ZCCM-IH asks Lusaka High Court to hear fraud case

ZCCM-IH Plc has opposed submissions by First Quantum Minerals directors that the Lusaka High Court dismisses its fraud case against the mining giant for irregularity.


In the matter, ZCCM-IH sued First Quantum Minerals Limited, its chairman and chief executive officer Philip Pascall, directors Arthur Pascall, Clive Newall, Martin Rowley and Kansanshi Mining Plc for fraud of over US $2.3 billion.


ZCCM-IH which holds the country’s stake in foreign-owned privatised mines, sued FQM in the Lusaka High Court in November last year and simultaneously filed a Notice of Arbitration in London claiming the Vancouver-based company cheated Zambia of US$2.3 billion.


ZCCM-IH accused FQM of defrauding it by using money from its Kansanshi Mining Plc as cheap financing for its other operations without the state investment company’s consent.


But FQM wanted the High Court to dismiss the claims by ZCCM-IH as they were “inflammatory, vexatious and untrue” and that the loans were at fair market rate.


FQM also argued that ZCCM-IH chief executive Pius Kasolo could not sue because by November 2016, the ZCCM- IH board which could have given consent had been dissolved and that the action was statute barred.


Lusaka High Court judge Winnie Mwenda on Tuesday adjourned the case to June 1 for hearing of various applications.


ZCCM-IH has maintained that the case against FQM and its directors was genuine and should stand.


In an affidavit, ZCCM-IH opposed the applications by Newall, Pascall and Rowley that the action be set aside for irregularities because it was statute barred.ZCCM-IH general counsel Yadika Mkandawire submitted that had FQM group and its directors concealed the use of the money from Kansanshi Mining Plc. Mkandawire submitted that ZCCM-IH only discovered about the alleged fraud in 2015 which prompted the legal action.


In the absence of further information from the defendants, I am unable to state precisely what use was made of the money and what benefit accrued to the First Quantum Group by reason of its access to such monies,

Mkandawire said.


She opined that it was only in the affidavits in support of the application to set aside the matter that FQM Group and its directors revealed that part of the money from Kansanshi Mining Plc was used in part by the FQM Finance who has been sued as second defendant.


Mkandawire stated that it was wrong for Philip Pascall and Newall to claim as far back as 2007, ZCCM-IH was aware of the transfer of Kansanshi Mining Plc profits to FQM Finance.


“They were not. Specifically, it was not known that the FQM Group was using the monies to develop its own business interests to the prejudice of the seventh defendant and the plaintiff,” Mkandawire added. “The criminal actions of the defendants are pleaded as an essential ingredient of the tort of conspiracy to cause injury or damage by unlawful means, the unlawfulness being the contravention of the Penal Code of Zambia among other matters.”


He explained that the FQM directors caused money to be remitted from Kansanshi Mining Plc to FQM Finance from 2007 to 2014. She also stated that FQM directors repeatedly told the ZCCM-IH both orally and in writing that Kansanshi Mining Plc money was placed in a deposit account with FQM Finance and would be available to meet the working capital for Kansanshi Mining Plc.


Mkandawire stated that FQM Group also told ZCCM-IH that it was because the money was available for immediate use by Kansanshi Mining Plc at an interest charge at the London Interbank Offered Rate (LIBOR).


That while that was the declared use and the declared benefit accruing by such use of the seventh defendant’s money [Kansanshi Mining Plc], in fact the monies were diverted from the deposit account for the benefit of the FQM Group of Companies of which the majority shareholder is a member and to which the third [Philip Pascal] and fifth defendants [Newall] are inextricably,

she submitted.


Mkandawire added that at no time was ZCCM-IH informed that Kansanshi Mining Plc money was being applied to and for the betterment of the FQM Group.


And Mkandawire also submitted that in December 2014, the plaintiff became aware of a demand served on December 7, 2016 by the Zambia Revenue Authority (ZRA) for payment of penalties in the sum of US $1. 155 million for non-compliance with the income tax Act 1996 and a further tax demand of US $182, 000 to be levied on Kansanshi Mining Plc on the basis that the advances were not made at arm’s length.


Meanwhile, when the matter came up for hearing on Tuesday, lawyers for ZCCM-IH led by Bonaventure Mutale submitted that the plaintiff was concerned by the false story that appeared in the Daily Nation of April 10 under the heading, ‘ZCCM-IH sues FQM for US$1.8 billion’.


He said the newspaper reported that Pascall appeared in court in person and made submissions during the April 4 hearing when he never did.


“The story therefore is not only false but is calculated at misleading the nation as to the developments in this case,” Mutale said.


He added that the plaintiff could have opted to have Daily Nation censored by way of contempt proceedings but it was not desirous of doing so as those proceedings would only delay an expeditious conclusion of the case.


And judge Mwenda said she had heard the concerns by ZCCM-IH lawyers and that they would be addressed by the court.

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