The decision by BAE Systems Plc earlier this month to pay 30 million pounds (approx. 63.5bn/-) in fines after settling a long-running corruption investigation into the sale of a radar system to Tanzania paves the way for the prosecution of high-profile suspects in Dar es Salaam, government officials have revealed.
The fine is part of around $450m (approx. 607bn/-) that Europe's biggest military contractor agreed to pay in the United States and Britain after reaching a settlement with Britain's Serious Fraud Office.
Dr Edward Hoseah, Director-General of the Prevention and Combating of Corruption Bureau (PCCB) confirmed last week that local investigators would continue to pursue the long-running probe.
The PCCB chief told reporters in Dar es Salaam that Tanzania was awaiting official communication from the UK through diplomatic channels so it can proceed with its own radar case.
The PCCB has had a mutual legal assistance agreement with the SFO in the radar investigation.
BAE pleaded guilty in Britain to one charge of breach of duty in relation to records
of payments made in Tanzania.
Tanzania paid 28 million pounds (approx. 59bn/-) to BAE Systems in 2001 for the air traffic control system.
Critics of the deal said the radar system was expensive, obsolete and unnecessary for Tanzania -- one of the poorest countries in the world.
President Jakaya Kikwete said in 2007 that the country would lodge a formal claim against Britain if it finds it paid too much for the radar.
BAE Systems paid $12m (approx. 16bn/-) to its marketing adviser in Tanzania, Shailesh Vithlani, in connection with the sale of the radar.
Investigators said part of the kickbacks paid to Vithlani was used to bribe senior government officials in President Benjamin Mkapa's government to approve the deal.
Senior government officials have insisted that although Tanzania stands a good chance of receiving a refund for the military radar, suspects involved in the corruption scandal must face criminal charges.
Following are allegations against the prime suspects in the military radar corruption investigation in Tanzania as compiled by local and SFO detectives:
SHAILESH PRAGJI VITHLANI & TANIL SOMAIYA
The two individuals grew up together in Mwanza where they jointly registered a highly controversial company -- Merlin International Limited. They later moved to Dar es Salaam where they made a fortune and became associated with a number of dubious defence contracts.
Vithlani was the paymaster of the military radar deal. Officials close to the ongoing radar investigation have confirmed that it was Vithlani who negotiated bribe payments with senior government officials and made arrangements for the transfer of kickbacks from a Swiss bank account.
Vithlani and his former business partner, Tanil Somaiya of the prominent Shivacom Group, held a power of attorney over another company, Envers Trading Corporation, a shadowy offshore firm registered in Panama, which acted as consultant for BAE Systems in the radar deal.
The legal document (power of attorney) allowed both Vithlani and Somaiya to act as agents of Envers Trading Corp. in the radar deal.
Merlin International Ltd was also co-owned by the two businessmen, although Somaiya later belatedly withdrew himself from the company after the radar scandal hit the headlines in both local and international media.
British investigators have since uncovered that BAE Systems, through yet another company (Red Diamond Trading Limited), agreed to pay Envers a ’commission’ fee of $12m, equivalent to a staggering 30% of the purchase price.
The radar transaction was hatched way back in 1992, when the German defence electronics manufacturer Siemens Plessey Systems (SPS) began negotiations with the Tanzanian government for the supply of a radar system.
From the earliest stages of these negotiations, Vithlani was already acting as local agent for SPS in Tanzania.
From 1995 when it assumed power, the Mkapa government took up the issue of the radar purchase with zest and proceeded with the negotiations with SPS.
But in 1997, SPS was taken over by BAE Systems, which continued pushing for the radar deal with the help of Vithlani.
Documents seen by investigators reveal that Vithlani requested amendments to his consultant relationship with suppliers of the radar equipment, because of "commitments" and "new promises" made to Tanzanian government officials.
In 2007, the Kisutu Resident Magistrate’s Court in Dar es Salaam issued an international warrant for Vithlani’s arrest after charging him with perjury and lying to an investigating officer over the radar deal.
The International Criminal Police Organization (Interpol) still has Vithlani on its 'Wanted' list.
Both Vithlani and Somaiya have been questioned by SFO detectives in Dar es Salaam over their roles in the military radar scandal.
Vithlani is reported to be enjoying comfortable life in Switzerland after fleeing Tanzania and previous reports of his arrest have been dismissed. Somaiya, who runs a vast business empire in Dar es Salaam, has denied any involvement in the radar deal.
The Bariadi West Member of Parliament (CCM) resigned as Tanzania's Infrastructure Minister in 2008 amid local media reports of corruption in the radar purchase while he was the country's attorney-general.
Chenge was responsible for giving crucial legal advice to the Tanzanian government during the purchase of the radar system.
The MP, who was the government’s chief legal advisor as Attorney General when the radar was purchased, gave advice on key aspects of the transaction, which ultimately led to the approval of the deal by the Cabinet.
The advice given by the then AG in the radar deal involved the "jurisdiction clause of the Supply and Financing Agreement and Performance Bond."
It is understood that Chenge’s advice on jurisdiction was very crucial to the final approval of the deal and he also gave key advice on whether the financing of the transaction by a commercial loan was compatible with Tanzania’s application for debt relief from the West.
At the time Tanzania was buying the overpriced radar, Mkapa’s government had successfully applied for substantial debt relief under the Highly Indebted Poor Countries (HIPC) initiative -- the joint IMF-World Bank's comprehensive approach to debt reduction designed to ensure that no poor country faces a debt burden it cannot manage.
Following Chenge’s advice, the government opted to proceed with the radar deal despite fierce opposition from the World Bank and key politicians in the United Kingdom, including current British Prime Minister Gordon Brown and former international development secretary Clare Short.
Short said the sale, for which Tanzania had to borrow yet more from a commercial bank, was corrupt and "stank."
Investigators have been probing allegations that the payment of more than $1m (over 1.3bn/-) in Chenge’s offshore bank accounts coincided exactly with the time he gave advice to the Tanzanian government in favour of the radar deal.
Chenge himself famously dismissed the small fortune found in his offshore bank account as "pocket change" and denied criminal wrongdoing.
His American and British lawyers have maintained that the ex-minister was not responsible for promoting the purchase of the military radar from BAE Systems.
Chenge's foreign lawyers, J Lewis Madorsky of Cleveland, Ohio in the US, and Goodman Derrick LLP of the UK, admitted that the MP, serving as Tanzania’s AG at the time of the radar deal, gave legal advice to the government on some aspects of the radar deal.
The fact that the MP is able to afford the services of reputable British and American law firms to defend him against the radar allegations has heightened public speculation about the extent of his personal fortune.
DR IDRIS RASHIDI
The immediate former managing director of the state-run Tanzania Electric Supply Company Limited (TANESCO) and former governor of the Bank of Tanzania (BoT), Dr Idris Rashidi, is among prominent individuals being investigated on allegations of corrupt involvement in the military radar purchase scandal.
British detectives have traced a series of suspicious payments from a bank account registered in the name of Chenge to one of Rashidi’s bank accounts.
Investigators say Rashidi received a sum of $600,000 (approx. 800m/-) from Chenge under dubious circumstances in May 1998.
Rashidi served as governor of the central bank from 1993 to 1998. SFO investigators say Rashidi, being the then BoT governor, was an important figure in the negotiations that led to the purchase of the overpriced radar.
It is understood that without the then central bank supremo’s go-ahead on the financing aspects of the deal, it would not have gone through.
At the time the radar negotiations were being conducted between BAE Systems and the third phase government, Chenge was the country’s AG while Rashidi was BoT governor.
Investigators believe that both were "pivotal persons of influence over the success of the radar contract."
While Chenge, as the government’s chief legal advisor, gave legal opinion in favour of the deal, Rashidi played a similar key role in the financial arrangement of the contract.
With Mkapa, Chenge and Ballali heavily backing the radar deal, the government used national gold reserves from the BoT to secure a $40m loan from Barclays Bank to finance the controversial purchase.
In order to secure the hefty loan, the Mkapa government went out of its way to minimize the financial risk carried by Barclays Bank in lending to Tanzania.
Measures taken included accepting a financing arrangement that allowed BoT money, backed up by the national gold reserves, to be held in London as collateral.
The third phase government also agreed that English law, and not Tanzanian law, should prevail in the event of any litigation arising out of a possible default on the Barclays Bank loan.
At the time the loan was being processed between 1999 and 2002, the Barclays Bank Tanzania Limited board of directors was chaired by Jayantilal Chande.
Chande, popularly known as Sir Andy, also served as chairman of the board of directors of the then state-run Tanzania Railways Corporation (TRC).