The heavy machinery supplier was convicted of fraud

Aug 3 , 2019

The National Bank of Ethiopia has suspended an Italian heavy machinery and equipment supplier being involved in fraud leading to the loss of foreign currency.

The National Bank of Ethiopia has suspended an Italian heavy machinery and equipment supplier being involved in fraud leading to the loss of foreign currency.

Signed by Yenehasab Tadesse, director of foreign currency reserve and administration at the central bank, the letter was issued two weeks ago informing all commercial banks in the country to stop working with SAFET SPA. SAFET, a group of companies that have been operating for over nine decades including 40 years in steel trading, has had a presence in Africa since 1970.

“Since the Federal High Court has convicted the company for being involving in fraud and fleecing foreign currency from the country,” reads the letter sent to the banks, “blacklist the company and don’t conduct import and export transaction[s] and affect any payments to this company.”

Last year in February, the company along with its managing director was convicted by the Court for selling sets of machinery and raw material to a local company, Lubar Industries Plc, violating the business registration and licensing law of the country and by forging documents.

Some 15 years ago, Lubar Industries, a local company that has been setting up a plant to manufacture wire products in Yeka District, signed an agreement with SAFET SPA through its local partner for the supply of four wire-making machines from Italy along with raw materials for a total of 50,000 dollars including logistics and shipping expenses.

Based on the contractual agreement and the documents furnished by SAFET, Lubar opened  letters of credit (LC) and received the products via customs. However, upon the delivery of the products, Lubar found out that the specifications agreed to in the contractual document does not correspond with the machinery.

Lubar took the case to the Addis Abeba Police Commission and the arbitration tribunal of the Addis Abeba Chamber of Commerce & Sectoral Association. The arbitration and the Torino Chamber of Commerce have verified that SAFET has presented two different documents to Addis Abeba and Torino chambers.

Following the investigations, police issued an arrest warrant for the managing director of the company, Sergio Demi. He was detained for a day and was able to post bail after the Italian Embassy in Addis Abeba provided a guaranty for his release.

The prosecutor, on behalf of Lubar Industries, then took the case to the Federal High Court, with SAFET, Sergio and the local partner as co-defendants. The allegations claim that the Italian company has supplied forged and used machinery, which can only operate at 18pc of the capacity of the contract stated in the proforma invoice.

As a defence, SAFET presented recommendations and documents that show it has supplied machinery and equipment for Mesfin Industrial Engineering, Mame Steel Mill, Ethiopian Steel, Kaliti Metal Products Factory and the Great Ethiopian Renaissance Dam to prove its legitimacy.

After reviewing the case, the Federal High Court Criminal Bench convicted the company and the general manager of fraud. Judge Adugna Negassa, imposed a 15-year prison sentence on the manager of the company, Sergio, in absentia. The company was also fined 15,000 Br. The Court has also ruled for the confiscation of the machinery.

Last year in October, Lubar Industries appealed to three standing parliamentary committees - Revenues, Budget & Finance, Trade & Industry and Foreign Affairs - against the execution of the ruling since the company was still operating in the country and the general manager was not arrested.

Following Lubar’s appeal and the intervention of the Trade & Industry Standing Committee, the Ministry of Trade & Industry has revoked the license of SAFET’s local agent. Following the direction from Revenues, Budget & Finance Standing Committee, the National Bank of Ethiopia suspended the company from conducting any financial transaction within the country.

The case as it relates to the arrest and imprisonment of the general manager of SAFET has not been finished, according to Solomon Abebe, general manager of Lubar.

On top of losing the 50,000 dollars, the machinery is still at the premises of Lubar’s plant, according to Solomon.

“We’re losing additional revenue since the machinery occupies the entire warehouse, which we could generate income through renting,” Solomon told Fortune.

Executives of SAFET did not respond to the email enquiry from Fortuneby the time the paper went to print.

PUBLISHED ON Aug 03,2019 [ VOL 20 , NO 1005]

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