Seychelles: The $50 m scandal explained

13 décembre 2021, 21:00


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Seychelles: The $50 m scandal explained

Corruption, a botched privatization, a change in government, money from the Gulf, a former first lady arrested, a cache of arms and underlying fears of a coup. Seychelles is being rocked by the scandal of the missing $50 million.

1.Privatization and Makarov pistols

Prominent Seychellois businessman and former political ally of late president Albert René, who ruled the country between 1977 and 2004, Mukesh Valabhji, was arrested in November along with his wife, Laura Valabhji, over a long-running scandal of $50 million missing from government coffers. Since then, the crisis has snowballed leading to more arrests, including that of René’s widow and key political figures of the René regime.

The story of the $50 million starts in 2002, when the Seychellois economy was going through a balance of payments crisis fuelled by heavy state spending, a lacklustre tourism industry and strict controls on foreign exchange. Between 2000 and 2001, the country’s foreign reserves had shrunk from $43.7 million to $30.2 million, the trade deficit doubled, and foreign debt galloping from an average of 30 percent of GDP between 1990 and 1998, to 74 percent of GDP by 2002. By that time, Seychelles had become one of the world’s most indebted countries in per capita terms, mostly to the Paris Club and the African Development Bank. To help see Seychelles through this crisis, the United Arab Emirates (UAE) gifted the country $50 million to help the Seychelles Marketing Board (SMB) (today the Seychelles Trading Company) pay for its food imports. The problem was that none of the money actually made it to the government. Rather, it was allegedly siphoned off into a bank account at a Bank of Baroda branch in the UK. Referring to the case, Seychelles’ Chief Justice Ronny Govinden said in court, “The funds were misappropriated and never included in the accounts of the Republic of Seychelles and as such were never available for their intended purpose, which was to assist in the national balance of payment deficit.”

Instead, according to the Chief Justice, the $50 million was to become an example of corrupt privatization. Valabhji, a former economic advisor and key ally of René, was at the time the CEO of the SMB that was receiving the $50 million. Due to the economic crisis that Seychelles had been plunged into, René had also put Valabhji in charge of overseeing the privatisation between 2002 and 2005 of the state-owned ‘Compagnie Seychelloise de Promotion Hôtelière’ (COSPROH), that managed publicly-owned hotels and tourism properties. According to the court record at Valabjhi’s bail hearing on November 19, the Chief Justice said, “The onward transmission of the funds amounts to the laundering of the proceeds of this initial crime but in fact the funds were apparently returned to the Seychelles to pay for hotels sold in the privatization of COSPROH holdings. The sums involved form a large portion of the misappropriated assets and led to the hotels moving into private hands under the control of Valabhji and other involved persons.”

Mukesh Valabhji, with the help of his wife, Laura Valabhji, allegedly received through the SMB and then redirected the $50 million from the Gulf to buy COSPROH hotels that he himself had been charged of selling off by the René government. The problem was that the money did not make its way back to the public purse even then. Rather, whatever funds were being used by Valabhji to allegedly buy the COSPROH hotels, were then paid back by COSPROH to Valabhji as one of its directors in the form of “director’s dividends”. In this way, “the funds used to purchase the hotels were again then misappropriated and removed from government accounts,” the court in Seychelles was told. COSPROH was liquidated in 2006 – by then René had quit power in 2004 – with Valabhji himself emerging as a major hotelier in Seychelles.

Referring to the case brought by the Anti-Corruption Commission of Seychelles (ACCS), the Chief Justice wrote, “These funds should have ended in the coffers of the Government of Seychelles and assist in our national development, it did not.” The $50 million that financed the whole deal ended up back up in smoke, making its way, the ACCS argued, in a number of different hands. The problem is that it is not just an allegedly crooked privatisation that is at issue; it’s the cache of arms found at the Valabhji residence: 72 guns of Dracuno, AK assault rifles and Makarov pistols, 122 magazines for assault rifles and 43,416 bullets according to state lawyer Joshua Revera in court.

Sarah ZarqaniRené with former president Albert René, who died in 2019.
Mukesh Valabhji, whose arrest sparked the crisis.
The scandal of the missing $50 million dates from the privatization of state hotels under the regime of Albert René, president of Seychelles from 1977 to 2004

2.Decapitating the top

After the arrest of the Valabhjis, a string of other arrests swiftly followed, turning it into a scandal that threatens to decapitate the old guard of the United Seychelles (US) – the successor of René’s old SPUP. And this at a time when the US has found itself out of power for the first time since 1977 after it lost to Wavel Ramkalawan’s LDS in October 2020. Since coming into power, despite having initially been conciliatory towards the US and former president Danny Faure, Ramkalawan has embarked on a much firmer line against it. In December 2020, for example, he established a committee to change the names of roads linked to the 1977 coup that brought René and the US to power. In October this year, the Ramkalawan government launched a scheme to return land confiscated by, or forcibly sold to, the René government between 1977 and 1993.

Following the arrest of old René’s confidant Valabhji and his wife, the scandal has now also led to the arrest of René’s widow, 63-year old Sarah Zarqani-René (see below), after the ACCS linked the $50 million to $700,000 deposited in an Australian bank account in her name between 2007 and 2010. In court, Zarqani-René argued that the account was being managed by a proxy and she had no control over it. Also under arrest is Lieutenant-Colonel of the Seychelles People’s Defence Forces (SPDF), Leslie Benoiton, after the ACCS linked a $100,000 payment, made from the bank account used to shift the $50 million out of Seychelles, to him back in September 2004, the discovery of weapons in boxes inscribed with Benoiton’s name at the Valabhji’s house and a rifle, two pistols and 32 bullets at Benoiton’s own house.

What makes this a problem for the US party is that Benoiton is a son of Albert René – in July 2019 he entered into a legal battle with Zarqani-René at the Seychelles’ Supreme Court over a plot of land bequeathed by René. Also currently under arrest is Maurice Loustau-Lalanne, who in 2016 was made tourism minister to replace Alain St.-Ange, who quit the post to try and become the Secretary General of the UN’s World Tourism Organization only to successfully sue the Seychelles’ government for $507,000 after it abruptly withdrew him its backing for the post. In 2018, Loustau-Lalanne was made finance minister and – the problem for the US – he was handpicked by Danny Faure to be his running mate as vice-president in the 2020 election. A position seen as a step towards presidency and leadership of the US – after all, Faure’s predecessor, James Michel, was René’s vice-president, and Faure was Michel’s. The only suspect arrested and granted bail in this case is Lekha Nair, at the time working as a public officer within the finance ministry. The bail was only because she produced documents in court showing that, when handling the $50 million, she was just following orders.

But with Zarqani-René, Benoiton and Loustau-Lalanne– two linked directly to René and the third placed on the traditional ladder towards the presidency by the US – all behind bars, the old ruling party seems blindsided. Hence on November 25, the party’s current leader, Dr Patrick Herminie, had to be careful and simply stated in a press conference that “the party is very relieved that finally the investigation is being completed after many years that the saga of the $50 million has been used as political propaganda”.

3.The sense of irony

Seychellois politics is not without its sense of irony. If a scandal over money from the Gulf is now threatening to cripple René’s grand old party, it’s easy to forget that, in a sense, an earlier scandal over money from the Gulf helped put it in power. The country’s first president James Mancham looked to the Gulf in 1976 to help develop Seychelles; in particular, he cultivated a friendship with Saudi businessman Adnan Kashoggi. That year, Kashoggi spent $8 million to buy up 104 acres of prime beach real estate to build a hotel. Through Kashoggi, Prince Talal, the nephew of Saudi King Khalid, pledged another $30 million to build a tourism complex in Seychelles and promised Saudi help in financing infrastructure and housing projects. At a state banquet in May 1976, Mancham praised Khashoggi as “the sort of friend Seychelles needed most”.

However, they were not the only Middle Eastern investors in Seychelles at the time – Shahram, a nephew of the Shah of Iran, had planned a $12 million resort on outlying D’Arros Island. René, in an uneasy coalition with Mancham as his number two, was blamed by the latter for being behind a whispering campaign against the Saudi projects, accusing Khashoggi of looking to “buy Seychelles”. Mancham’s links with Khasoggi was one of the arguments René used to topple Mancham in the 1977 coup. After Mancham’s overthrow, the new René government in August 1979 took over the land Khasoggi had obtained from the Mancham government to set up a state-owned fruit farm. The Saudi businessman was the first foreigner to see his property nationalised by the René government.

By October 1979, René was accusing Khasoggi of “sprinkling a hundred thousand here and there” to Seychellois opposition groups in London. Not only were the Gulf states, who were also being told that René was being supported by the left-wing regime in Libya, via its embassy in Mauritius, against the René regime, but the ouster of Saudi influence had galvanized Apartheid South Africa into action: after the overthrow of the Shah of Iran in 1979, the Gulf states were Pretoria’s last remaining oil suppliers. And having a hostile Seychelles on the route to those supplies was seen as a problem. Hence, Pretoria’s subsequent enthusiasm to getting involved in coup attempts against René: in 1979, 1981, 1982 and 1987.

For his part, René then turned to Italian businessman Mario Ricci, convicted for fraud in Italy and possessing counterfeit currency in Switzerland before becoming René’s unofficial economic advisor; in return he was allowed to set up Seychelles’ offshore sector earning the country the reputation of being the world’s only ‘socialist tax-haven’. All this is to say is that the strange relationship between René and Valabhji is nothing new in Seychellois politics. Nor is the reason why his arrest, along with lots of figures closely associated with René and his party, and the discovery of a large stock of arms would lead to fears of a new coup attempt, prompting Ramkalawan himself to come on national television on November 22, to dismiss such fears: “As head of state, I can tell you that everything is quiet in our country. So let us continue to live in peace, let us continue to build our country and let us continue to live in harmony.” Nor why his political opponent, Herminie, felt the need to do the same on November 25: “United Seychelles does not believe in coups d’état and the United Seychelles clearly states that there will not be any more coup d’état in Seychelles.''

4.The return

That the Seychelles is being rocked once again by a scandal over money coming from Gulf states shows how since the heady days of the 1970s and 1980s, the Gulf states – the UAE in particular – have made a return to Seychelles. The head of the UAE, Sheikh Khalifa bin Zayed Al-Nahyan, bought up four plots of land in Seychelles in 2005 for his personal use, and in 2010, spent $15 million to install a coast guard base, equipped with coastal radar, on Perseverance Island and has helped set up wind farms and redevelop Seychelles’ capital, Victoria. For its part, in 2011, Seychelles opened its first embassy in the Middle East in the UAE. Most recently, during the Covid-19 pandemic, the UAE helped kickstart Seychelles’ vaccination campaign by supplying doses of the Sinopharm vaccine.

The other aspect to the scandal and arrests over the missing $50 million, aside from how damaging it is for the US, is how it could play to the advantage of Ramkalawan’s LDS. After all, since 2016, when the US lost its majority in Seychelles’ parliament, Ramkalawan turned finding the missing $50 million into a major stick with which to beat the Danny Faure administration in the legislature. This forced Faure in 2017 to announce the opening of an investigation into where the $50 million had gone and, in 2018, a commission to look into what happened during the privatisation at COSPROH (its report is not public yet).

If the missing $50 million was a major arrow in Ramkalawan’s quiver, when he was in the opposition, now the scandal is surfacing again when the initial honeymoon period after Ramkalawan’s October 2020 election seems to have worn off and his government has taken a number of tough decisions: abolishing the Unemployment Relief Scheme, suspending the annual 13th month bonus and trying to downsize Seychelles’ traditionally large public sector. The only remaining question now is how many more prominent figures are going to be caught up in this growing scandal over the missing $50 million?