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By Stelios Orphanides
The reluctance of Lawrence Mafuru, the statutory manager appointed by Tanzanian authorities at FBME Bank, to cooperate with the administrator of the bank’s Cyprus branch puts the bank’s assets at risk and results in “significant” and unnecessary legal fees, says a document obtained by the Cyprus Business Mail.
When on August 19, 2015 a group of depositors at the Cyprus branch of FBME resorted to an English court seeking the immediate repayment of almost $201.2m (€188.6m) in funds deposited at the bank’s branch in Cyprus, Mafuru remained idle, the report prepared by Meenaa Azmayesh, a London-based associate of Dentons, a global law firm. It was only mere chance that the Cypriot special administrator received information about the proceedings allowing him to initiate legal action to successfully set aside previously issued court orders 11 months later.
Mafuru neither bothered to challenge the proceedings issued by the claimants that included Cinque Ports Trading Limited, Modena Corporate Services Limited, Saunders & Fyffe Corp., and Clifton Conroy Associates Limited against FBME nor to inform the special administrator appointed by the Central Bank of Cyprus about the development, even though he had been informed about the development days later, according to the report.
Mafuru is considered a person with political connections. He lost in December his job as head of the Tanzanian Treasury Registry, a body entrusted with all state investments in companies and corporations. Mafuru and the governor of the Bank of Tanzania Benno Ndulu are engaged in a legal battle and face a possible prison term. According to reports in Tanzanian press, the two men have been asked by a court in the African country to explain how a decree for the payment of 92m Tanzanian shillings to Coast Textiles Ltd can be implemented.
“The claimants served the proceedings on FBME in Tanzania on 27 August 2015,” the report seen by the Cyprus Business Mail said. “The proceedings were not served on or notified to the special administrator or the Cypriot branch of FBME, either by the claimants or by Mafuru. Unfortunately, Mafuru ignored the proceedings and as a result of Mafuru’s inaction the claimants obtained default judgment on 2 October 2015”.
After the claimants secured on October 14, 2015, European enforcement order certificates and 16 days later, they presented preliminary garnishment and transfer of claims orders against the correspondent banks holding the funds on behalf of FBME, the special administrator in Cyprus who was unaware of these developments, only found out when Commerzbank, one of the correspondent banks involved, sent him a notice, the report said.
“The proceedings were first brought to the attention of the special administrator on November 2, 2015 by Commerzbank,” the report said adding that this prompted special administrator at the time, Andrew Andronikou, to contact Mafuru requesting information and ascertain FBME’s position.
Andronikou received no “satisfactory responses,” the report said.
Only then, the special administrator could take legal action –which Mafuru decided to join–, the report said. The joint application was heard in July 2016.
“The English High Court stated that it was ‘…surprising and probably commercially unwise’ for the claimants not to have served –or at least given notice to– the bank’s branch in Cyprus,” Azmayesh said in her report.
“Following service on the bank in Tanzania ‘nothing happened,’ she said citing the High Court. “It is clear that Mafuru’s failure to act resulted in the claimants obtaining default judgments against FBME. Following a hard-fought English High Court hearing, the default judgments were set aside. However, it seems likely that, had it not been for Commerzbank contacting the special administrator and notifying him of the proceedings, it would have been too late in the day to deal with this matter successfully”.
“Mafuru’s failure to respond promptly to the proceedings in Tanzania placed substantial assets of FBME at risk and the significant legal costs incurred in salvaging the position have yet to be recovered,” the report said.
In July 2014, the Central Bank of Cyprus placed the Cyprus branch of FBME under administration and later under resolution, after US authorities described as a “financial institution of primary money laundering concern” with links to the Lebanese group Hezbollah deemed as a terrorist organisation also in the EU and barred it from opening or maintaining correspondent accounts with US banks in July 2014. In December 2015, the central bank fined FBME €1.2m for failing to comply with the provisions of the anti-money laundering and terrorist financing and revoked the licence of its Cyprus branch.
The central bank, which a year ago triggered the deposits guarantee scheme, is currently seeking to appoint a liquidator at FBME, whose shareholders deny the allegations and resorted to the Paris-based arbitration court of the International Chamber of Commerce seeking €500m in compensation.
The Cyprus Business Mail is not suggesting that any of the above mentioned FBME depositors were involved in any sort of illegal activity.
On March 30, Chris Iacovides whom the Central Bank of Cyprus appointed as special administrator at the Cyprus branch of FBME said on March 30 that Mafuru acts with “ulterior motives”. The Tanzanian official did not respond to repeated requests for comment.