News / National
Air Zimbabwe lost $11 million in an insurance scam
27 Jan 2014 at 02:35hrs | Views
Air Zimbabwe (Private) Limited was prejudiced of €5 895 695,49 and $1 298 827,88 - totalling around $11 milliom - in a 4-year aviation insurance scam involving top management at the airline, according to BCA Forensic Audit Services.
The audit report on Air Zimbabwe's aviation insurance dated December 28, 2013, also sucks in Secretary for Transport and Infrastructural Development, Munesu Munodawafa.
The report does not say Munodawafa benefited materially from the scam, but it accuses him of acting to protect the interests of his niece, Grace Pfumbidzayi.
Pfumbidzayi is Air Zimbabwe company secretary and is at the centre of the alleged scam, having authorised fraudulent payments to Navistar Insurance Brokers, according to the report.
BCA Forensic Audit Services recommends not only that criminal proceedings be instituted against those implicated, but also says the matter must be brought to the attention of President Mugabe due to its magnitude.
It is reported that Air Zimbabwe's planes took to the skies for a period of about two months in early 2009 without any insurance after Navistar received but failed to remit premiums.
The damning audit report, now with the Air Zimbabwe board and new Transport Minister Dr Obert Mpofu, is signed off by Budhama Chikamhi, the chief forensic investigator at BCA Forensic Audit Services.
In the audit, BCA looked only into Air Zimbabwe's aviation insurance - but further audit reports looking at other areas like fuel and procurement will unearth further corruption.
Prior to 1980, Air Zimbabwe (then Air Rhodesia) received its brokerage services from Marsh Insurance Brokers. This arrangement subsisted until March 18, 2009.
From that date, Pfumbidzayi "unprocedurally, illegally and in violation of the tender procedures appointed Navistar as Air Zimbabwe's provider of brokerage services".
At that time, Marsh Insurance Brokers was charging Air Zimbabwe an average of 125,000 euros (about $171,000) per annum as brokerage fees. Navistar, however, was paid 300,000 euros (about $410,000) per quarter, translating to 1.2 million euros (about $1.6 million) annually - nearly ten times what Marsh was charging.
"While the amount which was being charged to Air Zimbabwe by Navistar Insurance Brokers increased by 86 percent, the premiums charged by the international reinsurers remained more or less constant … The charges have been described by many of Air Zimbabwe's current and former executives as fraudulent, a position which is supported by findings of this investigation," BCA says.
The auditors say the increase in charges was not matched by any commensurate increase in Air Zimbabwe's fleet size or expansion of its route network. In fact, some of its planes were actually grounded at the time.
"In addition to paying a fraudulent flat broker's fee of 300,000 euros per quarter for the period April 4, 2009, to April 3, 2013, some of Air Zimbabwe's executives made several other fraudulent payments to Navistar Insurance Brokers, which resulted in the airline suffering actual financial prejudice of 5,895,695.49 euros and US$1,298,827.88 and potential financial prejudice of US$2,227,570.22..."
While Navistar was taking the 300,000 euros per quarter payments from Air Zimbabwe, it was also taking commission from Air Zimbabwe's insurers in the United Kingdom.
In several cases, money transmitted to Navistar was supposed to be forwarded to international insurers. However, there is a disparity of millions of euros between what the international insurers actually charged and what Navistar received from Air Zimbabwe.
BCA concludes that the difference was converted to personal use by management at Air Zimbabwe or Navistar or both.
Navistar board chair, Patrick Chingoka, told BCA he was not aware of the payments and recommended that criminal proceedings be instituted against management at the insurance brokerage.
In that scam, the auditors said Navistar would, at the beginning of every year, approach Altfin Insurance Company and request for policy documents for Air Zimbabwe's hangar property.
"We understand that Tafadzwa Nderere who is employed by Altfin would print policy documents and release them to Navistar. We understand that Tafadzwa Nderere is Givemore Nderere's brother [CEO of Navistar]."
Armed with the policy document, Navistar would surrender it to Air Zimbabwe together with their debit note for the annual premium of US$205,000 - but no premiums would be forwarded to Altfin and consequently no insurance existed,
The audit report on Air Zimbabwe's aviation insurance dated December 28, 2013, also sucks in Secretary for Transport and Infrastructural Development, Munesu Munodawafa.
The report does not say Munodawafa benefited materially from the scam, but it accuses him of acting to protect the interests of his niece, Grace Pfumbidzayi.
Pfumbidzayi is Air Zimbabwe company secretary and is at the centre of the alleged scam, having authorised fraudulent payments to Navistar Insurance Brokers, according to the report.
BCA Forensic Audit Services recommends not only that criminal proceedings be instituted against those implicated, but also says the matter must be brought to the attention of President Mugabe due to its magnitude.
It is reported that Air Zimbabwe's planes took to the skies for a period of about two months in early 2009 without any insurance after Navistar received but failed to remit premiums.
The damning audit report, now with the Air Zimbabwe board and new Transport Minister Dr Obert Mpofu, is signed off by Budhama Chikamhi, the chief forensic investigator at BCA Forensic Audit Services.
In the audit, BCA looked only into Air Zimbabwe's aviation insurance - but further audit reports looking at other areas like fuel and procurement will unearth further corruption.
Prior to 1980, Air Zimbabwe (then Air Rhodesia) received its brokerage services from Marsh Insurance Brokers. This arrangement subsisted until March 18, 2009.
From that date, Pfumbidzayi "unprocedurally, illegally and in violation of the tender procedures appointed Navistar as Air Zimbabwe's provider of brokerage services".
"While the amount which was being charged to Air Zimbabwe by Navistar Insurance Brokers increased by 86 percent, the premiums charged by the international reinsurers remained more or less constant … The charges have been described by many of Air Zimbabwe's current and former executives as fraudulent, a position which is supported by findings of this investigation," BCA says.
The auditors say the increase in charges was not matched by any commensurate increase in Air Zimbabwe's fleet size or expansion of its route network. In fact, some of its planes were actually grounded at the time.
"In addition to paying a fraudulent flat broker's fee of 300,000 euros per quarter for the period April 4, 2009, to April 3, 2013, some of Air Zimbabwe's executives made several other fraudulent payments to Navistar Insurance Brokers, which resulted in the airline suffering actual financial prejudice of 5,895,695.49 euros and US$1,298,827.88 and potential financial prejudice of US$2,227,570.22..."
While Navistar was taking the 300,000 euros per quarter payments from Air Zimbabwe, it was also taking commission from Air Zimbabwe's insurers in the United Kingdom.
In several cases, money transmitted to Navistar was supposed to be forwarded to international insurers. However, there is a disparity of millions of euros between what the international insurers actually charged and what Navistar received from Air Zimbabwe.
BCA concludes that the difference was converted to personal use by management at Air Zimbabwe or Navistar or both.
Navistar board chair, Patrick Chingoka, told BCA he was not aware of the payments and recommended that criminal proceedings be instituted against management at the insurance brokerage.
In that scam, the auditors said Navistar would, at the beginning of every year, approach Altfin Insurance Company and request for policy documents for Air Zimbabwe's hangar property.
"We understand that Tafadzwa Nderere who is employed by Altfin would print policy documents and release them to Navistar. We understand that Tafadzwa Nderere is Givemore Nderere's brother [CEO of Navistar]."
Armed with the policy document, Navistar would surrender it to Air Zimbabwe together with their debit note for the annual premium of US$205,000 - but no premiums would be forwarded to Altfin and consequently no insurance existed,
Source - chronicle
