quarter, translating to 1.2 million euros (about $1.6 million) annually – nearly ten times what Marsh was charging.
“While the amount which was being charged to Air Zimbabwe by Navistar Insurance Brokers increased by 86 percent, the premiums charged by the international reinsurers remained more or less constant … The charges have been described by many of Air Zimbabwe’s current and former executives as fraudulent, a position which is supported by findings of this investigation,” BCA says.
“In addition to paying a fraudulent flat broker’s fee of 300,000 euros per quarter for the period April 4, 2009, to April 3, 2013, some of Air Zimbabwe’s executives made several other fraudulent payments to Navistar Insurance Brokers, which resulted in the airline suffering actual financial prejudice of 5,895,695.49 euros and US$1,298,827.88 and potential financial prejudice of US$2,227,570.22…”
While Navistar was taking the 300,000 euros per quarter payments from Air Zimbabwe, it was also taking commission from Air Zimbabwe’s insurers in the United Kingdom.
The Air Zimbabwe CEO when Navistar was roped in, Dr Peter Chikumba, told the auditors that he had never approved the deal — which is not supported by any standard legal contract — and BCA concludes that Pfumbidzayi entered into the arrangement by herself.
Working with other senior managers, Pfumbidzayi actively pushed through the payments to Navistar. Once, when there was a delay of a US$305,000 payment to Navistar, Munesu Munodawafa, who is Pfumbidzayi’s uncle and a former managing director of the National Railways of Zimbabwe (NRZ), wrote to Air Zimbabwe asking them to expedite the payment.
The auditors concluded: “Consideration should be made not to involve Munodawafa in decisions to be made in connection with issues arising from this investigation as he is conflicted…
“During the course of the investigation, we held a meeting with Munodawafa in which meeting he expressed his view that the payments of 300,000 euros per quarter by Air Zimbabwe to Navistar are not fraudulent.
“All other executives of Air Zimbabwe (including the former group chief executive officer Dr Peter Chikumba) with the exception of Grace Pfumbidzayi accepted that the payments of 300,000 euros per quarter were baseless and fraudulent.”
The Transport Secretary — who was a principal director at Vice President Joyce Mujuru’s Office between 2008 and 2012 — also stands accused of on three occasions failing to assist BCA in getting Zinara, which also falls under his brief, to explain suspicious payments it has made on behalf of Air Zimbabwe.
In several cases, money transmitted to Navistar was supposed to be forwarded to international insurers. However, there is a disparity of millions of euros between what the international insurers actually charged and what Navistar received from Air Zimbabwe.
BCA concludes that the difference was converted to personal use by management at Air Zimbabwe or Navistar or both.
Navistar board chair, Patrick Chingoka, told BCA he was not aware of the payments and recommended that criminal proceedings be instituted against management at the insurance brokerage firm.
BCA says it identified possible criminal acts and calls for police investigations targeting the airline’s former CEO Innocent Mavhunga, Pfumbidzayi, Nicholas Mujere (Air Zim acting general manager), Norbert Machingauta (Air Zim strategy and economic manager), Patience Tichagwa (Air Zim finance and administration manager), Oswell Matore (former Air Zim finance and corporate services general manager), Givemore Nderere (Navistar managing director), Vukile Hlupo (Navistar director) and Orton Mawire (Navistar finance director and company secretary).
Pfumbidzayi, BCA says, on several occasions tried to justify payments to Navistar by claiming the airline was trying to “bust sanctions”.
However, Air Zimbabwe was not under sanctions and insurance companies interviewed by BCA said they could not comprehend how the economic embargo could have interfered with the insurance sector and the national carrier.
The forensic report also reveals how Pfumbidzayi authorised a payment of US$360,448 to Navistar for insurance cover for two Airbus planes leased by Air Zimbabwe – in the full knowledge that they were already insured by the lessor.
The report also reveals how Zimre, now BaobabRe, took US$422,304.56 from Air Zimbabwe but failed to remit it to Willis Limited, Air Zimbabwe’s International Insurance broker, resulting in Air Zimbabwe’s insurance cover being cancelled.
“On the basis of available evidence, it appears to us that during the period February 1, 2009 to March 31, 2009, Air Zimbabwe was flying with no aviation insurance cover as the underlying risk carriers cancelled the cover,” the auditors said.
“The premium in question was also not refunded to Air Zimbabwe.”
The auditors also accused Navistar of “theft by conversion” over payments for the hanger property by Air Zimbabwe totalling US$796,079.80.
“The premiums were not remitted by Navistar to the insurer resulting in the airline suffering a double exposure as they lost the US$796,079.80 at the same time as its hangar property were not insured for the period April 2009 to March 2013 as no payments were made to the insurer in respect of the premiums.”
In that scam, the auditors said Navistar would, at the beginning of every year, approach Altfin Insurance Company and request for policy documents for Air Zimbabwe’s hangar property.
“We understand that Tafadzwa Nderere who is employed by Altfin would print policy documents and release them to Navistar. We understand that Tafadzwa Nderere is Givemore Nderere’s brother [CEO of Navistar].”
Armed with the policy document, Navistar would surrender it to Air Zimbabwe together with their debit note for the annual premium of US$205,000 – but no premiums would be forwarded to Altfin and consequently no insurance existed.