Shipbuilder Seeks Compensation From Mozambique Over Hidden-Debt Scandal

(Bloomberg) -- Privinvest Group began arbitration against three state-owned Mozambican companies to seek at least $200 million in compensation for losses the shipbuilder says it incurred after contractual breaches.

The legal action marks a step change in Privinvest’s response to charges against employees including salesman Jean Boustani by the U.S. Department of Justice. It also signals a counter-strike against the southeast African nation that took it to court in London in February. The DOJ alleges Boustani and others stole about $200 million in Mozambique-loan proceeds in an indictment that stems from Mozambique’s $2 billion hidden-debt scandal.

Privinvest is targeting the state-owned entities for breaching supply agreements, said Jeffrey Birnbaum, a spokesman for the company.

“For three months or so, Privinvest has been largely silent in the face of a false narrative about its activities in Mozambique and it doesn’t wish to continue to be silent,” Birnbaum said by phone Monday from Washington. “Privinvest has been inaccurately and unfairly portrayed in the media and elsewhere and will now set the record straight.”

Privinvest is seeking $200 million from Mozambique Asset Management, one of the state-owned companies that took on the $2 billion in debts, Alexandre Chivale, a lawyer who represents the three companies, said by email.

Swiss Tribunal

Privinvest filed the claim with the Swiss Chambers’ Arbitration Institution, and Chivale has yet to be notified of the amounts the shipbuilder is seeking from the other two Mozambican companies, he said.

“We are still studying the dossier to see what kind of reaction we will have in the process,” he said. “Many, if not all, of the arguments put forward concern the government. Therefore, the ball is on the side of the government, which has all means to resolve this demand.”

The Mozambican attorney-general’s office didn’t answer two calls seeking comment.

Privinvest and its subsidiaries were the only suppliers for $2 billion of maritime projects for which Mozambique raised loans in 2013 and 2014, the bulk of which it hid from the International Monetary Fund and other donors. That led to a financing freeze when the debt was uncovered two years later. The government has missed payments on the obligations, including its $727 million of Eurobonds, since early 2017, as it sought to restructure them.

Three Companies

Privinvest signed contracts with the following state-owned companies:

• Mozambique Asset Management, which was to operate shipyards
• Ematum, a tuna-fishing company
• ProIndicus, which was to provide maritime security for the nation’s 2,470-kilometer (1,535-mile) coastline.

None of the three companies have reported a profit and the assets are lying idle.

In Mozambique’s London case filed on Feb. 28, it is requesting defendants including Privinvest help repay MAM’s debt. A Kroll LLC audit in 2017 found that Privinvest may have overcharged for the Mozambican projects by $713 million, a claim the company disputed at the time.

--With assistance from Matthew Hill.

To contact the reporter on this story: Borges Nhamire in Maputo at bnhamire@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net, Paul Richardson, Gordon Bell

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