…Used the company to raise share capital
…K4 billion cash triggered investigation
…Chairman Betgiri and friends won a tender they never bid
Indian businessmen assisted by Senior Malawi Government officials claimed shares and looted over K100 billion from Salima Sugar Company, with Chairman Shirieesh Betgiri and Dr Sachin Nikam- being accused of fraudulently claiming 60% ownership of the company, which they did not pay for.
In one of the largest corporate fraud cases Malawi has ever seen, dozens of Indian and Malawians of Asian origins were allocated a slice of cake that included advance payments, payment for goods not delivered, and repayment of Betgiri personal loans using the sugar that Malawians hardly see on the market.
So dangerous is the Forensic Audit that exposes what auditors -Audit Consult Advisory Services- describe as “fraudulent” and demanded that Chairman Betgiri, Nikam, and Kumar be made “accountable” for abuse of office, misconduct, and 60% ownership fraud. Secretary to the President and Cabinet Colleen Zamba has ordered state security for the employees of the company to protect them from the “mafia” like Directors that presided over the loot at Salima Sugar Company.
Allegations of racism, discrimination over salary where Indians were paid more than Malawians, and even witchcraft, where a witchdoctor ordered the removal of a sceptic tank and re-location of finance offices, all make what was supposed to be a public company sound like a badly scripted Bollywood (Indian) movie.
The 122-page report reads like a scam movie Betgiri scripted
Salima Sugar’s former Executive Chairman Shirieesh Betgiri would make The Wolf of Wall Street look like a kindergarten movie as he singles handily, and what auditors call “fraudulently” took ownership of a company he was supposed to contribute US$17.1 million dollars, but only paid US$1.472 million dollars.
Malawi Government registered Salima Sugar Company in 2013 and contributed a total of US$ 35.184 million in lands, buildings, and factory, but entered into an agreement with Aum Sugar and Allied Limited (AUM SAL) in a joint venture agreement that would give AUM SAL 60% shares for investing US$17.1million and the people of Malawi through Green Belt Initiatives Holdings 40% by putting up a further US$11.4 million.
“While the Malawi Government paid up its shareholding, AUM SAL did not manage to fully pay its US$17.1 million commitment. As of the due date of 31 May 2017, AUM SAL had only contributed US$1.472 million to date and the balance has been outstanding to date,” states the report.
Despite only contributing 12% AUM SAL was allowed, for eight years to run and claim 60% of shareholding, a decision that would see Betgiri turn the company Malawians will be paying for buying expensive sugar and repaying loans for someone to steal willy nilly.
K76 billion loan, K35 billion investments, and K25 billion guarantees that were looted
Starting from the beginning Salima Sugar Company has been a cash-bleeding machinery for politicians, senior government officials and Indian companies that bribed and inflated costs for everything that is associated with the company.
The initial loan of K77 billion (US$76.5 million) Malawi Government borrowed from India, it was claimed that K43 billion was used to buy equipment associated with the Salima Sugar setup, but Auditors describe it as a misprocurement.
“We could not validate an expenditure of US$42.86 million used for the procurement of fuel tanks and irrigation equipment,” reads the report.
“The identification and contracting of the firm that designed, supplied, installed and commissioned the sugar processing plant and factory Appollo International Limited was a misprocurement, it was not in accordance with the PP Act of 2003 and PPP Act of 2011,” add the Auditors.
Appollo Limited claimed the three fuel tanks cost US$26.5 million and that irrigation work cost US$16.36 million. There is no supporting evidence, and even a small irrigation network allegedly to have been done could not be verified costs as there is no inventory nor fixed assets register, charged the Auditors.
Apollo Limited was a dominant player in Indian loan contracts and might have got almost 60 percent of loan projects that were funded by the Indian Government. Several scandals including poor equipment and being middlemen rather than manufacturers of origin dodged the company.
Malawians’ contribution extended to K35 billion, through the factory and another K11 billion for the Joint Venture.
The Malawi Government has been also guaranteeing loans at the CDH Investment Bank Limited for the Salima Sugar Company, with K7 billion (US$7 million) borrowed in November 2016, K12 billion (US$12 million) borrowed in May 2018, and an additional K6 billion (US$6 million) borrowed in April 2020.
Identification of Salima Sugar Partner- How Chairman Betgiri got Salima Sugar without any tender
The mafia-like thriller that is Salima Sugar company started in 2013 when Betgiri, appeared in India to be partner to a company identified by the Malawi Ambassador and thereafter, the partner was kicked out of the partnership. Only in Malawi can public assets be given in such a scenario.
To understand the genesis of the massive looting at Salima Sugar Company, the report reveals an interesting history of how AUM SAL was incorporated after it was identified as a technical partner for the project that the Ministry of Finance was undertaking.
The initial tender floated in 2013 attracted 5 Indian companies but all fell off as they did not meet the requirements. The report indicates that Betgiri’s two companies Mother Daily and Energy Limited (MDE Farms Limited) and Ogale Group were not among those that expressed interest.
Then Finance Minister Goodall Gondwe directed that a Core Grower partner should be identified. Instead, the Green Belt Initiative did not tender but preselected MDE Farms Limited and Ogale Group despite that they had never expressed interest in the sugar partnership.
“Instead GBI without retendering, preselected two Indian companies Ogale Group and Rajarambapu Group allegedly through the Malawi High Commissioner in India and on the basis of previous interest and participation in similar RFQ advertised in 2013,” reads the report.
“It is unclear how MDE Farms Limited, being a Malawian company ended up in the shortlisting together with the Indian companies that were selected through the Malawi High Commissioner to India,” the report dazzles.
Dr. Henry Njoloma, Head of GBI led a four-man delegation to meet Ogale and Rajarambapu Groups, and at Ogale, Chairman Betgiri was in attendance as a partner to Ogale. The GBI team recommended the Ogale-MDE Farms Limited partnership group to the Malawi Government.
Wait, too soon, Ogale Group would be disqualified for technical and financial capacity issues including fraud and tax issues, but interestingly maintained MDE Farms Limited of Chairman Betgiri. Chairman Betgiri invited Dr Sachin Nikam of Ulka Industry from AUM SAL which was registered in Malawi.
“GBI did not re-tender again for Private Partner. It closed its engagement with PPP and did not inform it when it was meeting Indian companies. No due diligence was done of Sherieesh Betgiri MDE Farms nor Ogale Group nor Ulka Industry,” reveals the report of the handpicking of AUM SAL without following any public procurement rules.
Executive Chairman Betgiri’s reign at Salima Sugar- The shares he never paid for
AUM SAL and Chairman Betgiri wanted to use the Salima Sugar Company to raise their own shares contribution, in one of the most intriguing money games ever played on public finances in Malawi.
On 27 August 2015, Malawi Government-owned GBI Holdings went into a shareholding agreement with AUM SAL. GBIHL was incorporated on 2 July 2015, followed by AUM SAL thirteen days later 15 July 2015.
The two new companies incorporated Salima Sugar Company Limited on 22 October 2015, which was about 60 days after the incorporation of AUM SAL. The brochure announcing AUM SAL claimed the company, which was 60 days old had experience in hydropower, electrical engineering, and farming.
From the required US$17.1 million, AUM SAL controlled 60 percent of the company having only paid US$1.472 million, a strange arrangement that the government allowed to exist, and with such a decision, allowed Betgiri to control the Board and Company as a majority shareholder.
The Auditors found that a total of US$7 429 442 was received by AUM SAL from 11 November 2015 to 3 January 2023. The monies came from Ulka Industry which paid US$1 500 400 whose director is Dr Sachin Nikan, US$ 3 841 960 came from Vikas Hirawat’s Finovo Holdings, and Sucro Farmind of Betgiri which paid US$ 2 088 996. The three, according to the Auditors are related.
“Suspiciously none of the related parties declared an interest at any SSCL board. Out of the amount, US$7 174 00 was transferred to SSCL and US$ 245 000 was transferred to AUM SAL kwacha account for its own use,” reads the report.
While Malawi Government repaid the loans to Indian Exim Bank, the Salima Sugar Company which was a private entity did not contribute a penny or recognise the loan in its books.
“It is our finding that AUM SAL and Chairman Shirieesh Betgiri had planned to use SSCL as a source of share capital contributions according to Chairman Betgiri’s handwritten document,” adds the report.
The Audit report says it came across evidence that some of the funds were Salima Sugar Company payments to service providers who had been contracted by the company and were paid. In simple words, these were proxies to get money from Salima Sugar company which would then be paid back as share contributions.
Some of the companies who received payments made for works, goods, and services to related party companies such as Farm Projects Limited and Cane Ramesh Jashnani of Farm Projects Limited and Sukhanidhi Limited was fellow shareholder and Director of SSCL UAE.
Mr. Prasad Jadhav, the owner, and Director of Cane and Agro Limited, Veecon Infrastructure Limited, and Baba Infrastructure Limited was the first Director of AUL SAL and a close ally of both Chairman Shirieesh Betgiri and Dr Sachin Nakim.
On 10 August 2017, Farm Projects Limited received US$102 348 from SSCL for the supply of a bulldozer. On 15, 16, and 20 August 2017, Farm Projects Limited transferred US$15,000, US$ 20,000, and US$50000 to Finivo Holdings.
In turn, Finivo Holdings transferred US$ 50,000 to AUM SAL and the company transferred the same amount to SSCCL on 29 August. Farm Projects Limited on 27 July 2017 transferred US$107 500 to Sucro Farmind Limited which in turn paid US$50000 on 8th August of US25,000 dollars each and the same amounts for 14th and 28 August 2017. SSCL received US$50 000 each from AUM SAL on 29th and 31 August 2017 completing a money circus that had started from its own accounts.
“Available evidence suggests that some payments to these companies were for goods not supplied or overcharged,” claims the report.
The K4 billion cash that sparked the Audit: AUM SAL pays share capital in Malawi Kwacha
With the change of Government, the Secretary to the Treasury gave AUM Sugar to fully pay its share capital of US$17.1 million by December 12, 2020, as the Government was restructuring both the Board and Management of the Salima Sugar Company.
AUM SAL through Chairman Betgiri ramped up K3.871 billion in hard cash which was deposited as part of its share capital contribution. Whilst the Board and the Bank estimated the amount to be US$5.777 million equivalent, the Auditors claim this was wrong as the Reserve Bank Exchange rate is lower than the true value was US$4.4 million.
This brought the total capital equity to US$11.574 million, not US$11.666 million as initially agreed by the board. However, this money has been rejected as it was not in United States dollars as per the agreement, and this was supposed to be a Foreign Direct Investment.
Where did the money come from?
Chairman Betgiri borrowed the hard cash on behalf of AUM SAL and the amounts were in hard cash deposited in his MDE Farms Limited account, then transferred to AUM SAL account at the same CDHIB. Betgiri and Nikam are signatories to the account of AUM SAL.
According to the report, Betgiri, Nikam, and Prashant Sharma, there were no Board resolutions to borrow the money locally, but all Directors agreed to source money locally after failing to raise it from India and elsewhere.
All loans were provided without collateral and only in consideration was Betgiri’s position as Chairperson of Salima Sugar Company. The report notes that he had attempted to borrow K6 billion from Pacific Limited earlier.
Pacific Limited gave Betgiri K1.8 billion, Mount Meru paid K1.05 billion, and Mphoto Enterprises paid K600 million. R Mart of Rajash Salien paid K25 million and R Mart Investment made another K75 million. K191 million was paid into the accounts but its source was not disclosed.
Corporate malfeasance, guess how the loans have been paid back- Salima Sugar
The K3.741 billion loans sourced by Betgiri as his share capital are either outstanding or have been repaid using the same Salima Sugar which was literally stolen from the company and not declared.
The depressing audit reads that Mount Meru received 1500Mt of sugar from Salima Sugar as repayment for the K1.05 billion loan it had advanced to Chairman Betgiri as a contribution to his share capital.
The auditors say Vikas Hiriwat, Apoorva Roy, Abdul Kadir, Sachin Jadhav and Vivek Gwangwal were all aware of the arrangement and provided an Export Clearance letter to MRA for Mount Meru to export 12000MT of Sugar.
Mount Meru sold the sugar to Rwanda, but the export proceeds have never been declared to the Reserve Bank of Malawi. (Read our part 2). Mount Meru confirmed it was paid with the sugar which was not cleared by the CDHIB as per the requirement of its loans.
Mphoto Enterprises received its K600 million from sales of sugar using a distributor in Karonga Micheal Sopera Mwafulirwa who paid K35 million to the Niloy (deceased) and K571 million was transferred from Mwafulirwa into MDE Farms Limited with those mentioned above participating in the transfers.
Pacific Limited loan of K1.8 billion is said to be unpaid but interest of K379 510 274 was said to have been paid in March this year and a withholding tax of K75 902 055 under certificate number B9245901 was allegedly paid to the MRA. The MRA rejected that it had received the K75 million and denied issuing the certificate.
R Mart investment is not clear yet, but according to the Auditors, all these companies are not registered money lenders with the Reserve Bank of Malawi which could see them face criminal prosecution that could include money laundering.
AUM SAL was involved in corporate malfeasance and oppression against minority shareholders. They were involved in unjust enrichment,” concluded the auditors.
SPC Zamba locks Salima Sugar Company
The auditor’s draft report of 28 September 2023 has led Secretary to the President and Cabinet Colleen Zamba to shut down the Board and Management of the company and order state security to protect workers who could be harmed by those that have looted the company.
The Investigator Magazine will publish the second part of the report- detailing how Asian businesses got sugar, contracts and inflated the costs of items to fleece the company. We will also publish how Politicians and other public servants colluded to defraud the company, how Malawians were underpaid, and conclude the criminal enterprise Salima Sugar has been running.
Chairman Betgiri could not be reached for comment and Executive Chairman Wesam Kosamu expressed surprise that the report had leaked to The Investigator Magazine saying only, “That report is confidential, and the public will be duly informed when there is information for the public.”
Salima Sugar Looting Part 2: The Indian playground, sharing the loot while Malawians buy expensive sugar. Tuesday 24 October 2023.