Mahtani Accused of Shady Tactics in Radisson Blu Case For several years on a prominent corner of Lusaka’s Great East Road, a large construction plot languished quietly with large signs promising that a new luxury hotel would be opening soon! But as every scheduled opening date passed and as the delays piled up, many were wondering if the hotel would ever open. The Radisson Blu did successfully open several years later than planned, and is now well regarded as one of the finest hotels in the city. Now, a recent case in the courts shows sheds some light on what was causing all those delays: a dramatic fight between a foreign investor and a financier close to President Michael Sata. The businessman Rajan Mahtani has found himself in court again recently, this time with a lawsuit against Hotellier Ltd, the operator of Lusaka’s Radisson Blu hotel, seeking repayment of millions of dollars of debt. The most recent finding by Judge Albert Wood, who has a long record of issuing favourable rulings to Mahtani, ordered Hotellier Ltd to repay loans to Finance Bank of some $8.6 million and almost 200,000 kwacha that were loaned to the operator during the construction of the hotel. However, according to the defendants, Mahtani’s Finance Bank had allegedly used unlawful tactics in its dealings with Hotellier Ltd and attempted to force them into defaulting on loans in order to seize control of the property. According to the defendant’s submission to the court, the account numbers 0014326550012 and 0014526550001 were illegally opened by Mahtani without consent by Hotellier Ltd, and then were loaded up with debt on Mahtani’s orders without approval by Finance Bank’s credit committee. According to Judge Wood’s decision, Mr Odysseas Mandenakis, a European foreign investor and owner of the Radisson Blu hotel in Lusaka, testified before the court that “he had been led into believing that Dr Rajan Mahtani and Finsbury Investments Limited would source money at low interest rates” without compound interest, while another witness called by the defence highlighted numerous violations by Finance Bank of the Bankers Association of Zambia Code of Banking Practice. The hotel operators argued before the court that Mahtani had attempted to convince them to construct a third floor to the hotel to make it more profitable, allegedly knowing that such a move would make it impossible for the operator to make payments on the loan. The Radisson Blu owners also allege that Finance Bank deliberately and repeatedly delayed delivery of the loans, which slowed down construction and ballooned the costs of the project. The court agreed with Hotellier Ltd that Mahtani’s unorthodox banking practices fell afoul with the ethics code: “It is quite clear to me that the plaintiff ignored the basic tenets espoused in the code of conduct,” Judge Wood wrote in his ruling, however he also ruled that the banking code is not “mandatory” and that this is a matter for the Bank of Zambia to address, which is not party to the dispute. According to an independent legal expert who reviewed the decision, there are likely grounds for the defendant to appeal Judge Wood’s ruling – mainly pointing out that there is an established Supreme Court decision that has established that the banking code is in fact mandatory. “What is alleged to be happening in this case looks like the classic Mahtani modus operandi,” said a anonymous source with knowledge of the matter. “Lend out money, create conditions so that the borrower can’t service the loan, and seize control of the asset. This would not be possible unless a single person owned the majority shares of the bank – which is precisely why the banking code makes it illegal for a single individual to run a bank alone.” The Radisson Blu case isn’t the first time that Mahtani has faced accusations of misconduct. In 2010, the Bank of Zambia took over Finance Bank after a report found that Mahtani stood in violation of the banking code by owning up to 56.5% of the bank. He’s also been accused by the owners of the Zambezi Portland Cement (ZPC) company of an illegal corporate raid of the company through forged share transfer documents, while also running into problems with a private hospital project and a ban from banking activities in Malawi (the Reserve Bank of Malawi produced a report finding numerous money laundering concerns with Finance Bank’s operations). Last year, a video was leaked on YouTube, purporting to show Rajan Mahtani talking openly about “overruling” the banking regulations and using his personal accounts to carry out these maneuvers. As the defendants in the hotel case make their next move, the foreign investment community will be watching closely to observe the extent of Mahtani’s influence over both the judiciary and the ruling Patriotic Front administration of President Michael Sata.
Posted on: Thu, 15 May 2014 18:37:36 +0000