THE Drug Enforcement Commission and Police have been challenged to investigate circumstances under which Finance Bank (FBZ) has lost US$3 million depositors’ money through a dubious loan facility extended to the defunct Zambian Airways, owned by former Director of Public Prosecutions Mutembo Nchito, Post Newspaper owner Fred M’membe and Lusaka lawyer Nchima Nchito.
Kitwe High Court judge Catherine Makungu this week dismissed a case in which Finance Bank sued Development Bank of Zambia (DBZ) for failing or neglecting to take up an equity stake in Zambian Airways, thereby breaching an agreement to indemnify it from the loss of US$3 million advanced to the airline.
Speaking in a walk-in interview, former Zambian Airways employees said that Government should fully investigate the manner in which the airline could have obtained the high value loan using documents that were not worth the paper they were written on.
They explained that it was an offence for any company to borrow money in full knowledge that it was not going to paid back as this was a case of false misrepresentation. In this case the bank is losing depositors monery.”
Judge Makungu found that both Finance Bank and Development Bank of Zambia “acted impetuously and made a lot of mistakes in the process and that the risk taken by FBZ was huge because they knew that Zambian Airways was getting bankrupt.”
The employees explained that the “bankruptcy” of Zambian Airways was a well known matter and yet money was lent to the company. “We never saw the money that is why an investigation must be instituted to establish where this money went to.”
The whole transaction, they said was a carefully planned and elaborate scheme.
Justice Makungu in her judgment noted that there was nothing to enable DBZ to its loan commitment to Finance Bank because there was no loan transfer agreement or certificate between the plaintiff and the defendant, making the issue of ovation non existence.
She said it was not DBZ’s fault that Finance bank did not register a debenture for the US$3 million facility in question and found that there was no proper consent or approval by the other syndicate banks on that aspect.
“I further find that the defendant decided to overlook some of the conditions precedent to obtaining equity participation in Zambian Airways in order to enable DBZ to quickly grant the facility required by the plaintiff,” she said.
She said Mine Air Services trading as Zambian Airways had already borrowed US$4,300,000 from DBZ, and amounts from other banks, making it reach a stage where it should not have been allowed to borrow any more money from DBZ as it had no more assets free of encumbrance to pledge as security for any debt.
According to the syndicated loan agreement, Investrust loaned US$3,292,000, Intermarket K500,000,000 (unrebased) and DBZ US$3,000,000 to Zambian Airways and the three banks also entered a security sharing agreement.
Based on that, the plaintiff later agreed to pay the defendant the US$ 3 million provided that the relevant security documents that the defendants were holding were discharged and released to the plaintiff.
DBZ then informed Finance bank that it no longer had a claim in the security assets of Zambian Airways and that the contract for indemnity had been discharged with immediate effect but at that time the plaintiff had not received the securities and did not know the value.