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Cablegate: Namibia: Corruption Cases to Net Big Fish?

VZCZCXRO7311
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHWD #0302/01 2321454
ZNR UUUUU ZZH
P 201454Z AUG 09
FM AMEMBASSY WINDHOEK
TO RUEHC/SECSTATE WASHDC PRIORITY 0716
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHBJ/AMEMBASSY BEIJING 0102

UNCLAS SECTION 01 OF 02 WINDHOEK 000302

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV KCOR CH WA
SUBJECT: NAMIBIA: CORRUPTION CASES TO NET BIG FISH?

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Summary
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1. (SBU) Namibia's Public Services Commissioner Teckla Lameck
and her two business partners (a Namibian and Chinese
national) are alleged to have defrauded the Namibian
government (GRN) of USD $4.2 million. The alleged corrupt
acts are linked to a deal involving the GRN's purchase of
x-ray scanning equipment from NucTech, a Chinese
government-owned company. In a separate case, the Chief of
the Namibian Defense Force (NDF) is alleged to have profited
from a deal in which a Chinese businessman provided another
senior ranking military officer USD 1 million to secure a
mining exploration license, according to media reports. Both
cases have emerged at a time of increasing scrutiny and
criticism of Chinese business practices in Namibia.
Namibia's Anti-Corruption Commission (ACC) is leading both
investigations, but its failure to secure convictions in
high-profile cases since its inception in 2006 has tarnished
its image. A conviction in one or both of these cases might
help restore the Namibian public's faith in the ACC and
government's anti-corruption efforts. End Summary.

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NucTech Scandal
---------------


2. (SBU) According to the Namibian Anti-Corruption
Commission, Public Services Commissioner Teckla Lameck, her
Namibian business partner Kongo Mokaxwa, and Chinese National
Yang Fan defrauded the government of 42 million Namibian
dollars (approximately USD $4.22 million). The charge is in
connection with the government's purchase of USD $55.3
million in X-ray scanning equipment from NucTech a Chinese
company. Lameck and her co-defendants do not dispute
receiving the money, but they argue the transaction was a
commission for consulting services rendered to NucTech by
their company Teko Trading.

3. (SBU) In early February, NucTech and Teko reportedly
entered into a consultancy agreement. On February 27,
two-and-a-half weeks later, the Ministry of Finance provided
an advance payment of USD $12.8 million to NucTech for the
X-ray scanners - an arrangement considered highly unusual for
a GRN procurement. On March 11, NucTech paid Teko Trading
USD $4.2M, although it is not clear what services were
provided. Subsequently on April 10, NucTech and Teko entered
into new consultancy agreements entitling Teko to another USD
$8.6M, a sum equal to the difference between the USD $12.8M
paid by the GRN to NucTech, and the $4.2M NucTech had already
paid Teko. Fan allegedly was an employee of both NucTech and
Teko Trading. In her defense, Lameck stated she had notified
the president of her business interest in Teko Trading.

4. (SBU) The Chinese government provided a concessionary
loan to fund most of the X-ray scanners, and President Hu
Jintao's son Hu Haifeng was the CEO of NucTech when the
Namibian government approved the deal. A tender for the
equipment was not released publicly. The ACC has indicated
that it wishes to interview Hu Haifeng, although it does not
consider him a suspect.

5. (SBU) Lameck and her two business partners were released
on bail August 11 after six weeks in detention. Lameck has
been suspended, pending completion of the investigation, and
her assets and those of her co-defendants have been frozen.
In its ruling upholding the asset freeze, the High Court
determined there was sufficient evidence that Lameck and her
associates had violated two sections of Namibia's
anti-corruption act.

------------------------------------------
Another Corruption Case with Chinese Links
------------------------------------------

6. (SBU) A separate corruption scandal involving high-level
military officials and alleged Chinese conspirators has also
generated significant media attention in recent weeks. The
Chief of the Namibian Defense Force (NDF), Lieutenant General
Martin Shalli, has been suspended pending the completion of
an investigation into an alleged fraud scheme where another
(as yet unnamed) senior NDF officer facilitated the
acquisition of an exploratory mining license. Press reports
claim a Chinese national paid USD $1 million to the senior
NDF officer, who in turn transferred USD $250,000 to Shalli.
Shalli reportedly facilitated the deal. Shalli allegedly
placed his cut in a Zambian bank account under another
person's name while he was serving as Namibia's High
Commissioner in Lusaka.

WINDHOEK 00000302 002 OF 002

7. (SBU) Military sources have been tight lipped about the
case, noting that the investigation is ongoing. According to
media reports, Shalli and the other military officer met the
Chinese national in 2005 or 2006 on a trip to China to close
a weapons purchasing agreement between the NDF and the
Chinese company Poly Technologies. At that time, their
Chinese contact reportedly approached Shalli for help in
procuring a diamond license, but Shalli referred him to the
other military officer. News reports that Poly Technologies
paid Shalli USD $250,000 have been explained by Shalli as an
up front payment to lease one of his properties for 10 years.

8. (SBU) Early speculation about Shalli's suspension was
that it was instigated by SWAPO-party stalwarts who believed
that the general was a closet sympathizer of the opposition
party, Rally for Democracy Progress (RDP). Shalli has long
been rumored to be an ally of RDP's Hidipo Hamutenya, and in
recent months there have been calls from more radical
elements within SWAPO (especially individuals connected to
the SWAPO Party Youth League) to oust "non-loyal" party
members from government. Public sentiment has generally been
supportive of Shalli, however, as he is considered a strong
contributor to the liberation movement. Nevertheless, his
suspension has not elicited any unrest in the military ranks
or any significant fears of instability among the general
public.

-------
Comment
-------

9. (SBU) Both the NucTech/Teko and Shalli cases have emerged
at a time of increasing scrutiny and criticism of Chinese
business practices in Namibia. Chinese construction
companies are often criticized for skirting labor regulations
and winning government tenders despite, some allege, not
complying with all the requirements for submission of bids.
Chinese business people are frequently accused publicly (but
until now without concrete examples) of bribing public
officials to win government contracts. In fact, the
perception that Chinese business people bribe government
officials is so pervasive that the leading guide book on
anti-corruption contains a cartoon of a Chinese man handing a
bag of cash to a government official during a ceremony
celebrating the award of a construction tender.

10. (SBU) While Teckla Lameck is reportedly close friends
with the Minister of Finance Saraa Kuugongelwa-Amadilha, and
the Ministry of Finance signed the contract with Nuctech,
there are no allegations that the Minister is linked to the
NucTech/Teko scandal. The scanners, destined for the Customs
Service, have arrived in country. It is possible that the
Ministry availed itself of a loan offered during President
Hu's visit to Namibia in early 2007. Concessionary loans
from China often have conditions attached to them, including
certain procurement conditions.

11. (SBU) Since its founding in 2006, the ACC has yet to
secure a conviction in a high profile corruption case. In
fact, the ACC has been strongly criticized for only going
after "small fish." Some observers argue that the recently
implemented Financial Intelligence Act (FIA) and the
Prevention of Organized Crime Act (POCA) regulations give the
ACC more tools to go after the "big fish." It remains to be
seen if Lameck and/or Shalli will be ACC's first big fish. A
conviction in one or both cases would bolster the public's
faith in the ACC and the government's anti-corruption
efforts. It could also strengthen the hand of President
Pohamba, who made the fight against corruption a central
tenet of his 2004 campaign. The President is generally
perceived to be clean, but that is not the case for most
other government officials. According to the November 2008
AfroBarometer survey, 49 percent of those questioned
expressed their view that all or most national government
officials are corrupt, whereas only 16 percent viewed the
president and his inner circle as corrupt. End Comment.
MATHIEU

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