After a six month long investigation process, the Federal Ethics and Anti Corruption Commission was finally able to start prosecuting the top tax officials, prominent businessmen and freight forwarders it started detaining in May. A long list of charges were read out, but pretrial argument was adjourned until October 29, 2013, as the Commission did not submit evidentiary documents writes ELLENI ARAYA, FORTUNE STAFF WRITER.
For the first time since he was escorted to prison by Federal Police on a late Friday afternoon in early May, Melaku Fenta, then director general of the Ethiopian Revenues & Customs Authority (ERCA), was able to hear exactly what he and most of his colleagues at the helm of the Authority were implicated in.
Indictment proceedings in the high profile corruption probe on the tax sector, which saw the arrest of over 60 tax officials, prominent businessmen, freight forwarders and their family members over the past six months, started on Monday, October 14, 2013.
The nation’s wealthy businessmen, Ketema Kebede of K. K. Plc, Simachew Kebede of InterContinental Addis Hotel, Nega G. Egziabhere of Netsa Trading Plc, Fikru Maru (MD) of Addis Cardiac Hospital, and new additions such as Gebreselassie H. Mariam of Comet Trading Plc and Getu Gelete, of Get-As International Plc, who is yet to be brought to court, were named as defendants in this trial, and stood alongside the public officials with whom they were accused of establishing connections for undue benefits.
Maladministration, abuse of power and corrupt practices were rife within the ERCA during the time Melaku was director general of the institution between 2008 and 2012, was the gist of the numerous charges filed against him and his colleagues.
Appointed first as a minister and director general when ERCA was reformed in 2008, Melaku came from a background in economics. Born in Gonder, he joined the ruling party in the early 1990s during the time when he had served the Ministry of Labour & Social Affairs. He was promoted to the Prime Minister’s Office prior to 2000s, responsible for handling the affairs of the newly formed regional states. It was this background that eventually led to his appointment as a state minister of Federal Affairs, under Abay Tsehaye, then its minister, and one of the ideologues of the EPRDF to date.
Transferred to the tax and customs sector in the mid-2000s, Melaku was trained in The Netherlands, where he received his post graduate degree in customs and revenues. He has seen through the reforms of the nation’s tax regime and the introductions of schemes such as automation, VAT and sales register machines which are now numbered close to 63,000. First elected to the EPRDF Central Committee in 2006, he has been one of the most powerful government officials in whose watch the nation’s domestic revenue mobilization drive jumped from 19 billion Br before his appointment in 2008 to 84.2 billion Br in 2012/13.
Despite these successes, however, his period at ERCA has created a ground for many businessmen and their companies to underpay taxes, perpetuate fraud and avoid criminal liability through graft, accuses the Federal Ethics & Anticorruption Commission (FEACC). Its prosecutors now claim this had led the government to lose nearly 795 million Br in revenue, with 667 million Br down to unpaid taxes and revenues that should have been credited to the public coffer, while the balance is the tally of what the abuse of power has cost the government in general, according to officials from the Commission.
How and when these losses were incurred tax notice to pay took a long time to process. Melaku, allegedly reduced nearly 100,000 Br outside of procedure for Mekdes, with whom he established a romantic relationship. Using public property to travel with her was also cited in the charge.
Similarly for Gebrewahed, charges that startled the public were included in the third file. In this, Gebrewahed is accused of corrupt practices, including calling and threatening businessmen to pay bribes in return for dropping legal charges and reducing taxes. A specific instance mentioned in the charge is the case of Baheru Abreha, shareholder of Bisrat Plc, which operates Elfign Baheru Corrugated Iron Sheets Factory.
While Baheru was under prosecution by the ERCA for allegedly conducting business transactions without VAT receipts, Gebrewahed allegedly called and threatened him to pay bribes or face maximum sentencing. He then met Baheru through the facilitation of Nega G. Egziabhere, in Yordanos Hotel, and took 250,000 Br in bribes, the charge reads. While taking the money, he then spotted a gold bracelet on Baheru’s wrist and asked that he receive a similar kind, which Baheru gave him the next day, when the met inside InterContinental Addis Hotel, according to the charge.
Other ERCA officials, including Markneh Alemayehu, former prosecutor for ERCA, are also accused of taking 100,000 Br in bribes and dropping the case for Baheru.
Gebrewahed is also charged with possession of nine unlicensed weapons – Kalashnikov, Colt and Makarov – possession of goods from unknown sources and money laundering.
While Gebrewahed and his wife had a salary of between 247 Br to 5,700 Br and 790 Br to 2,145 Br, respectively, throughout their working years, Gebrewahed was allegedly found to have 1.4 million Br in several bank accounts under his, his wife and children’s names. This is in addition to being in possession of money in five different currencies, six laptops as well as property in Legetafo area, on the outskirts of Addis Abeba, in Oromia Regional State.
Melaku was also accused of a similar charge for having nearly 3.2 million Br in cash and assets, including a two-storey house on a 659sqm plot that is estimated to worth 1.5 million Br.
The charge for most of the wealthy businessmen was also included in the third file.
The companies these businessmen run, including Ketema’s K. K. Plc, Simachew’s G. H. Tsemex Plc, Nega’s Netsa Trading Plc, Getu’s Get-As International Plc and Gebreselassie’s Comet Trading Plc were also indicted as separate legal entities. The audit report of these companies reveals that nearly 237 million Br due to the government has not been paid, according to officials from the Commission.
Most of the businessmen running these companies are accused of having charges and investigations on them and their companies dropped through graft.
Ketema, for instance, was accused of having his loan-sharking charges dropped due to his special relationship with Melaku established for undue benefits. Simachew, on the other hand, is charged with having investigations on his alleged use of machinery and furniture imported duty free for the hotel, for other purposes, dropped. Similar investigations against Fikru, who was accused of an attempt to pass medical equipments which were not allowed through the customs, were also terminated for undue benefits by officials, according to the charges.
Additionally, Nega, Getu and Gebreselassie, who allegedly transported cement imported for government housing projects to third parties, had investigations and charges against them dropped because of their affiliations with Gebrewahed and other officials, the charge reads.
Gebrewahed and Woldeselassie W. Michael, a senior national security officer at the time, tried to twist testimonies of others and put the blame on three other companies involved in the transport of the cement, without bringing liability to the above-mentioned businessmen, the charge reads.
Not much was heard from the defendant’s side during court proceedings because prosecutors at the Commission did not submit evidence along with the indictments. Many of the defendants’ lawyers appealed to the judges that they first read the evidence before making pre-trial arguments. Few of the defendants spoke, including Markneh.
“Not submitting evidence along with charges is outside of procedure,” he voiced his complaints. “Why did the court’s registrar accept and seal the charges if they are incomplete in the first place?”
The judges took these arguments in consideration and ruled that during their next appearance, prosecutors bring in evidence. The hearing for the three indictment files were adjourned until October 29 with a strict admonishment from the bench that prosecutors should bring evidence next time.
Markneh also appealed to the court to monitor media and request that they present their stories in summarised manner.
“If they do go into the details, it should be balanced,” he appealed to the court.
The bench deferred judgment on the matter for sometime but reminded reporters to write balanced news until such judgement is passed.
Since most of the charges levied against defendants are punishable by 10 or more years of imprisonment, only three of the defendants, Semere Negussie, the Ethiopian Revenues & Customs Authority’s (ERCA) Adama Branch container inspection official at Modjo Dry Port & Terminal, Mareshet Tesfaye from M.D. Freight-Forwarding, and Dawit Mekonnen, a self-employed broker, were granted on bail for 15,000 Br. No bail was granted in the second and third charge files.
Outside of the three indictment files, however, Meheretab Abreha, brother of former TPLF strongman Seeye, was charged with corruption and not paying taxes along with the company he manages, MFAM Plc.
Meheretab, along with Begziabhere Alebel, an architect and shareholder in the design firm, Ultimate Plan Plc, and businessmen Tekleab Zerabruk and Fitsum Gebremedhin, were not indicted with the rest of the businessmen they were initially detained with a month and a half ago. Instead, the Commission’s investigators were asking more time to complete audit reports of the suspects’ companies until last week. While Fitsum and Meheretab were charged, Begziabhere and Tekleab remain unindicted.
The Commission itself has let out Tekleab on bail, whereas the court granted Begziabhere a 100,000 Br bond for bail last week, after the Commission’s investigators announced that his case does not fall under their jurisdiction but that of the Ministry of Justice (MoJ) instead.
It is not clear whether the MoJ will take over Begziabhere’s case, nor has he been released from police custody. He is counted as a witness in the first count of the first indictment file, along with Eshetu Woldesemayat, chief prosecutor at the ERCA, who was initially arrested along with the rest of the ERCA officials, to testify against Melaku, Gebrewahid and Ketema.
As Melaku et al. were being escorted out of the court on Wednesday the Commission’s prosecutors, Ayele Tessema, Getachew Aga and Endale Tsegaye, stayed behind to participate in the hearing for the rest of the seven files, which include mid-level customs officials and businessmen from Adama, Mille and Dire Dawa.
They will be back in the same place for week two of the trial.
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