THE CONTROL OF BANK ACCOUNTS OF A STATUTORY CORPORATION LIES WITH THE BOARD AND MANAGEMENT – FORMER POSTMASTER GENERAL
Defense in the case in which former Postmaster General McPherson Chanda and former ZamPost Finance Director Best Mwaichi and former Director of Operations Isaac Kamwimba are facing 13 counts of theft by public servant amounting to over K335m of social cash transfer funds begun yesterday 21st April, 2022 in the Financial Crimes Court sitting at Ndola before Magistrate Kaunda Sakuwanda.
Opening the defense former Postmaster General McPherson Chanda as witness informed the Court that according to section 8.3.A of the contract signed between ZamPost and the Ministry of Community Development and Social Services (MCDSS), the Ministry’s first responsibility was to avail Payment Schedules of beneficiaries to ZamPost in a timely manner and ZamPost’s obligation was to pay the beneficiaries within 72 hours in line with those Payment Schedules or Instructions. Chanda informed the Court that as earlier confirmed by prosecution witnesses, the payment schedules which were the only instructions on which basis ZamPost could pay were delayed and sent to ZamPost by the Ministry several weeks after the Ministry had sent funds to ZamPost.
Chanda told the Court that as earlier stated by the first prosecution witness Director Social Welfare Kennedy Mumba, when the first transfer of social cash transfer funds amounting K27.3m was received by ZamPost on 28th September, 2017 the Ministry of Community Development informed ZamPost that they were still updating the data for beneficiaries. As a result the Ministry only sent the payment schedules 1 month later at the monthend of October 2017. The defense witness told the Court that during this period when payment schedules were not available, social cash transfer funds sent to ZamPost were not payable to any beneficiary as there were no payment instructions for ZamPost to know who the beneficiaries were. Pending receipt of the payment instructions ZamPost Management decided to move the funds from the Corporation’s main operations account and placed them into a 7 – days fixed deposit account. The witness further said after the funds matured the funds reverted to ZamPost with interest and since payment schedules were still not available, Management decided to roll – over the funds into another 7 days fixed deposit until the payment schedules or instructions were received.
Chanda further told the Court that when the payment schedules were finally received it was observed that against funding of K27m, the payable amount from the schedules sent by the Ministry was only K13m which left excess funds of K14m. ZamPost Management therefore distributed K13m to the paying Post Offices and transferred the K14m excess from its main operations account into a 14 days fixed deposit.
The witness said later, on 14th December 2017 ZamPost received additional funds amounting to K64.6m from the Ministry but the funds were not accompanied by payment schedules which were only made available a month later in January 2018. The witness told the Court that during this period, given the absence of payment instructions for beneficiaries, ZamPost Management decided to move K50m of those funds from its main operations account into a 14 – days fixed deposit account which was rolled over twice upon maturity as payment schedules were still not available.
In evidence Chanda presented a letter written to ZamPost on 28th February, 2018 by the Permanent Secretary at Ministry of Community Development in which, by copy, the Director Social Welfare was being instructed to send payment schedules with immediate effect against funds sent 2 and 1/2 months earlier on 14th December, 2017. The witness told the Court that ZamPost was, therefore, in custody of social cash transfer funds whose payments to beneficiaries could not be made for over two months.
The witness informed the Court that in considering to place the funds into fixed deposits on short term basis Part V of the Public Finance Act of 2004 gave the power for the “Control of a Statutory Corporation” to the Board of Directors which was in turn delegated to Management.
He said sections 18 to 23 of the Public Finance Act of 2004 which required obtaining authority from the Secretary to the Treasury did not apply to bank accounts of statutory corporations as they applied to Government Bank Accounts. The witness cited the requirements for the authority from the Secretary to the Treasury under sections 18 to 23 as covering the following actions: opening and closing of bank accounts, obtaining an overdrat from the bank, transferring funds from one account to another, placing idle funds into an investment and transferring accrued interest on bank accounts to the Consolidated Fund.
He told the Court that these provisions did not apply to Statutory Corporations as the authority for these functions was vested with the Board.
The witness further said the definition of bank account in the 2004 Public Finance Act was “a bank account opened by Government into which public monies are deposited at a bank”.
The witness said it was evident that bank accounts of parastatals or Statutory Corporations are not opened by Government and were thus not included under sections 18 to 23 which were earlier cited by the prosecution witness.
In closing his defense Chanda said the decisions made to place funds did not delay payments to or deprive any beneficiaries as the placements were made in the absence of schedules which delayed for as long as 2 and half months.
He said when ZamPost had custody of funds pending receipt of schedules, there was no legal prohibition to place the funds into a fixed deposit and generate interest income for the Corporation and for the beneficial shareholders being the Government of the Republic of Zambia to whom distributable profits from ZamPost would accrue whether as retained earnings or dividends.
Chanda further said, as cited by prosecution witnesses, no social cash transfer funds had been stolen at ZamPost and it was impossible to steal K335m when total funds received during the period amounted to K98m.
He lastly cited the immunity clause in Section 90 of the Postal Services Act which grants immunity against prosecution to the Postmaster General and postal officers for anything done or omitted to be done in good faith in the course of performing their functions under the Postal Services Act of 2009.
In cross examination lead prosecutor Daniel Ngwira from the Anti – Corruption Commission asked Chanda to show the Court whether there was any single charge alleging that he had stolen K335m.
The witness said the total sum of the charges amounted to K335m and it was the figure announced by the Anti Corruption Commission to the public.
The prosecutor however insisted that there was no such charge. Chanda was further asked whether he understood the term “theft by converting”. Chanda however told the Court that he was not a lawyer but by placing the funds into short term placements ZamPost did not convert or change the purpose of the funds as they were not payable in the absence of schedules whether they remained on the main operations account or placed in the 7 to 14 days fixed deposit accounts.
Trial continues today.