Finance Bank of Zambia Report on Shareholding by Edward Nathan Sonnenberg

confidential draft report forensic investigation into the true shareholding behind the individuals and entities declared as shareholders in finance bank zambia

prepared for the drug enforcement commission - zambia

June 2010

Your Ref: Commissioner Zulu

Our Ref: Steven Powell

Matter Number: 2001588

Drug Enforcement Commission - Zambia Report for discussion purposes Forensic investigation into the true shareholding behind individuals and entities declared as shareholders in Finance Bank Zambia

Private & Confidential This document is intended for the use of the Commissioner of the Drug Enforcement Commission, Zambia and other officials authorised by him and may contain legally privileged and confidential information. Dissemination, distribution and/or copying of this document is prohibited without express written permission of Commissioner Zulu. If you receive this document in error, please immediately notify Commissioner Zulu on +260 (211) 25114 or [email protected].

TABLE OF CONTENTS

Clause number and description Page

1. ABBREVIATIONS OF ENTITIES AND SUBJECTS................................................................................1

2. LIST OF ANNEXURES............................................................................................................................2

3. INTRODUCTION AND BACKGROUND..................................................................................................3

4. INVESTIGATION PROCEDURES ..........................................................................................................4

5. INTERVIEWS CONDUCTED ..................................................................................................................4

6. DOCUMENT REVIEW.............................................................................................................................5

7. CHRONOLOGY OF HISTORICAL SHAREHOLDING IN FBZ................................................................6

8. THE CURRENT (DECLARED) SHAREHOLDING OF FBZ ..................................................................12

9. SUMMARY OF FINDINGS ....................................................................................................................12

10. DETAILED FINDINGS ...........................................................................................................................13

11. CONCLUSION.......................................................................................................................................44

12. OUTSTANDING ISSUES ......................................................................................................................47

13. GENERAL LIMITATIONS......................................................................................................................48

Drug Enforcement Commission - Zambia Report for discussion purposes Forensic investigation into the true shareholding behind individuals and entities declared as shareholders in Finance Bank Zambia Page 1

Private & Confidential This document is intended for the use of the Commissioner of the Drug Enforcement Commission, Zambia and other officials authorised by him and may contain legally privileged and confidential information. Dissemination, distribution and/or copying of this document is prohibited without express written permission of Commissioner Zulu. If you receive this document in error, please immediately notify Commissioner Zulu on +260 (211) 25114 or [email protected]

1. ABBREVIATIONS OF ENTITIES AND SUBJECTS

Abbreviation Description

FBZ Finance Bank Zambia Limited

Dr Mahtani Dr Rajan Lekhraj Mahtani, former chairman of Finance Bank Zambia

ENS Edward Nathan Sonnenbergs

CS Credit Suisse International Limited

CSIBV Credit Suisse Investments (Nederland) BV

Corson Christopher Corson, Managing Director at Credit Suisse responsible for the Emerging Markets financing group in the EMEA region

Seabrooke Robert Seabrooke

Leistner Maria Leistner, Managing Director and General Counsel of Credit Suisse for the EMEA region

Stoltzfus Jonas Stoltzfus, declared shareholder in FBZ and Clarkwell

Clarkwell Clarkwell Limited, declared shareholder in FBZ

Chinyata Justin Chinyata, declared shareholder in FBZ

Bazian Yousef Bazian, declared shareholder in FBZ

Loita Loita Capital Partners International Limited

Finsbury or FIL Finsbury Investments Limited, declared shareholder in FBZ

Schultz Mary Schultz, sister to Dr Mahtani and alleged 99% shareholder in Finsbury

Puta Estate late Pat Bwala Puta, declared shareholder in FBZ

Chamunda Patrick Chamunda, declared shareholder in FBZ

Samuel Job Albert Thiagaraj Samuel, declared shareholder in FBZ

Mwape Dr Austin Mwape, Director Bank Supervision Department, Bank of Zambia

BOZ Bank of Zambia

Drug Enforcement Commission - Zambia Report for discussion purposes Forensic investigation into the true shareholding behind individuals and entities declared as shareholders in Finance Bank Zambia Page 2 of 50


2. LIST OF ANNEXURES

Annexure Description

A 1-10 CSIBV 40% share purchase in FBZ Transaction documentation

B Historical share reconciliation supported by PACRO supporting documents

C Credit Suisse Investments (Nederland) BV 2008 Annual Financial Statements

D Affidavit, Maria Leistner, General Counsel Credit Suisse, Europe

E Declaration of Trust signed by Jonas Stoltzfus 25 July 2003

F Minutes of meeting Jonas Stoltzfus and Bank of Zambia n 18 May 2010

G S Powell e-mail to Stoltzfus and reply thereto from Sangwa & Associates

H Declaration of Trust signed by Jonas Stoltzfus dated 6 April 1998

I E-mail from Paul Reed of Circle Trust to Dr Mahtani dated 4 November 2003 with a Fee schedule from Circle Trust attached

J Letter from Professional Services Limited to Finance FBZ dated 30 June 2007

K Mary Schultz statement to Drug Enforcement Commission dated 9 April 2010

L Gabriel Schultz statement to Drug Enforcement Commission dated 9 April 2010

M Finsbury letter to First Alliance Bank Lusaka dated 28 April 2010

N e-mail from M Chisa of Professional Services Limited to Ignatius Mwape of FBZ

O 1 to 14 Reconciliation of Finsbury dividend payments attaching Instructions from Dr Mahtani re dividend transfers

P Declaration of trust signed by Job Samuel dated 25 May 1993

Q Email correspondence from S Powell to Job Samuel dated 11 May 2010 and replies thereto

R 1-3 Credit Suisse dividends SWIFT MT 100 and Zambian Revenue Authority returns as well as e-mail from Chris Corson

S Management agreement FBZ and Loita

T Sale of Shares agreement Dr Mahtani and Chinyanta and Bazian



3. INTRODUCTION AND BACKGROUND

3.1. On 26 April 2010, ENS Forensics (Pty) Ltd, the forensics arm of Edward Nathan Sonnenbergs Inc. was appointed by the Commissioner of the Drug Enforcement Commission to conduct a forensic investigation into the true persons behind the individuals and entities declared as shareholders in Finance Bank Zambia (FBZ).

3.2. The Zambian authorities, including the Drug Enforcement Commission as well as the Bank of Zambia (BOZ) were extremely concerned regarding developments at FBZ, which required interventions to address significant governance issues at FBZ, including insider loans and potential money laundering, which have damaged the solvency of FBZ. These interventions culminated in the stepping down of Dr Rajan Mahtani as chairperson of FBZ and, shortly thereafter, led to the dissolution of the Board of FBZ.

3.3. We understand that the Board was dissolved at the behest of BOZ, who were concerned in that Mahtani appears to have acted autonomously in committing a serious of irregularities and governance failings with limited or no control exercised by the FBZ Board, and notwithstanding this fact; several of the former board members were nominated by FBZ for re-appointment to the new Board. We understand that this was unacceptable to Bank of Zambia and aggravated concerns about integrity at the institution.

3.4. We further understand that BOZ has serious concerns regarding the capital solvency of FBZ which has been hampered by non performing insider loans.

3.5. These concerns are highly sensitive as dissemination of this information could easily result in a run on the FBZ which would have disastrous consequences for investors, depositors and stakeholders. We understand that the Zambian authorities are looking at urgent remedial steps to address the situation.

3.6. An integral part of the remedial processes that are being considered is a forensic legal investigation to establish the true shareholding behind the declared shareholders in FBZ. In this regard we were advised that there are many indicators which suggest that many of the former shareholders were merely fronts for Dr Mahtani who has been influencing and controlling the bank even after his purported stepping down. The forensic investigation is required to establish the facts behind the declared shareholding.

3.7. Kindly note that we have adopted your terminology regarding declared shareholdings with reference to the recorded registered shareholders.



4. INVESTIGATION PROCEDURES

4.1. The procedures adopted by the forensic investigation team to determine the true shareholding behind the declared shareholding in FBZ comprised of the following:

4.1.1. Background checks and research on the listed shareholders;

4.1.2. Interviews with critical role players;

4.1.3. Analysis of the electronic FBZ records on the server and computers of key personnel at FBZ;

4.1.4. Analysis of the e-mail correspondence on the mail server as well on the computers of key personnel at FBZ;

4.1.5. Document analysis Analysis of records of FBZ and other Mahtani entities that were seized by the Drug Enforcement Commission. This included PACRO, and other share and statutory information relating to FBZ and related entities. Special attention was accorded to the cash flows and payment trails relating to payment for shares and dividend flows from FBZ to the various shareholders.

5. INTERVIEWS CONDUCTED

5.1. During the investigation we interviewed the following witnesses:

Name Capacity Austin Mwape Director Bank Supervision department Bank of Zambia Wilson Kalumba Bank of Zambia official Patrick Chamunda Declared shareholder in FBZ Patricia Puta Daughter of Anne Puta re Estate late Pat Bwala Puta Justin Chinyata Declared shareholder in FBZ Job Thiagaraj Samuel Declared shareholder in FBZ Jonas Stoltzfus Declared shareholder in FBZ Christopher Corson MD Fixed income Credit Suisse Securities (Europe) Limited Maria Leistner Group General legal Counsel Credit Suisse Europe Dick King Managing Director and Chief Executive Officer, FBZ Dr Rajan Mahtani Group Executive Chairman, Mahtani Group of companies



6. Document review

6.1. We reviewed the following files that were provided to us by the DEC.

Synopsis of document Date Reviewed

Received From

Reviewed By

Reference

1 Leasing Finance Company Limited

28-Apr-10 DEC SP & RG Local Company Number 12161

2 Professional Services Corporation Zambia Limited


3 Finsbury Park Limited 28-Apr-10 DEC SP & RG Local Company Number 61497

4 Finsbury Estate Limited 28-Apr-10 DEC SP & RG Local Company Number 61496

5 Finsbury Investments Limited 28-Apr-10 DEC SP & RG Local Company Number 11032

6 Professional Services Limited 28-Apr-10 DEC SP & RG Local Company Number 6235

7 Zambezi Portlands Cement 28-Apr-10 DEC SP & RG Local Company Number 57313

8 Finance Bank Zambia Limited 28-Apr-10 DEC SP & RG Local Company Number 15083

9 Professional Travel and Tours Limited


10 Moor Apartments Limited 28-Apr-10 DEC SP & RG Local Company Number 60048

11 Mukuyu Homes Limited 28-Apr-10 DEC SP & RG Local Company Number 65561

12 Cladava Mining Limited 28-Apr-10 DEC SP & RG Local Company Number 64513

13 Finsbury Files (Case full) various

28-Apr-10 DEC SP & RG File 11032

6.2. We reviewed extensive records received from Credit Suisse International (Nederland) BV, CSIBV, relating to their share purchase in FBZ in 2008, including:

6.2.1. A private and confidential memorandum relating to Credit Suisses shareholding in Finance Bank Zambia (Provided to us by Corson and confirmed by Leistner);

6.2.2. The Shareholders Agreement dated 23 May 2008, between FBZ and CSIBV and Dr Mahtani and Finsbury Investments and Clarkwell;

6.2.3. Option Deed, Clarkwell and CSIBV;

6.2.4. Share Charge, Clarkwell Limited- Jonas Stoltzfus as Charger and CSIBV as Chargee; and

6.2.5. Mortgage over Shares dated 23 May 2008 relating to shares in FBZ between Clarkwell as mortgagor and CSIBV as beneficiary.



6.2.6. Guarantee (and extension) furnished to CSIBV by Dr Mahtani:

6.2.6.1. Barclays Bank guarantee USD 13 million; and

6.2.6.2. Royal Bank of Canada - guarantee USD 37 million.

6.2.7. Put and Call Option term sheet summary of indicative terms and conditions (and extension thereto).

6.2.8. Side agreement between CSIBV and Clarkwell.

The CSIBV share purchase in FBZ records are attached as Annexure A1 to A12.

6.3. We reviewed extensive records received from Justin Chinyata relating to:

The management services contract entered into between FBZ and Loita Financial Services;

A due diligence report done on FBZ in 2002 for Loita; and

the sale of shares to Credit Suisse in 2008.

7. Chronology of Historical Shareholding in FBZ

7.1. From our analysis of the FBZ share registry and share certificates as well as the Registrar of Companies records, we were able to identify the historic declared shareholding in FBZ. The tables below set out the declared shareholding in FBZ from inception in 1988 until 31 December 2009. Attached as Annexure B.

Certificate % of File

31-Jul-87 Number of shares

held total shares Ref 1 Finsbury Investments Limited 3,999,999.00 100.00 4

2 Mary Schultz (Nominee for Finsbury Investments Limited) 1.00 0.00 4

Total shares 4,000,000.00




11-Jul-88 Number of shares

held total shares Ref 1 Finsbury Investments Limited 24,679,999.00 98.72 6 2 Zahid Sarwar Nizam 320,000.00 1.28 6

3 Mary Schultz (Nominee for Finsbury Investments Limited) 1.00 0.00 6

Total shares 25,000,000.00 100.00


17-Sep-90 Number of shares

held total shares Ref 1 Finsbury Investments Limited 39,680,000.00 39.68 10 2 Leasing Finance Company Limited 20,000,000.00 20.00 10 3 Finsbury Investments Limited (as nominees) 3,250,000.00 3.25 10 4 Pat Bywalya Puta 2,500,000.00 2.50 10 5 Lumbamba Muyambango Nyambe 1,500,000.00 1.50 10 6 Zahid Sawar Nizam 1,820,000.00 1.82 10 7 Patrick Chamunda 1,000,000.00 1.00 11 8 Job Albert Thiagaraj Samuel 250,000.00 0.25 11

9 Finance Holdings Corporation (International) Limited 30,000,000.00 30.00 11

Total shares 100,000,000.00 100.00


31-Dec-92 Number of shares

held total shares Ref 1 Finsbury Investments LTD 314,748,000.00 40.12 13


3 Leasing Finance Company Limited 158,638,000.00 20.22 13

4 Leasing Finance Company Limited (as Nominees) 37,670,000.00 4.80 13

5 Pat Bwalya Puta 19,837,000.00 2.53 13 6 Patrick Chamunda 7,929,000.00 1.01 13 7 Job Albert Thiagaraj Samuel 1,975,000.00 0.25 14 8 Zahid Sarwar Nizam 5,786,000.00 0.74 14

Total shares 784,540,000.00 100.00







3 Leasing Finance Company Limited 176,600,000.00 20.00 16

4 Leasing Finance Company Limited (as Nominees) 58,013,000.00 6.57 16

5 Pat Bwalya Puta 22,075,000.00 2.50 16 6 Patrick Chamunda 8,830,000.00 1.00 16 7 Job Albert Thiagaraj Samuel 2,208,000.00 0.25 16

Total shares 883,000,000.00 100.00



held total shares Ref 1 Finsbury Investments Limited 794,382.00 39.72 17 2 Finance Holdings Corporation 600,000.00 30.00 17 3 Leasing Finance Company Limited 400,000.00 20.00 17 4 Finsbury Investments Limited (as Nominees) 130,618.00 6.53 17 5 Pat Bwalya Puta 50,000.00 2.50 17 6 Patrick Chamunda 20,000.00 1.00 17 7 Job Albert T Samuel 5,000.00 0.25 17

Total shares 2,000,000.00 100.00

Annual Returns and Certificates % of File



2 Finance Holdings Corporation (International) Limited 900,000.00 30.00 20

3 Leasing Finance Company Limited 600,000.00 20.00 20

4 Leasing Finance Company Limited (as Nominees) 195,620.00 6.52 20

5 Estate of the late Patrick Bwalya Puta 75,000.00 2.50 20 6 Patrick Chamunda 30,000.00 1.00 20 7 Job Albert Thiagaraj Samuel 7,500.00 0.25 20

Total shares 3,000,000.00 100.00



Annual Returns and Certificates % of File

31/12/1996 Number of shares


2 Finance Holdings Corporation (International) Limited 978,000.00 30.00 25

3 Leasing Finance Company Limited 652,000.00 20.00 25

4 Leasing Finance Company Limited (as Nominees) 212,570.00 6.52 25

5 Estate of the late Patrick Bwalya Puta 81,500.00 2.50 25 6 Patrick Chamunda 32,600.00 1.00 25 7 Job Albert Thiagaraj Samuel 8,150.00 0.25 25

Total shares 3,260,000.00 100.00

Annual Return of a Company % of File


held total shares Ref 1 Finsbury Investments Limited 1,442,180,000.00 39.73 29

2 Finance Holdings Corporation (International) Limited 1,089,000,000.00 30.00 29

3 Leasing Finance Company Limited 726,000,000.00 20.00 29 4 Finsbury Investments Limited (As Nominees) 236,695,000.00 6.52 29 5 Estate of the late Patrick Bwalya Puta 90,750,000.00 2.50 29 6 Patrick Chamunda 36,300,000.00 1.00 29 7 Job Albert Thiagaraj Samuel 9,075,000.00 0.25 29

Total shares 3,630,000,000.00 100.00





3 Leasing Finance Company Limited 726,000.00 20.00 41 4 Finsbury Investments Limited (As Nominees) 236,695.00 6.52 41 5 Estate of the late Patrick Bwalya Puta 90,750.00 2.50 41 6 Patrick Chamunda 36,300.00 1.00 41 7 Job Albert Thiagaraj Samuel 9,075.00 0.25 41

Total shares 3,630,000.00 100.00





held total shares Ref 1 Finsbury Investments Limited 1,442,180,000.00 39.73 45


3 Leasing Finance Company Limited 726,000,000.00 20.00 45 4 Finsbury Investments Limited (As Nominees) 236,695,000.00 6.52 45 5 Estate of the late Patrick Bwalya Puta 90,750,000.00 2.50 45 6 Patrick Chamunda 36,300,000.00 1.00 45 7 Job Albert Thiagaraj Samuel 9,075,000.00 0.25 45

Total shares 3,630,000,000.00 100.00



held total shares Ref 1 Finsbury Investments 1,442,180,000.00 39.73 55


3 Leasing Finance Company Limited 726,000,000.00 20.00 55 4 Finsbury Investments Limited (as Nominee) 236,695,000.00 6.52 55 5 Estate of the late Pat Bwalya Puta 90,750,000.00 2.50 55 6 Patrick Chamunda 36,300,000.00 1.00 55 7 Job Albert Thiagaraj Samuel 9,075,000.00 0.25 55

Total shares 3,630,000,000.00 100.00



held total shares Ref 1 Finsbury Investments 1,442,180,000.00 39.73 49


3 Leasing Finance Company Limited 726,000,000.00 20.00 49 4 Finsbury Investments Limited (as Nominee) 236,695,000.00 6.52 49 5 Estate of the late Pat Bwalya Puta 90,750,000.00 2.50 49 6 Patrick Chamunda 36,300,000.00 1.00 49 7 Job Albert Thiagaraj Samuel 9,075,000.00 0.25 49

Total shares 3,630,000,000.00 100.00




15-Nov-02 Number of shares


2 Finance Holdings Corporation (International) Limited 0.00 - 57

3 Finsbury Investments Limited (as Nominees) 0.00 - 57 4 Leasing Finance Company Ndola 0.00 - 57 5 Estate of the late Patrick Bwalya Puta 90,750,000.00 2.50 57 6 Patrick Chamunda 36,300,000.00 1.00 57 7 Job Albert Thiagaraj Samuel 235,950,000.00 6.50 57 8 Justin Chinyanta 726,000,000.00 20.00 58 9 Yousef Bazian 726,000,000.00 20.00 58

10 Jonas Stoltzfus 907,500,000.00 25.00 58

Total shares 3,630,000,000.00 100.00

Annual Return % of File

07-Nov-03 Number of shares

held total shares Ref 1 Finsbury Investments Limited 907,500,000.00 25.00 75 5 Estate of the late Patrick Bwalya Puta 90,750,000.00 2.50 75 6 Patrick Chamunda 36,300,000.00 1.00 75 7 Job Albert Thiagaraj Samuel 235,950,000.00 6.50 75 8 Justin Chinyanta 726,000,000.00 20.00 72 9 Yousef Bazian 726,000,000.00 20.00 72

10 Jonas Stoltzfus 907,500,000.00 25.00 72

Total shares 3,630,000,000.00 100.00

Annual Return % of File


held total shares Ref 1 Finsbury Investments Limited 907,500,000.00 25.00 81 2 Jonas Stoltzfus 907,500,000.00 25.00 81 3 Justin Chinyanta 726,000,000.00 20.00 81 4 Yousef Bazian 726,000,000.00 20.00 81 5 Job Albert Thiagaraj Samuel 235,950,000.00 6.50 82 6 Estate of the late Patrick Bwalya Puta 90,750,000.00 2.50 82 7 Patrick Chamunda 36,300,000.00 1.00

Total shares 3,630,000,000.00 100.00





held total shares Ref 1 Finsbury Investments Limited 907,500,000.00 25.00 89 2 Job Albert T Samuel 235,950,000.00 6.50 89 3 Estate of the late Patrick Bwalya Puta 90,750,000.00 2.50 89 4 Patrick Chamunda 36,300,000.00 1.00 89 5 Clarkwell Limited 907,500,000.00 25.00 89 6 Credit Suisse Investments (Nederland) B.V. 1,452,000,000.00 40.00 89

Total shares 3,630,000,000.00 100.00

8. The current (declared) shareholding of FBZ

8.1. Credit Suisse - 40%

8.2. Finsbury Investments Limited 25% (Jointly owned by Mrs. Mary Schultz -99% and Rev. G. Schultz -1%)

8.3. Clarkwell Limited - 25% (Jonas Stoltzfus 49,999 shares and Global Holdings Group 1 share)

8.4. Job Albert T. Samuel - 6.5%

8.5. Estate of Late Pat B. Puta - 2.5%

8.6. Patrick Chamunda - 1.0%

9. SUMMARY OF FINDINGS

We were requested to establish the true identities of the natural persons or entities behind the declared shareholding in Finance Bank Zambia. A summary of our findings in this regard are set out below. In our view, there is compelling evidence to suggest that Mahtani and/or entities under his control had direct and/or indirect control over the declared shareholding, which becomes apparent from thorough analysis of the CSIBV share purchase transaction records regarding their acquisition of a 40% interest in FBZ, which sheds light on a number of critical aspects to the transaction. The share purchase transaction reflects the current shareholding which we have analysed in great detail. Where we address the various individuals and entities as declared in the current shareholding we have also incorporated an analysis of their historic positions.



By way of summary, there is a compelling argument that the current shareholding is as follows:

9.1. Credit Suisse - 40% -

9.2. Finsbury Investments Limited 25% Nominee for or under the control of Mahtani

9.3. Clarkwell Limited - 25% Nominee or under the control of for Mahtani

9.4. Job Albert T. Samuel - 6.5% Nominee or under the control of for Mahtani

9.5. Estate of Late Pat B. Puta - 2.5% r

9.6. Patrick Chamunda - 1.0% -

10. DETAILED FINDINGS

10.1. Credit Suisse Investments Nederland BV

10.1.1. We are satisfied that, on the face of the information made available to us as well as on the strength of the interviews that we have conducted with various Credit Suisse representatives, that Credit Suisse appear to be genuine shareholders in respect of their 40% interest in FBZ. The evidence reflects that they made the investment on behalf of Credit Suisse. We found no evidence to suggest that they are acting either as a nominee for Dr Mahtani or acting on his behalf. We are still awaiting assurance from Credit Source regarding the source of funds used in the acquisition.

10.1.2. We were initially concerned that the Credit Suisse investment in FBZ did not reflect in the Annual Financial Statements of Credit Suisse International Limited, nor did it appear to reflect on the Credit Suisse website. This anomaly has been explained by Christopher Corson, the Managing Director at Credit Suisse responsible for the Emerging Markets financing group in the EMEA region and the person responsible for managing Credit Suisses investment in FBZ, who explained that the investment is in fact recorded in the Credit Suisse Investments Nederland BV Annual Financial Statements for the year ended 31 December 2008. This is the private subsidiary responsible for investments of this nature. They explained that Credit Suisse has made similar investments in Asia and other parts of Africa, and, in fact, initially looked at investing in Zanaco in Zambia.



10.1.3. Page 5 of the CSIBV 2008 Annual Financial Statement reflects that On 28 March 2008, the Company purchased shares in Finance Bank Zambia Ltd from a third party vendor, equating to 40% equity interest at a market price of USD 80,000,000 (equivalent of EUR 50,646,628 at the date of purchase). The Annual Financial Statements of CSIBV for 2008 is attached as Annexure C.

10.1.4. We secured independent confirmation regarding the nature of the investment from Maria Leistner, General Legal Counsel for Credit Suisse London, who confirmed that CSIBV is the legal and beneficial shareholder in respect of the Purchased FBZ Shares. The payment for the Purchased FBZ shares was made by CSIBV, the subsidiary of Credit Suisse International Limited referred to above, who have provided assurances that they are not holding the shares in trust for Mahtani or any entity under his control, or acting as his nominee.

10.1.5. Maria Leistners draft affidavit is attached as Annexure C to this report. (The affidavit is submitted as an unsigned draft at this stage as Ms Leistner is presently out of the country and will finalise the affidavit on her return to the UK in the week of 14 June 2010).

10.1.6. Credit Suisse are running additional probity checks to ensure that Mahtani is not indirectly linked as investor in the Credit Suisse investment and have undertaken to supply the requisite confirmations in this regard.

10.1.7. Leistners affidavit which sets out the various elements to the CSIBV share purchase is critically important for a number of reasons.

10.1.8. As set out above, it provides confirmation that Credit Suisse is not a nominee for Dr Mahtani.

10.1.9. The next important aspect of Leistners affidavit evidences the fact that on 22 March 2010, Dr Mahtani and Jonas Stoltzfus signed an indicative term sheet which restructured the Put and Call Option Deed entered into between Clarkwell and Credit Suisse Investments Nederland BV, originally entered into on 23 May 2008. This reveals that Mahtani continues to act regarding the Credit Suisse transaction, notwithstanding the fact that, during February 2010, he stepped down as chairman of FBZ.



10.1.10. In addition to the affidavit from Leistner, in order to gain a thorough understanding of the transaction, we conducted several interviews with Christopher Corson, the Managing Director at Credit Suisse responsible for the Emerging Markets financing group in the EMEA region and the person responsible for managing Credit Suisses investment in FBZ. According to Corson, Mahtani negotiated the Credit Suisse transaction in 2008, and he continues to do so, during the restructuring which has taken place over the last few months in 2010. The Indicative Term sheet reflecting the above, signed by both Mahtani and Stoltzfus, dated 22 March 2010 is incorporated as Annexure A in the batch of CSIBV share purchase documents attached as A10.

10.1.11. It is argued that this document which was signed in March 2010 shows that Mahtani continues to hold a material interest in the shareholding of FBZ. This would explain his continued active involvement in the transaction, as on paper, he has no direct shareholding and is no longer Chairman or a Director of FBZ.

10.1.12. The other revealing aspect of the information provided in Leistners affidavit is that, (whilst it confirms that Mahtani is continuing to be the key role player in the shareholding agreement even though on paper, he is not a shareholder, as indicated above), it also shows that Mahtani has managed to get Stoltzfus to put Clarkwells shares in FBZ in the transaction, even though Clarkwell does not appear to have a beneficial interest in that transaction. Corson indicated that this was an oddity to Credit Suisse, who required comfort that were able to exit the transaction in the event of the IPO not taking place. Corson also indicated that Dr Mahtani signed as guarantor even though he was not a beneficiary. When interviewed by Powell Dr Mahtani stated that: Credit Suisse needed the guarantee and they knew me, they did not know Clarkwell, so I provided the guarantee.

10.1.13. A possible explanation for the guarantee provided by Dr Mahtani is that the entire Credit Suisse transaction may simply have been a loan of USD 80 million which was secured via an elaborate sale of shares agreement. The security for the loan takes the form of the equity stake. The PUT option would allow Dr Mahtani to repurchase the shares in FBZ via Clarkwell which equates to repayment of the loan. (This is however pure speculation which has not been confirmed by any of the Credit Suisse officials, but this would certainly explain the high 17% return guaranteed to CSIBV, whether the IPO took place or not).



Clarkwell

10.1.14. Clarkwell Limited is a 25% shareholder in Finance Bank of Zambia Limited

10.1.15. Clarkwell Limited is an entity registered at the following address 90 Main Street, P O Box 3099, Tortola, British Virgin Islands with shareholding as follows:

Jonas Stoltzfus holds 49,999 shares and

Global Holdings Group 1 share in Clarkwell.

10.1.16. From the CSIBV share purchase documents as well as the interviews that we conducted, it appears that Clarkwell was acquired just before the transaction was concluded in 1998, as a Special Purpose Vehicle, (SPV), specifically for the transaction, as Credit Suisse were not comfortable with a single individual owning a significant stake of the equity in FBZ and preferred to deal with a corporate entity rather than an individual.

10.1.17. The dividends from Clarkwells interest in FBZ do not however flow to Clarkwell as one might have expected; all dividends due to Clarkwell were paid into the bank account of Finsbury Investments Limited.

10.1.18. This aspect will be explored in greater detail herein below, however we wish to point out at this stage, that the payments made to Finsbury (an entity which was a nominee for Dr Mahtani whom we confirmed as the beneficial owner) in respect of dividends due to other shareholders is a common denominator amongst the shareholders who appear prima facie, to be nominees for Dr Mahtani and/or entities controlled by him.



10.1.19. A review of the dividend distribution history from Finance Bank Zambia in respect of Clarkwell Limited reflects the following dividend payments that were made to Finsbury:

Details Gross Dividend Beneficiary Name

2003 Final Dividend 1,751,750,000 Finsbury Investments

2004 Interim Dividend


2005 Interim Dividend 1,500,000,000 Finsbury Investments







10.1.20. It is difficult to understand why Stoltzfus was prepared to put his shares in FBZ at risk to facilitate the Credit Suisse transaction. A strong indicator to the nature of the relationship between the parties is derived from a Declaration of Trust which Stoltzfus signed on 25 July 2003, in which he acknowledges that the 907, 500 Ordinary Shares held by him in Finance Bank Zambia Limited are the bona fide Property of Finance Holdings Corporation (International) Limited (a Mahtani Group entity discussed below) and further that he has no beneficial interest in the said shares. The document goes on to state that he acknowledges and declares that the said shares are registered in his name for convenience sake only and that he hereby irrevocably in rem suam authorises and empowers the owners to be true to transfer the said shares into the name of the owners or into the name or names of such other nominee or nominees as the owners may think fit, promising and engaging at all times to ratify, allow and confirm whatsoever that owners may do or cause to be done in the premises by virtue hereof.



Finally, the document states that he authorises the secretary of the company to transfer all dividends payable on the said shares to the owners (our emphasis). The Declaration of Trust dated 25 July 2003 is attached as Annexure E.

10.1.21. We noted that this Declaration of Trust was signed less than one month after a FBZ Board Resolution was adopted (on 30 June 2003), transferring the entire shareholding of Finance Holdings Corporation (International) in FBZ (907,500, 000 shares) to Jonas Stoltzfus. (our emphasis). The FBZ Resolution referred to above is attached as Annexure A (2). The relevant Form of transfer of Fully Paid shares in Company Limited is attached to the above Board Resolution. The share transfer form is attached as Annexure A (3). We further noted that the form refers to fully paid shares and refers to an amount of Kwacha nine hundred and seven million five hundred thousand only. When questioned on his shareholding by Bank of Zambia officials in Lusaka on 18 May 2010, by Bank of Zambia officials, Stoltzfus indicated however that he never paid for the shares which were to have been financed out of dividends from FBZ over a period but he was uncertain of the amounts redeemed as well as in respect of the exact time frame for such redemption.

10.1.22. During the meeting with officials from the Bank of Zambia on 18 May 2010, he was specifically asked if he had ever at any time renounced his shares in FBZ. He indicated that he had never renounced any shares in FBZ. When shown a copy of the Declaration of Trust bearing his signature, he confirmed his signature on the document but indicated that when he was asked earlier about this, he did not recall it. He confirmed that he signed the said Declaration of Trust, confirming that the Finance Holding Limited shares were Dr Mahtanis.



10.1.23. In the same meeting, when Stoltzfus was asked how he had paid for the shares (that he had stated earlier in the meeting he had purchased from Finance Holdings Limited), Mr Stoltzfus stated that he did not pay anything for the shares as it was agreed that he would not receive any dividend until the value of the shares were redeemed. When he was questioned as to whether or not he was aware that such an arrangement was not a permissible method of share purchase as no sale could be said to have taken place, he pleaded ignorance. Asked whether he was informed when dividends were declared for him to determine that he had met the conditions of share transfer, he stated that he was never advised and was merely waiting for a time period to lapse. The minutes of the meeting between the Bank of Zambia officials and Mr Jonas Stoltzfus which were compiled by Mr Norbert Mumba, Assistant Director, Regulatory Policy, Bank of Zambia, is attached as Annexure F.

10.1.24. In analysing the statements made by Stoltzfus to the Bank of Zambia officials, it is clear that he was not honest and sought to evade admitting that he had simply been a front for Mahtani and/or entities under his control, which, we submit, is the only inference which can be gleaned from declarations which he admitted he had signed.

10.1.25. Stoltzfus was given ample opportunity by our forensic team to provide clarity regarding his share ownership in FBZ, but apart from supplying some limited and cryptic information, he has failed to do so.

10.1.26. When Stoltzfus initially received our request, he stated that he needed confirmation that we were acting on behalf of the Zambian authorities.

10.1.27. He indicated to us that once he received the confirmation that he sought, he would provide the information. Our appointment was confirmed to him by the authorities but he then indicated that he would be travelling to Zambia shortly and would prefer to provide the information when in Zambia.



10.1.28. When he eventually arrived in Zambia, Stoltzfus seemed to adopt a less co-operative stance. After meeting with the Bank of Zambia officials, on 18 May 2010, (the details of that meeting have already been set out above), he met with our Advocate Steven Powell on 20 May 2010. At this stage he was represented by a local attorney, Mr Sangwa, and declined to answer questions on the grounds that anything that he said during the meeting may be used in potential proceedings against him as we were also representing the Drug Enforcement Commission. Mr Sangwa indicated that we could put questions to his client in writing and they would consider providing the information. We repeated our initial e-mail request for clarification regarding Stoltzfus and on 7 June 2010 we received a limited and cryptic response from Mr Sangwa.

10.1.29. In Stoltzfuss response, furnished to us by Mr Sangwa, Stoltzfus denies that he has ever been a nominee for Dr Mahtani. We believe that Stoltzfus is being dishonest in this denial of nomineeship as he claims to have acquired his interest in FBZ from Finsbury whereas the share transfer forms that he signed showed that he acquired his shareholding in FBZ by taking over the shares of Finance Holdings Corporation (International). He also refers to taking over the shareholding in 2003, but this is inconsistent with a further Declaration of Trust, signed by Stoltzfus on 6 April 1998.

10.1.30. In terms of the further Declaration of Trust, Stoltzfus must have been registered and/or recorded as a shareholder or owner of Finance Holdings Corporation (International) as this Declaration of Trust reflects that all of the issued and fully paid equity in Finance Holdings Corporation International Ltd, hereafter called Finance Holdings, a company incorporated in Dublin in the Republic of Ireland on 7 March 1990, is the bona fide property of Doctor Rajan Lekhraj Mahtani, (our emphasis) hereafter called the owner whose registered address is: care of Mister William Hedley of Swepstone Walsh solicitors of nine Lincoln Inn Fields, London WC2. This document further states that Stoltzfus empowers the owner to deal with the said equity in any manner that he deems fit without any reference to him (Stoltzfus) and that he undertakes to ratify any decisions that may be requested by the owner in respect of the issued and fully paid equity of Finance Holdings. The final comment in the Declaration of Trust is also important as there is an indication from Stoltzfus that he waives any claim to compensation in respect of this holding and that he does so voluntarily and of his own free will. The Declaration of Trust document dated 6 April 1998 is attached as Annexure H.



10.1.31. This evidence provides a compelling argument that in 2003 as well as previously in 1998, and possibly even before then, Stoltzfus acted as a nominee for Mahtani and/or entities under his control. Finance Holdings Corporation (International) is reflected as a shareholder in FBZ from 1992 to November 2003. It is argued that the above Declaration of Trust shows that Stoltzfus must have previously been a shareholder in Finance Holdings Corporation (international) Limited. It is reflected in various documents (see below) as being registered in Dublin Ireland; however we have not located any further records confirming the shareholding of this entity and the entity does not appear to be listed in the Company House records in the United Kingdom.

10.1.32. It is important to point out that we found various documents which indicate that Finance Holdings International, in fact, formed part of the Mahtani Group of companies and furthermore revealed a link to Stoltzfus. One of these documents is an e-mail dated 4 November 2003 addressed from Paul Read of Circle Trust Ltd (telephone number +441534 823333) addressed to Rajan Mahtani with the subject header Finance Holdings. The said e-mail indicates that Circle Trust Ltd is urgently trying to finalise the audited accounts for the company (Finance Holdings). In the e-mail Paul Read requests Mahtani to send by fax, copies of the new share certificates issued to Mr Stoltzfus. He goes on to talk about the balance in the loan account due to you. (Mahtani). Attached to this e-mail was a Fee Schedule entitled Mahtani group of companies reflecting the entities in that group, jurisdiction, Circle trust minimum fees and other costs. The very first entity listed on this Fee Schedule is Finance Holdings Corporation (International) Ltd with jurisdiction reflected as Eire. The above e-mail correspondence and the said Fee Schedule are attached as Annexures I (1) and I (2).

10.1.33. In the Declaration of Trust documents referred to above, Stoltzfus relinquished all claim to dividends flowing from his shares in FBZ and previously in Finance Holdings. This corresponds with information which we established confirming that all dividends due to Stoltzfus from his shareholding in FBZ went to Finsbury Investments Limited.



10.1.34. In his response to our enquiries, Stoltzfus claims that he in fact received dividends. This contradicts the evidence that he gave to Bank of Zambia officials on 18 May 2010, where he explained that dividends due to him from his shareholding in FBZ were paid to Finsbury in payment for his shares. It also contradicts Dr Mahtanis assertion to our Steven Powell that Finsbury never paid dividends; all monies in Finsbury were inter-company loans. Based on the available information it appears that Stoltzfus is simply a nominee for Dr Mahtani (or entities controlled by him) who is the beneficial owner of his shares in FBZ. Stoltzfus has not explained the purpose of the Declaration of Trust letters which he signed alienating his shareholding in FBZ. It is argued that if Stoltzfus shares in FBZ were in his name for convenience only in 2003, the same must apply to the interest of Clarkwell in FBZ, from 2008 as his interest was merely transferred to that entity which was an SPV for the CSIBV transaction.

10.1.35. We noted further that the dividends of all shareholders including Stoltzfus, with the exception of Estate Late Pat Puta and Patrick Chamunda were paid to Finsbury. The dividend flow to shareholders is detailed below in this report.

10.1.36. In a letter dated 30 June 2007 from Professional Services Limited to Mr A Geeverghese, the Executive Director (Finance), Finance Bank of Zambia, headed Interim Dividend Year Ended 31st December 2007, it is requested that the bank pay all dividends due to the account of Finsbury Investments Limited with the exception of the payments due to the Estate of the late Pat Puta and Mr PS Chamunda whose cheques should be paid directly to them. See Annexure J

Finsbury Investments Limited

10.1.37. Finsbury Investments Limited is a 25% shareholder in Finance Bank of Zambia.

10.1.38. Finsbury Investments Limited was incorporated in May 1981. The declared shareholders of Finsbury Investments Limited are Mary Shultz and Gabriel Schultz (her husband). They hold 99% of the shares and 1% respectively. They are both members of the clergy. Mary Schultz is the sister of Dr Mahtani. According to Mary Schultz, Finsbury Investments Limited was set up as a holding company in order to invest in economic development opportunities in Zambia. The directors of Finsbury Investments Limited are Dr Rajan Lekraj Mahtani (Managing Director), Mary Schultz, Gabriel Schultz and Joan Craven.



10.1.39. Mary Schultz admitted to the DEC in an interview on 9 April 2010 that the Finsbury Investments Limited shares in her name (as recorded by PACRO) are held in her capacity as a nominee and in trust for Dr. Mahtani. Dr Mahtani maintains executive powers and duties over Finsbury Investments Limited and confirmed that she has never received any dividends from any investments in Finsbury Investments Limited or Finance Bank of Zambia or any other related entities. Mary Schultz also indicated that although she regularly attended FBZ board meetings and received directors fees, she does not attend board meetings or AGMs related to other companies in the group.

10.1.40. Mary Schultz further confirmed that she resides in Canada and has not been involved in the day to day running of any of the companies in the group and consequently plays no role in nominating directors and senior managers for the group; her focus is on serving the Lord. Statement recorded by DEC from Mary Schultz by the DEC on 9 April 2010 (unsigned) as per Annexure K.

10.1.41. Gabriel Shultz also confirmed his 1% shareholding in Finsbury Investments Limited in the meeting with the DEC on 9 April 2010. Gabriel Shultz stated that he has never received any dividends, directors fees or salary from Finsbury Investments Limited or Finance Bank of Zambia and that he had no interest in knowing the business of Finsbury Investments Limited as he is only interested in spreading the word of God. Gabriel Shultz has never attended board meetings and that Dr Mahtani has all the executive powers to make decisions. Statement recorded from Gabriel Schultz by the DEC on 9 April 2010 (unsigned) as per Annexure L.

10.1.42. During the forensic investigation, our Steven Powell conducted two interviews with Dr Mahtani on 5 and 6 May 2010 respectively, during which he requested clarity regarding the shareholding in FBZ. On the issue of Mary Schultz owning 99% and Gabriel Schultz owning 1% of Finsbury, which owned 25% of FBZ, Dr Mahtani stated (in the presence of his lawyers) that they are basically my nominees, so I effectively own those shares (our emphasis).

10.1.43. During the data analysis exercise we discovered a letter from Finsbury to the Manager, First Alliance Bank, Lusaka signed by Gabriel and Mary Schultz confirming that Dr Mahtani will be the sole signatory on the bank account of Finsbury Investments. This further supports the above argument. The Letter from Finsbury is attached as Annexure M.



10.1.44. During the analysis of e-mail correspondence on the servers and computers of FBZ and related entities we found an e-mail from Ignatius Mwape of FBZ to M Chisha of Professional Services Limited, dated 3 February 2010, and headed REVISED FIL PROFILE. The e-mail is a confirmation that an earlier request to delete the reference to Ultimate Beneficial Shareholder Dr RL Mahtani 100% in the Executive Summary of the Finsbury Investments Profile, has been actioned and the revised document which no longer reflects the Ultimate beneficial shareholder - Dr Mahtani 100%, is attached. We argue that this provides further proof that the Schultzs were mere fronts for Dr Mahtani and provides written confirmation of his admission to Steven Powell. The said e-mail correspondence with the attachment is attached as Annexure N.

10.1.45. As per the DEC records made available to us, we noted the following dividend payments totaling USD 660,000.00 flowing from the Finsbury Investments Limited (Dollar Account administered at Finance Bank Zambia) for the period 3 February 2009 - 22 January 2010.

Date

Instruction addressed to

Dollar Account Number Instruction

Amount US$ To

Bank Beneficiary

1 03-Feb-09 Finance Bank of Zambia

842645026 "Transfer the following amount in respect of the dividend"

200,000.00 The Hong Kong & Shanghai Banking Corporation

Erving Brettell Solicitors

2 29-Mar-09 Finance Bank of Zambia

842645026 "in respect of the dividend"

50,000.00 KBC Bank N.V., Antwerpen Noord, Belgium

For the credit of Overseas Trading Company N.V.

3 10-Sep-09 Finance Bank of Zambia


40,000.00 Gold Pacific Development Limited

DSB Bank, Hong Kong




DSB Bank, Hong Kong




DSB Bank, Hong Kong




DSB Bank, Hong Kong

7 08-Oct-09 Finance Bank of Zambia



DSB Bank, Hong Kong

8 22-Oct-09 Finance Bank of Zambia



DSB Bank, Hong Kong

9 02-Nov-09 Finance Bank of Zambia



DSB Bank, Hong Kong





50,000.00 CITI Bank New York

For onward credit: Punjab National Bank



20,000.00 Commercial Bank, Livonia, Michigan

Erika I Droste (Acc 6820801733)

12 04-Dec-09 Finance Bank of Zambia



DSB Bank, Hong Kong

13 11-Dec-09 Finance Bank of Zambia



DSB Bank, Hong Kong

14 22-Jan-10 Finance Bank of Zambia



DSB Bank, Hong Kong

10.1.46. Note that all of the above instructions to FBZ to pay these dividends were on the instruction of Dr Mahtani. (Note that Dr Mahtani had informed Steven Powell that Finsbury never paid dividends; all funds in Finsbury were inter-company loans). The above reconciliation, including the instruction letters signed by Dr Mahtani are attached as Annexure O.

Job Samuel

10.1.47. Job Albert Thiagaraj Samuel, of Lakeland Drive, Etobicoke Ontario, Canada (a retired professional accountant) is declared to hold a 6.5% shareholding in Finance Bank Zambia Limited. Mr Samuel confirmed to us that Finsbury is the beneficial owner of his shares and that he was simply a nominee shareholder with no beneficial interest in the shares reflected in his name.

10.1.48. From documents made available to us by the DEC we see from a Declaration of Trust dated 21 May 1993 that Job Albert Thiagaraj Samuel acknowledges and declares that 1975,000 ordinary shares of K1 each numbered 96,500,001 96,750,000, 169,750,001 170,000,000, 493,790,001 494,540,000, 783,815,001 784,540,000 held by him (Job Albert Thiagaraj Samuel) in Finance Bank of Zambia Limited are the bona fide property of Finsbury Investments Limited and that he (Job Albert Thiagaraj Samuel) has no beneficial interest in the said shares. (our emphasis) The document further states that Job Albert Thiagaraj Samuel acknowledges and declares that the said shares are registered in his name for convenience sake only and that he irrevocably and in rem suam authorize and empower Finsbury Investments Limited to be the true to transfer the said shares into the name of Finsbury Investments Limited or into the name or names of such other nominee or nominees as Finsbury Investments Limited think fit. Further that Job Albert Thiagaraj Samuel authorizes the Secretary of Finsbury Investments Limited to



pay all dividends payable on the said shares to Finsbury Investments Limited. See signed Declaration of Trust attached as Annexure P.

10.1.49. During the data analysis we discovered a further Declaration of Trust in the name of Job Samuel. The unsigned document, dated 30 June 1990, declared that Dr Mahtani was the owner of shares in FBZ reflected in the name of Job Samuel.

10.1.50. On 11 May 2010 we corresponded with Job Albert Thiagaraj Samuel via email (on the address [email protected]) and requested him to provide clarity on the following:

Please advise how much money you paid for the shareholding which you acquired in FBZ;

Did you enter into any agreement regarding financing of your share purchase? If so, please supply a copy of any share purchase agreement;

Have you ever received any dividends from FBZ or Finsbury?;

Did you act as a nominee for Dr Mahtani?; and

Have you received dividends flowing from your shareholding in FBZ?

10.1.51. In his response to us Mr Samuel stated the following regarding his Finance Bank Zambia Limited shareholding:

No money was paid by me for my shareholding in FBZ;

No agreement was made for financing of any share purchase in FBZ;

No dividends were received by me from FBZ or Finsbury;

I held 235,950,000 Ordinary shares in FBZ and had no beneficial interest in these shares;

After I ceased to be a Director of FBZ, the above shares were transferred in a Declaration of Trust; and

No dividends were received by me from the nominee shares held by me in FBZ.



10.1.52. Mr Samuel has indicated that he will supply us with a sworn affidavit confirming the above information shortly. Copy of email correspondence from Job Samuel attached as Annexure Q.

10.1.53. Dr Mahtani claimed that these shares were to have been placed in a trust for employees that Dick King was involved in setting up. King confirmed that he was engaged in setting up an employee share scheme, however in the interim; Samuel remained the recorded shareholder, over an extensive period, while he was not in fact a beneficial shareholder and the dividends flowing from his shareholding went to Finsbury, which as confirmed above, was effectively owned by Dr Mahtani. The parties spoke of these shares being transferred to Joan Craven, but she is not recorded as the owner of the 6,5% shareholding registered in Job Samuels name.

10.1.54. Dr Mahtani also confirmed that Stoltzfus, as well as Justin Chinyanta and Yousef Bazian were to have financed their share acquisitions in FBZ out of future profits from FBZ. (This aspect will be dealt with in greater detail below). Dr Mahtani initially indicated that If you look at the share certificates you will see a note recorded in the certificate that there is a five year payment plan for the shares. All dividends go to Finsbury as payment for the shares. He added that all monies in Finsbury are inter-company loans there are no dividends out of Finsbury. We attached above a series of letters of instruction from Finsbury Investments Limited to the Manager of FBZ, signed by Dr Mahtani instructing that various USD amounts in respect of dividend payments from Finsburys dollar account No. 842645-026 be paid to various accounts across the globe. The narrative on the payments refutes Dr Mahtanis claim that Finsbury never paid dividends. Annexures O1 to 23 refer.

10.1.55. We reviewed the share certificates in question, but found no notation relating to a five year payment scheme out of future dividends. In fact, on the contrary, the certificates describe the shares as fully paid up.

10.1.56. On 6 May 2010, when we confronted Dr Mahtani with the fact that there was no such annotation on the Share Certificate, he then indicated that he referred us to the Share Transfer Form, not the Share Certificates. We then checked the Share Transfer forms but again found no annotation referring to a delayed payment scheme. These documents once again referred to fully paid up shares which we know is not the correct position.



10.1.57. Regarding Dr Mahtanis allegation that no dividends were paid from Finsbury we identified documents from FBZ which indicate that funds were transferred from Finsburys account at FBZ to Dr. Mahtanis personal account held at HSBC in Hong Kong and the Jersey Islands. The narration details on the transfer refer to dividends. The relevant transfer instructions were signed by Dr Mahtani. It is currently unclear how and when, if at all, the dividends, once in Dr Mahtanis personal accounts, were paid out to other shareholders of FBZ.

10.1.58. Regarding the dividends due to Credit Suisse, we have confirmed that Finsbury transferred the dividend due to Credit Suisse for 2008 to the beneficiary account of CSIBV. We enquired as to the reason why the dividend from FBZ to CSIBV was routed via Finsbury. Corson stated that Dr Mahtani arranged the dividend payment which came from Finsbury. CSIBV accordingly did not question the source of this payment as they were transacting with Mahtani and he converted the Kwacha dividend at a favourable US Dollar exchange rate. The amount transferred, namely USD 832, 057, 14 is contained in documents sent by Corson via e-mail to the Deputy Governor of the Bank of Zambia. These documents are attached as Annexures R1 to R3

10.1.59. Corson explained that the dividend due to CSIBV for the 2009 year was waived by Credit Suisse in order to facilitate the guarantee which Mahtani provided in respect of the transaction in March 2010. He indicated that this waiver of the dividend is reflected in the restructuring term sheet and was part of the agreement for securing the restructuring and guarantees/payment of USD 50 million as a guarantee. See Annexure A6

10.1.60. Mahtani admitted that he effectively controlled Finsbury which received the dividends due to Finsbury from its shareholding in FBZ. Mary Schultz and her husband Gabriel have already confirmed they did not receive dividends from Finsbury. Finsbury also received the dividends due to Clarkwell and prior to the creation of that entity in 2008, it received all dividends due to Stoltzfus, as well as all dividends due to Chinyanta and Bazian. The rationale being that these parties had never paid for their shares which were to have been financed out of future dividends. The position was slightly different regarding Job Samuel who also never paid for his shares and the dividends in respect thereof also went to Finsbury, but he confirmed that he was simply a nominee for Dr Mahtani and was never the beneficial owner of those shares and accordingly was never intended to receive dividends.



Justin Chinyanta and Yousef Bazian

10.1.61. For the purpose of this report it is also important to gain a clear understanding of the position regarding the shareholding prior to the Credit Suisse transaction. Credit Suisse acquired the shares of Chinyanta and Bazian who were declared shareholders in FBZ from 2003 to 2008, with each party owning 20% of the issued share capital of FBZ.

10.1.62. We have not traced Yousef Bazian who we understand is living in Palestine at present. Bazian has not responded to our e-mail to his address at Loita, which we understood from Dick King, was still operational. We did however manage to contact Justin Chinyanta who has provided the background and documentation to the sale of their shares in FBZ to Credit Suisse.

10.1.63. Chinyanta explained that the basis of the relationship between the above parties is the Management Services Agreement (MSA) entered into between Finance Bank of Zambia (FBZ), the shareholders of FBZ and Loita Capital Partners International (copy herewith), which was approved by the Bank of Zambia (BOZ) prior to its coming into force.

10.1.64. Loita Capital Partners International Limited is an investment banking firm focused on Africa. Loita provides services in the arrangement and funding of debt transactions; advisory services and capital-raising for equity transactions; bank management; correspondent banking; asset management; and other corporate-oriented financial services.

10.1.65. Per clause 13 of the said Agreement, it was FBZs responsibility to obtain all related approvals to ensure implementation of the provisions of the MSA.

10.1.66. The background to the MSA was inter alia, the poor performance of the bank, poor market perception, internal management divisions and weak regulatory relationships, which according to Dr. Mahtani (who led the discussions with Loita) had prompted the shareholders to seek an external professional party to manage the bank back to health. Dr Mahtani although known Justin Chinyanta personally during the days when he was VP of Citibank in Zambia, was aware of the work which Loita was doing in Malawi (where he had a bank branch) and Rwanda in nursing bank to financial health and subsequent successful privatization of two government owned banking institutions (FINCOM and BACAR);



10.1.67. A condition precedent of the MSA per clause 4.1.1 was the requirement for a due diligence exercise to be conducted by Loita, and also the representation and warranty (per clause 4.1.2) that FBZs business was being conducted in accordance with the provisions of the Banking and Financial Services Act and generally in compliance with the requirements of the BOZ. The said due diligence was accordingly undertaken by DCDM a reputable regional advisory and audit group on behalf of the Loita group.

10.1.68. We do not attach the due diligence report, which is extensive with limited relevance to the investigation. The important aspects of the due diligence is that it reported that the draft 2002 Bank of Zambia Inspection report reflected that Finsbury Investments, Finance Holdings and Leasing Finance Limited are related parties to the Chairman by virtue of common shareholders and they represent 89,75 % shareholding in FBZ. The due diligence report went on to state that this may not be in accordance with the Banking and Financial Services (Amendment) Act requirement, which states that no single shareholder should own more than 25% of the voting rights to the bank. It further reflected that September 2002 was the deadline set for all banks in Zambia to regularise their shareholding.

10.1.69. This requirement is clearly the catalyst which obliged Mahtani to shift his shareholding into the names of Bazian and Chinyanta as well as Stoltzfus. The limitation on voting control is contained in the Banking and Financial Services Act (Chapter 387 of the laws of Zambia). The relevant section is set out below:

23. (1) Shares issued by a bank shall be only of such classes or series as may be approved by the Bank of Zambia.

(2) A person shall not, without prior approval in writing of the Bank of Zambia-

(a) acquire any beneficial interest in the voting shares of a bank; or

(b) enter into any voting trust or other agreement;

that would enable that person or another person to control more than twenty-five per centum of the total votes that could be cast on any general resolution at a general or special meeting of the bank:

Provided that this subsection shall not apply to a company which is publicly listed on a securities exchange in a jurisdiction outside the Republic acceptable to the Bank of Zambia.

Drug Enf

Documents

Finance Bank of Zambia Report on Shareholding by Edward Nathan Sonnenberg