Introduction and a Brief on the Case

INTRODUCTION AND A BRIEF ON THE CASE

Mr. P. P. Shenoy

I am a career banker having started my career in 1960. Since then I have worked for 2 banks in India for over 17 years. Thereafter I joined a Bank in London, transferred to Alexandria/ Cairo (Egypt), Freetown (Sierra Leone), Lagos (Nigeria) and Kenya. Thereafter I worked for 2 banks in Nairobi (Kenya) and a Bank in Kampala/Jinja (Uganda) before coming to Lusaka (Zambia) in October 1996. I was invited by Mr. Ajay Shah (Chairman of Trust Bank Ltd., Nairobi) and Mr. P. K. Khanna from Nairobi to join their new banking venture in Lusaka.

After arriving at Lusaka, I commenced establishment of the United Bank of Zambia Ltd., which was promoted by main shareholders in Kenya and others in Dubai and U.K. Mr. Ajay Shah, Chairman of United Bank was also the Chairman of Trust Bank Ltd., Kenya, which was a leading bank in the private sector there. Other directors were Mr. Mahendra Ladha, Nairobi and two local directors from Zambia (non-shareholders) Mr. Bharat K. Patel, Kitwe (a leading businessman) and Mr. Francis H. Kaunda, ex-Chairman of Zambia Consolidated Copper Mines Ltd., (which is one of the top copper producing companies in the World). Mr. P.K. Khanna was appointed Managing Director and I was appointed as General Manager.

The Bank commenced operations in February 1997 at Lusaka. Before the end of 1997 we opened a branch at Kitwe, in the Copperbelt. Mr. Khanna brought in one Mr. Vikas Tandon (his new nephew, sister’s son), a young with relatively less experienced man, from India to be the Manager of Kitwe branch. (It was apparently a favour to his relative)

The Bank did very well in deposit mobilization as well as in profits. Mr. Khanna, however, remained out of Zambia most of the time, presumably attending to Mr. Ajay Shah’s other businesses elsewhere. Bank of Zambia did object to his stay abroad more than his stay in Zambia, even after obtaining a residence status in Zambia. Also they did not like a “non-resident” Managing Director. As a result the Board of Directors, in Sept./ October 1998 appointed me (P. P. Shenoy) as “Acting Chief Executive/Managing Director” during the absence of Mr. P. K. Khanna from Lusaka. I was, however, to be functioning under his instructions, which were through telephone, email, fax, etc.

In the middle of 1998 Mr. Khanna recruited one Mr. Benedict A. D’Souza to be Manager in charge of Lusaka main branch. He was brought from Delhi where he was working after returning from a short period of work with a bank in Mauritius.

In February 2000 the Bank opened another branch as Ndola, Copperbelt. Mr. Khanna transferred Mr. Tandon as Regional Manager for Copperbelt and in charge of Ndola branch. My protests against such a transfer as well as a premature promotion were not listened to. Mr. Khanna also brought in another Mr. Rajesh Kaushik from India to be Manager of Kitwe Branch. (It was reported that Mr. Kaushik was a relative of Mr. Tandon)

In the meantime Bank of Zambia continued to pressurise the Bank’s Board on Mr. Khanna’s excessive absence from Zambia. The Board of Directors ultimately appointed me as Managing Director in August 2000 (back-dating my appointment from June 2000). Mr. Khanna continued to be a member of the Board. Bank of Zambia then inspected Mr. Khanna’s accounts as well as his expenses and instructed me to recover certain amounts from him. I recovered part of the amount and reported to the Board about the balance.

The Bank was performing excellently, even though small, in all areas of business and profits.

Some police investigations were conducted at Ndola branch in December 2000/January 2001 when Mr. Tandon was at the branch. Somehow these investigations ended without any report/complaint, etc. In the last week of January 2001 Bank of Zambia deputed one Mr. Francis Mulenga to inspect “two of customers accounts” at Ndola branch. Apparently he also investigates the same accounts investigated by the Police earlier. Mr. Tandon attended to BOZ inspector but had been reporting sick during the period and asked to travel to India for urgent treatment. Mr. Khanna had been pressurizing me to allow leave to Mr. Tandon for medical treatment in India. Immediately after Mr. Mulenga withdrew from Ndola branch Mr. Tandon traveled.

When Mr. Mulenga came to Lusaka in connection with his investigations we informed him that Mr. Tandon had traveled. Mr. Mulenga threatened all expatriate management staff that the matter would be reported to Drug Enforcement Commission, etc. Mr.Mulenga commented that Mr.Tandon did not look sick and looked very healthy. He also commented negatively about all expatriate management staff that there are too many expatriate staff and that they are all protecting each other. Even before commencing his inspection Mr.Mulenga seemed to have concluded that there were fraudulent transactions perpetrated by expatriate management staff, though he did not substantiate with details. He seemed to have come just to ‘catch’ the culprits.

In spite of showing him company files of Trais Investments Ltd. he ignored the documented facts and went on to say that I owned the 2 buildings leased by the United Bank.

He knew about family relationship between Mr.Khanna and Mr.Tandon and also knew that they are behind these transactions. Therefore, he had concluded that all the expatriate staff are party to all these transactions. His approach was totally unprofessional in as far as he did not want to study documents and records in the Bank to arrive at his conclusions. He had already made up his mind. His approach was totally anti-expatriate.

Bank of Zambia never submitted its Ndola inspection report to the Managing Director or to the Chairman or to the Board of United Bank. They simply handed over the matter to Drug Enforcement Commission, even though they themselves did not complete their investigations. BOZ also never gave a chance to United Bank to make their own internal investigation as they never submitted their report. Instead they handed over the matter to Drug Enforcement Commission in haste. Bank of Zambia officials must have hastily arrived at their conclusions and took this step.

Drug Enforcement Commission commenced its investigations at the Bank on 9th February 2001 and on the same day seized all personal accounts and passports of the four expatriate management staff.

We appointed Chilupe & Co., a leading legal firm to assist us with these investigations. The DEC wrote to Chilupe & Co. on 23rd March 2001.

Our advocates Chilupe & Co. conveyed and discussed above letter with us. In response to these allegations we submitted out detailed factual document “Facts” already scanned and sent to you. We had clarified each and every point raised by the DEC in their letter. Our advocates were well satisfied with our response and conveyed them to DEC in their letter dated 10th April 2001 to DEC.

The DEC, however, did not consider or try to verify any of the factual details submitted by us. The DEC called each one of us, 4 expatriate management staff, to give detailed statements, with our lawyers present. I had given clear answers to each and every query raised by the DEC officer. Our advocates Mr. A. Lungu (of Chilupe & Co.) and Mr. Levy P. Mwanawasa, now President of Zambia, who was brought in by Chilupe & Co. to defend us). After my statement Mr. Mwanawasa exclaimed “You have satisfactory answer for each and every question. Why did you bring me here?” He was more than satisfied that DEC have nothing to hold against me and was confident that I would not be charged. To everyone’s surprised, however, DEC proceeded with their criminal action and charged all the 4 expatriate management staff, including me, with various charges.

It was explained that I was never involved in any branch day-to-day transactions as I was the Acting Managing Director since middle 1998 (as Mr. Khanna practically remained out of Zambia) and appointed Managing Director in August 2000. But in spite of all the explanations and documentary evidences submitted to Bank of Zambia as well as to DEC subsequently, I was charged along with other 3 management staff.

Details of the charges are:

Count 1 to 4 – Money laundering

These 4 charges mention U.S. dollar and Kwacha amounts in the 2 allegedly fictitious accounts of Lesly Mulenga at Ndola branch and Justin Sakata at Kitwe branch Transferred out of Zambia (externalized).

These two accounts were opened by Mr.Vikas Tandon when he was the Manager at Kitwe and Ndola branches. As per procedure in all Banks Branch manager is the final authority to open customer accounts. Accounts opening forms were normal like any other account opening documents. Internal Auditor from Head Office did visit these branches several times but did not report anything on these accounts. Everything appeared normal and Lusaka Main branch/Head Office handled remittance transactions originated by Kitwe and Ndola branches in normal course of business. Both branches were active in foreign exchange business and remittances from these two accounts were among so many other such transactions.

United Bank had ‘Citibanking’ computer accounting program to operate its account with Citibank, New York. Branches conclude buying/selling foreign exchange transactions and send their instructions to Lusaka main branch, with all necessary details such as remitter’s name, amount, beneficiary’s name/address, intermediary bank’s name in U.S. and beneficiary’s bank details. It also confirmed having debited kwacha equivalent to remitter’s account at the agreed exchange rate. These details were required to complete computer fields in ‘Citibanking’ program.

Officers/staff at Lusaka simply feed in these remittance details received from branches and transmit to Citibank, New York.

Staff, Officers or Senior Management staff at Lusaka Main branch/Head Office are not responsible for such transactions originated by the branches.

Count 5 – Obstruction of inspection by Bank of Zambia inspector

It states that I had obstructed BOZ inspection by allowing leave to travel to Mr. Vikas Tandon, before their inspection was over.

Firstly, Bank of Zambia’s letter had clearly stated that inspection was to be of 2 customer accounts and not of any bank’s staff. Secondly, BOZ did not direct the Bank not to allow leave of absence to any staff member. BOZ conducts inspections several times during the year at all the banks but never are there any restrictions on staff movements or staff availing leave.

In our case Mr.Tandon availed leave after Mr.Mulenga concluded inspection at Ndola branch and for medical reason for treatment in India.

Of course Mr.Tandon never returned probably after coming to know of DEC investigations.

Count 6 – Failure to comply with Bank of Zambia directives

This stated that I had leased 2 building properties “owned by me” to the United Bank without prior approval from Bank of Zambia.

The facts are as follows:

The defunct Meridien Bank was selling building properties in Zambia. The Chairman of the Bank Mr. Ajay Shah and Mr. P. K. Khanna established a new company “Trais Investments Ltd.” And purchased 2 bank premises/buildings (one on Cha Cha Cha Road, Lusaka) and second one at Ndola. The intention was to open United Bank branches in due course. Funds for these purchases were received from U.K. specifically for this purpose. I was the Secretary to this Company, which did not have any other business.

Mr. Francis Mulenga, during his inspection, went through each and every document to establish above facts. It was also clear that I was not even a shareholder or a director of Trais Inv. Ltd.

In spite of this DEC went on to charge me with this offence, which never existed.

Counts 7 & 8 – On opening fictitious accounts in the names of Justin Sakata at Kitwe

Branch and Lesly Mulenga as Ndola branch

It had been amply established that these 2 accounts were opened by Mr. Vikas Tandon with the assistance of his Zambia officers/staff members. Account opening forms, etc. were signed by branch officers/staff members and approved by Mr. Vikas Tandon.

Even though above facts were clear from documents/forms DEC charged all the 4 management staff with these counts.

Counts 9 to 55 – each and every debit/withdrawal entry in the above 2 accounts were

counted as forgery charges.

All these transactions originated at Kitwe and Ndola branches, when Mr. Vikas Tandon and then Mr. Rajesh Kaushik were Managers. Mr. B.A.D’Souza, Senior Manager in charge of Lusaka branch also officiated at Manager at these branches during the periods, when Mr.Vikas Tandon or Mr.Rajesh Kaushik availed leave.

Neverthless DEC charged all the 4 with these “forgery” charges.

Count 56 – Corrupt practices by private bodies.

Lesly Mulenga had sued the Bank for using his name in a “fictitious account” at the

Ndola branch opened by Mr. Tandon. Mr. Mulenga’s lawyers then approached the officiating Manager, Mr. Lazarus Kasabo, for an ‘out of court settlement’ and settled the matter with payment of K.3 million. In spite of showing all the relative documents the DEC charged all the 4 management staff.

It is very important to note that Bank of Zambia or DEC did not charge Mr.Khanna and Mr.Tandon with these offences, even though it was well known that they are the people behind. Probably it was because both Mr.Khanna and Mr.Tandon were out of Zambia. It is also surprising that none tried to locate and bring them back to Zambia to face these charges. In addition the DEC never charged Zambian officers / staff members involved in opening these accounts as well as originating transactions from these accounts. One of them was, to our surprise, in fact, brought as prosecution witness.