Reminiscences of Failure
The PNQ of the Leader of the Opposition this week was addressed to the PM. It concerned a fraud of nearly Rs 900 million at the Mauritius Commercial Bank (MCB) which came to light as far back as February 2003. The gist of that PNQ was that, it being given that the Commercial Court had just given judgment in favour of the plea made in a civil suit by the MCB against one of its former employees, notably Robert Lesage, and a customer of the bank, Teeren Appassamy, whether it was appropriate for public institutions such as the Police and the ICAC to “keep accusing the victim (i.e., the MCB)”. At the end of the question-answer session in which roles were finally changed with Navin Ramgoolam actually asking the questions and Paul Bérenger answering, the PM announced that he was contemplating setting up a Commission of Inquiry to look more thoroughly into the whole matter. An incursion into the past is necessary to appreciate the subject more fully. In the evening of Friday February 14th 2003, just before the start of the week-end, news was flashed out in the media that the MCB had found out that substantial funds had been siphoned out from the bank and that the matter had been reported to the authorities. It came out later that it was more than one week earlier, around 6th February 2003, that the Accountant of the National Pension Fund (NPF), enquiring about the NPF’s account status at the MCB, had been informed that the outstanding balance was some Rs 800 million less than what it should have been. She accordingly alerted the government authorities about the presumed loss of funds, including SAJ, the Prime Minister at the time. SAJ was then advised by Paul Bérenger, who was Minister of Finance at the time, not to bring up the matter to Cabinet in view of other considerations. For one full week, the matter was shelved away as proposed by Paul Bérenger. On Tuesday last, Paul Bérenger explained that the one-week delay was intended to avert any run on the bank, that is, a rush of panicked depositors withdrawing deposits for having lost confidence in the bank’s ability to repay them. This does not hold water as there was no question in the MCB’s case, contrary to what the situation was in the recent case of Northern Rock in the UK, that MCB would have gone insolvent due to the loss of the NPF’s funds.
The whole matter was accordingly hushed up until the evening of Friday 14th February 2003. It is only on Saturday 15th February 2003 that the Independent Commission against Corruption (ICAC) came to take hold of evidence from the MCB following the referral to it by the Financial Intelligence Unit (FIU) of a case of money laundering reported by the MCB. This gap of one week or more is material to any case that may be filed in the matter. We are not here to establish who really is guilty or not; we are not comfortable as to what could have happened during that suspended week when the Police, ICAC, the BoM and presumably also the external auditors of the bank were altogether absent from the scene.
As the PM stated while answering the PNQ, the Bank of Mauritius (BoM), which is the regulator of the bank, appeared on the scene even later than the ICAC although it had apparently been informed of the scandal earlier. Even with that delay, it embarked on the flashy enterprise of employing a team of foreign external forensic investigators to inquire into the mechanism employed for the diversion of the funds. The regulatory report of the foreign investigators (which must have been lying with the BoM and is to be kept confidential according to law), was leaked out and published by Le Mauricien in extenso. The report showed that the mechanism for transferring out the funds to the beneficiaries was not so complicated after all and that it had been the practice at the bank for a long time to move funds out of certain customers’ accounts for the bank’s convenience, unknown to those customers.
Passions ran high in the media at the time the MCB scandal erupted. Traditionally, the views of papers belonging to the Week-end/Le Mauricien and the L’express groups tend to converge regarding political and other issues with some minor nuances here and there. In the case of the MCB scandal, they appeared to be on diametrically opposed wavelengths. While Le Mauricien/Week-end qualified it as a politico-financial scandal right from the start, the L’express group adopted, in our view, a softer attitude. We do not know what exactly could be the reasons behind this differential stance adopted by the two media groups vis-à-vis the MCB. But Le Mauricien went even further to publish in full the leaked out BoM confidential regulatory report which could only have been released, if at all, under specific orders from the court.
Although not directly connected to the PNQ and the Commercial Court’s decision, the matter of the leaking out of the BoM report can be qualified as part of a system of general mis-governance undermining our institutions, mainly in the public sector. When the BoM regulatory report was ready, it looked as if Labour which was in the opposition at the time, would likely win at the next elections. Given that the one week’s respite allowed to the MCB before reporting its case to law enforcers was being viewed by the then Opposition as suggesting that the BoM had also not acted on its duty in as expeditious a manner as called for by the situation, the leaking out of the confidential regulatory report was possibly calculated to mitigate the ‘political risk’ faced by the top management of the BoM in the event of Labour winning at the polls.
It may have been calculated to show to Labour and possibly also the future Labour government, in our high imagery Creole language, that “un grand paquet a été cassé” as a way of currying political favour just in case the perceived ‘political risk’ materialised. Resort to similar tactics have served to excuse the incompetency of several senior post holders mainly in the public service who cannot deliver on their real mission but can play up politics more skilfully. Suffice it to note here that resorting to such tricky devices has become the hallmark of extensive managerial failure in quite a few branches in the public sector, much to the country’s enduring detriment. We will come back on this subject at a later time.
The decision to appoint a Commission of Inquiry in the case of the MCB illustrates the point that there are fewer answers than questions that have been raised in this case which hit the headlines more than seven years ago. They involve various players who had a role to play in the matter. We appear to be back to square one, with the question as to who is really culpable standing as far apart as it was at the start and during the evolution of the matter over the past years. Nothing illustrates better the loss of energy and time that this matter has occasioned, putting in peril the good standing of our banking sector. Nothing illustrates better the vainness of certain human endeavours when it has not been possible to sort out simple matters such as this once and for all as comprehensively as a Commission of Inquiry would have done.