Namcor says Mulunga fraudulently paid N$53m for tanks owned by Govt

The National Petroleum Corporation of Namibia (Namcor) has taken legal action against a company tied to businessman Peter Elindi and retired brigadier general James Auala in an attempt to recover N$53 million which the parastatal lost by buying storage facilities that already belonged to the government.

Namcor and an entity called Enercon are involved in the transaction.

Peter and Malakia Elindi own 75% of Enercon Namibia, and the military, through its business arm August 26 Holdings, owns the remaining 25%.

The Namibian has in the past reported on a fierce power struggle at Namcor, which is linked to turf wars involving oil dealers.

In court documents submitted to the High Court on 8 December, Namcor presented a case of fraudulent dealings that included ‘bogus’ valuations to justify the company paying N$53 million for an asset that belonged to the Ministry of Defence and Veterans Affairs.

Namcor is holding Enercon and three of its directors, retired brigadier general James Auala, Peter Elindi and Malakia Elindi, liable for the transaction.

Peter Elindi did not comment on the lawsuit, despite a request to do so yesterday.

The Namibian failed to get hold of Malakia Elindi.

Auala yesterday said he just heard about the lawsuit and needed time to acquaint himself with it.

He said his involvement with Enercon was part of his official duties as managing director of August 26 Holdings, a position he left in 2018.

Suspended Namcor boss Immanul Mulunga and a number of his former senior managers have also been taken to court for their alleged role in allowing what the parastatal board deems a sham transaction.

Former chief financial officer Jennifer Hamukwaya, former head of supply and distribution Corneliuse (Cedric) Willemse, former territory manager responsible for commercial downstream sales and marketing Olivia Dunaiski and Davis Maphosa, who used to be Namcor’s retail manager, have all been cited as defendants in the suit by Namcor.

“We are yet to receive the combined summons from the deputy sheriff, but once we receive it, we are definitely going to defend the matter. My client cannot be held liable for money he did not receive,” said Mulunga’s lawyer, Jermaine Muchali.

Court documents indicate that Namcor wants the court to hold all the accused liable for the transaction, which it says was fraudulent and a sham, and to order that the N$53 million Namcor paid in the transaction be paid back with interest of 20% yearly from 19 July 2022 until the date of final payment.

The oil parastatal is also asking that the nine defendants be held liable for the payment jointly and severally.

Court documents further state that Namcor is seeking an order declaring the 2022 agreement between itself and Enercon for the purchase of the assets null and void, as well as declaring that the Enercon directors in Auala, Peter and Malakia Elindi, knowingly ran Enercon in a fraudulent and reckless manner and that they personally be held liable for Enercon’s debt.

THE DEAL

To comprehend this deal, one must first understand the partnership between Enercon Namibia and the defence ministry’s subsidiary, August 26.

Enercon is owned by brothers Peter and Malakia Elindi, as well as military company August 26 Holdings.

The joint venture has a 15-year contract (since 2014) to supply fuel to the defence ministry, as well as to build and refurbish oil depots.
In 2022, Namcor – via Mulunga’s leadership– decided to buy oil storage facilities owned under the Enercon partnership.

Now, court documents provide an insight into how that deal was structured and how the money flowed from Namcor to Enercon and back to Namcor.

Documents indicate Namcor paid the money in two instalments on 19 July last year.

The first instalment was for N$35 million, and the second for N$18,2 million.

Both payments were made to Enercon’s account at Bank Windhoek.

Court documents found Enercon on the same day paid Namcor N$35 million of the N$53 million paid to it by Namcor.

The N$35 million was paid as part of a partial payment on debt Enercon had with Namcor for taking petroleum products without paying for them.

A BOND

Mulunga is already facing disciplinary charges emanating from the transaction with Enercon.

The Namibian last week reported that Mulunga was being charged for the N$53-million payment Namcor made to Enercon last year as part of a transaction which would have seen the national oil parastatal take over the fuel supply contract and related infrastructure business with the Namibian Defence Force (NDF).

The transaction also included Namcor buying a number of oil storage facilities from Enercon.

However, Enercon was forced to reverse the agreement with Namcor due to objections from the military, but failed to repay the N$53 million immediately.

It has now also turned out that the oil storage facilities and tankers sold to Namcor actually belong to the defence ministry, while Enercon is left to repay Namcor in monthly instalments of N$500 000.

This led to the Namcor board believing that the defendants in the suit intended to defraud the parastatal of N$53 million.

The investigation found that Mulunga failed to inform the board and to obtain board authorisation for the deal.

Despite the deal being concluded in July last year, a report on the transaction and acquisition of the assets was submitted to the board on 31 May – three days after minister of finance and public enterprises Iipumbu Shiimi received an anonymous tip from a whistleblower about the questionable deal.

The investigation found that internal procedures were not followed, including the fact that N$53 million exceeded Mulunga’s signing authority.

Namcor’s board is also accusing Mulunga of having failed to establish whether Enercon was the lawful owner of the said assets and whether the company had the power to transfer such assets to Namcor.

Despite paying N$53 million to Enercon for the assets, there was no guarantee that Namcor would have benefited from the transaction, because there was no contract between the defence ministry and Namcor for the supply of fuel.

There was also no lease agreement between Namcor and Enercon indicating that Enercon would use such assets in its obligation to supply the defence ministry with petroleum products.

ASSET VALUATION ‘A SHAM’

The board further concluded that Namcor’s internal valuation process of the said assets was a sham.

The qualifications of two Namcor officials who conducted the evaluation are being questioned, and they appear not to be registered with the Engineering Council of Namibia to conduct such an evaluation.

The internal valuation was also incomplete.

The external valuation, dated 14 June 2022, was also deemed a sham.

This was because the valuation company was not officially requested to conduct a valuation on behalf of Namcor, and no contract for such an arrangement could be found.

Seal Consulting appears to have done so as a favour to a Namcor employee.

The external evaluation was based on what appeared in the internal evaluation report.

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