US embassy cable - 05KINSHASA1870

C O N F I D E N T I A L SECTION 01 OF 02 KINSHASA 001870 
 
SIPDIS 
 
DEPT PASS TO USTR (WJACKSON) 
 
E.O. 12958: DECL: 11/06/2015 
TAGS: EFIN, ECON, PGOV, KCOR, KJUS, CG 
SUBJECT: LARGEST CONGOLESE BANK CLAIMS GROSS INJUSTICE 
 
 
Classified By: EconOff W. Brafman for reasons 1.4 b/d. 
 
1. (SBU) Summary.  The DRC's largest and oldest bank has 
launched a lobbying campaign in opposition to a Supreme Court 
decision that upheld a USD 5.7 million judgment against it. 
The Commercial Bank of the Congo (BCDC) claims that the 
October 28 decision is a gross miscarriage of justice and yet 
another example of a corrupt justice system.  The award arose 
out of a lawsuit that a Lebanese-owned company filed against 
BCDC in connection with a commercial transaction.  A senior 
bank official said the BCDC may consider closing as a result 
of the case. End summary. 
 
JUST THE FACTS 
-------------- 
 
2. (SBU)  BCDC's Corporate Finance Advisor, Guy-Robert 
Lukama, met with Econ Counselor and EconOff November 1 to 
discuss a USD 5.7 million judgment entered against it.  The 
litigation arose out of a 1987 World Bank (WB) funded 
economic development project with Sintimex, a company owned 
and operated by a Lebanese businessman with what the local 
media reports to be a long history of shady transactions in 
the DRC, resulting in a government order to expell him in 
1995. BCDC extended to Sintimex and a sister company about 
USD 1.8 million in credit for the import of coffee processing 
equipment, at the request of SOFIDE, a now essentially 
defunct Congolese development parastatal.  Sintimex alleged 
that it fully paid BCDC and that the bank then refused to 
turn over the documentation enabling it to recover the 
equipment.  Looting in 1991 and 1993 resulted in the 
equipment's irreparable damage. Two appellate courts, 
including the Supreme Court, have upheld the trial court's 
judgment. 
 
3. (U) BCDC is the Congo's oldest and largest bank, claiming 
to hold forty percent of all national accounts, including 
deposits of nearly USD 55 million (several times that of 
Citigroup locally) and USD 80 million in credit extended. 
Fortis, a Belgium-based multinational, is the primary 
shareholder in BCDC's parent company, Belgolaise. BCDC has 
several branches throughout the country, and is in the 
process of reopening several offices, including one in 
Kolwezi, near the  copper-cobalt concessions of 
American-owned Phelps Dodge and several other mining 
entities.  (Comment: Although the banking sector remains 
extremely weak and currently acts as little more than a 
transfer agent, it has growth potential, particularly should 
an anticipated post-election investment boom occur. End 
comment.) 
 
THE BANK'S POSITION 
------------------- 
 
4. (SBU) BCDC denies any malfeasance. Lukama told EconCouns 
that he does not believe Sintimex ever intended to process 
coffee, and that the entire endeavor was no more than a 
money-making scam.  He said that Sintimex represented the 
coffee processing equipment as new, when in fact it was 
secondhand and overvalued. 
 
5. (C)  Lukama said BCDC has no doubt corruption occurred at 
all three court levels.  He points as an example to a court 
appearance before the Supreme Court President to discuss the 
case. The Judge said that he would consider the matter and 
rule on it, but several minutes later appeared with a 
typewritten judgment that Lukama believes the Court had 
already prepared after receiving a bribe.  Lukama also said 
that Minister of Justice Kisimba Ngoy may have a personal axe 
to grind against BCDC, but he did not offer any details. 
(Comment: It is widely known that justice is often for sale 
in the DRC, so corruption in this specific case is certainly 
possible. Congolese lawsuits can often be little more than 
bidding contests to influence judges. End comment.) 
 
6. (SBU) Lukama said that BCDC has little hope of any further 
judicial recourse, its last possibility being an appeal based 
on claims of malfeasance by individual judges.  Lukama told 
EconCouns that Vice President Azarias Ruberwa has the power 
to overturn the judgment on the grounds of malfeasance. 
(Comment: This in itself is an example of the lack of 
separation of powers under the Transitional Government. End 
comment.) Ruberwa has declined to do so, instead offering 
only an oral assurance that the judgment will never be 
executed.  Lukama also said that Parliament is discussing 
this matter but that the outcome is unlikely to be positive 
for BCDC. 
7. (C) Since it sees no solution through legal channels, BCDC 
has begun lobbying other diplomatic missions, including the 
French, British, Belgians and the European Union (EU) for 
support, as well as President Kabila's staff.  Lukama said 
that the EU responded that it will raise this issue within 
the framework of the CIAT/good governance discussions and 
that the French may suspend a mission of its Chambers of 
Commerce.  (Comment: Post is not becoming directly involved 
in this matter at this stage, particularly as there are no 
direct American interests at stake. We believe it likely that 
the Belgian Embassy will act, given the Belgian financial 
interest involved.  End comment.) 
 
POSSIBLE RAMIFICATIONS 
---------------------- 
 
8. (SBU)  Lukama said that the judgment could result in some 
serious consequences beyond the impact of paying the 
judgment. (He also explained that the WB is not a source for 
recovery because it had already discharged its obligation 
when it provided the original funding.) He said that the 
judgment's payment could ultimately result in BCDC's closure, 
as its primary international shareholder, Fortis, is in the 
process of divesting itself of its sub-Saharan banking 
business, and Belgolaise must now attract other investors. 
BCDC justifibly fears that this current problem would be a 
strong disincentive to potential investors.  Short of 
closure, Lukama said that the judgment threatens to end or 
even reverse BCDC's current expansion. Lukama is also clearly 
concerned about the potential precedential effect of this 
judgment, as a solvent enterprise such as BCDC is an 
attractive target for the unscrupulous. 
 
COMMENT 
------- 
 
9.  (C) Even if BCDC turns out to be crying wolf about the 
impact of the case on the bank's future, it is noteworthy 
that it is taking a stand against what it sees as a corrupt 
and broken justice system.  In fact, this case may be the 
final straw for the Justice Minister because his reported 
overt interference in the case is creating a fairly strong 
reaction against him. 
MEECE