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1 Thursday, 18th May 2006
2 (10.00 am)
3 MR JUSTICE ANDREW SMITH: Yes.
4 MR BLAIR: Good morning, my Lord. My Lord, yesterday your
5 Lordship raised the issue of Mr Sheehan's affidavit and
6 the exhibits to it. We have now prepared a bundle, 3.2,
7 that should be before your Lordship.
8 MR JUSTICE ANDREW SMITH: Right, thank you. I have it.
9 Good morning.
10 A. Morning, my Lord.
11 MR JUSTICE ANDREW SMITH: Yes.
12 MR VINCENT MALAMBO (continued)
13 Cross-examination by MR SULLIVAN (continued)
14 MR SULLIVAN: My Lord. Mr Malambo, good morning.
15 A. Good morning.
16 Q. Could I ask you please to turn in bundle 16.2 to
17 page 157. This is a letter that you sent to the then
18 Secretary to the Treasury, dated 4th July 2002, in
19 relation to the debt owed to Donegal Limited. If you
20 turn over the page to page 158, you write in the
21 following terms:
22 "We have now received instructions from our clients
23 to confirm to you what steps are now underway to
24 commence litigation against GRZ in this matter. A firm
25 of lawyers based in the United Kingdom have been
1
1 instructed to commence process to recover the sum of 42
2 point [et cetera] million plus interest at 5 per cent
3 per annum. Please note that this matter will be pursued
4 until every cent is recovered."
5 Bearing in mind your own knowledge of Zambia's
6 economic situation and its inability to pay such a sum,
7 do you not consider it inappropriately aggressive to
8 have written in terms suggesting that "Please note that
9 this matter will be pursued until every cent is
10 recovered"?
11 A. My Lord, I do not have any knowledge of Zambia not
12 having ability to pay its debts. I believe that if
13 debts are contracted, everyone is under an obligation to
14 pay whether you are poor or you are not. So it would be
15 incorrect, my Lord, to say that I have knowledge of the
16 poverty of Zambia, therefore I could not act on
17 a client's instructions. I do not consider that to be
18 the matter that was at the back of my mind.
19 Q. So the sentence "Please note that this matter will be
20 pursued until every cent is recovered", that reflects
21 your client's instructions?
22 A. Correct.
23 Q. Can you turn please to volume 3.1, page 2. This is your
24 witness statement. I want to take you to paragraph 15
25 on page 4. You refer to correspondence with
2
1 Mr Diangamo, then Secretary to the Treasury. Then the
2 commencement of proceedings in the BVI. At the bottom
3 of that page you say:
4 "However, being court documents, I decided to serve
5 the documents on the Attorney General at the Ministry of
6 Legal Affairs by hand on 27th September. I informed
7 George Kunda, the then Attorney General --"
8 Pausing there, he is and has at all times since this
9 time been Attorney General, correct?
10 A. That is correct.
11 Q. "... that he did not need formally to act on the claim
12 at this stage since it had not been formally served, but
13 that Donegal was giving advance notice of the claim."
14 Can you then take, please, again 16.2, page 174.
15 This is a letter from Messrs Harneys, BVI and Antiguan
16 lawyers, dated 20th September, to the Secretary to the
17 Treasury:
18 "We write to notify you that on 20th September
19 Donegal started proceedings against you in the High
20 Court in the British Virgin Islands. I enclose for your
21 information the following: a claim form and statement of
22 claim. These are important documents. If you do
23 nothing, judgment may be entered against you without
24 further warning."
25 Did you know that Harneys were representing to the
3
1 Government of Zambia that upon receipt of these
2 documents, if they did nothing, judgment would be
3 entered without further warning?
4 A. I read that, my Lord, in the letter.
5 Q. Did you know when you read it that at that time no
6 application had been made in the courts of the BVI with
7 permission to serve out of the jurisdiction?
8 A. Yes, I did.
9 Q. Did you not then see fit to suggest to Messrs Harneys,
10 who were your co-attorneys for Donegal, that they should
11 write a letter of correction so that the Attorney
12 General should be under no misapprehension as to what
13 the position was in the BVI?
14 A. My Lord, I did not because in fact the Attorney General
15 was under no misapprehension at all because this was
16 explained to him. It is common knowledge in the legal
17 profession that when you are issuing process for service
18 out of jurisdiction you require leave, and there were
19 no -- there was no order for leave.
20 Q. Could you turn, please, in the same bundle to page 178.
21 MR JUSTICE ANDREW SMITH: When you said this was explained
22 to the Attorney General, by whom was it explained? You
23 said you did not suggest that they should write a letter
24 of correction to ensure that the threat to enter
25 judgment without further warning was not misunderstood
4
1 because this had been explained to the Attorney General.
2 I was not sure what you meant by "this" --
3 A. By myself.
4 MR JUSTICE ANDREW SMITH: You explained it?
5 A. Yes, my Lord.
6 MR JUSTICE ANDREW SMITH: When you --
7 A. When I took the papers to him.
8 MR JUSTICE ANDREW SMITH: So you said to him on that
9 occasion what, that in fact this is an empty threat
10 because leave has not been obtained?
11 A. My Lord, I did not specifically put it that way, that
12 this is an empty threat. What I said was that there is
13 no order for leave for service yet but I am giving you
14 these papers so that you are at least aware that these
15 proceedings are underway.
16 MR JUSTICE ANDREW SMITH: Right, I see.
17 MR SULLIVAN: Did you confirm that to the Attorney General
18 in writing?
19 A. No, my Lord, because I met the Attorney General when
20 I took these papers to the Ministry.
21 Q. Given that it was an important matter involving court
22 process, did you not think it appropriate to record in
23 writing what you had informed the Attorney General of
24 orally?
25 A. No, my Lord, I did not.
5
1 Q. If we just look again at your witness statement. What
2 you say at the extract I read out a minute ago:
3 "I informed George Kunda, the then Attorney General,
4 that he did not need formally to act on the claim at
5 this stage (since it had not been formally served), but
6 that Donegal was giving advance notice of the claim."
7 What is the purpose of putting "since it had not
8 been formally served" in brackets, if in fact what you
9 are reporting is what you had told the Attorney General
10 orally?
11 A. My Lord, I am not sure I make the link that counsel
12 would like to make me -- for me to make. I did tell the
13 Attorney General that the papers were being served
14 without leave and therefore he did not need to take
15 steps to enter appearance or anything of that sort. And
16 that is what I am trying to say. Maybe I should have
17 made it clearer in paragraph 15 of my statement.
18 Q. Could you turn then in bundle 16.2 to page 178, please.
19 On 25th October 2002 the Attorney General wrote to you,
20 copied to his own attorneys in the BVI:
21 "I refer to the above matter in which you served
22 a claim form and statement of claim on behalf of
23 Messrs Harney Westwood & Riegels,
24 British Virgin Islands. Kindly note I am in the process
25 of taking instructions. In the meantime, however,
6
1 I must put it on record that I have not accepted service
2 of the claim form in the statement of claims because (1)
3 there is no order for service out of the jurisdiction
4 issued by the court of the BVI, (2) as a result of the
5 above I am not aware of any time limitations prescribed
6 by the court for filing a defence."
7 What I suggest to you is that if your recollection
8 of what you told the Attorney General orally was
9 accurate, the Attorney General would not have written in
10 these terms to you on 25th October and that accordingly
11 your evidence to his Lordship is mistaken?
12 A. No, my Lord, my evidence to his Lordship is not
13 mistaken. That was the discussion I had with the
14 Attorney General.
15 Q. Can we look then at paragraph 16 of your witness
16 statement, which you will see at binder 3.1, page 5.
17 What you tell his Lordship there is that:
18 "On 23rd October 2002 I spoke to Mr Kunda regarding
19 the Romanian debt. He stated that he was keen for
20 a settlement out of court but that he had not yet been
21 briefed by his colleagues in the Ministry of Finance."
22 Now, pausing there. The Attorney General gave
23 evidence last week to his Lordship, and this was put to
24 him by Mr Trace, and the Attorney General denied that
25 you said what you say you said in paragraph 16.
7
1 What I suggest to you is that your recollection is
2 mistaken and I suggest that the Attorney General's
3 recollection is accurate. You see, the Attorney General
4 would not discuss with you, counsel for the other side,
5 before he had taken instructions from his client.
6 A. My Lord, the papers to the Attorney General were taken
7 earlier than 23rd October 2002, the date that I refer to
8 there.
9 In fact, my recollection is clear, this is
10 a telephone call I received from the Attorney General
11 himself. He called me because he was in possession of
12 these papers having been previously given them by me.
13 He called me and told me that he would like to discuss
14 this matter because he did not want the matter to
15 proceed in court.
16 The conversation, my Lord, I referred to in the
17 first sentence of paragraph 16 was a telephonic
18 conversation.
19 Q. You see, I suggest that if there had been such
20 a conversation, the Attorney General, who is quite
21 a meticulous man, would have (a) recorded it in writing,
22 and (b) would not have written the letter that we just
23 looked at, at 25th October 2002, in the terms in which
24 he did.
25 A. Well, I know Mr Kunda to be meticulous and that is why
8
1 he telephoned me to discuss this matter.
2 Q. Can I ask you please in the same bundle, that is 16.2,
3 to turn to page 189. This is a letter on Ministry of
4 Finance notepaper from Treasury Counsel, Mr Lukwasa,
5 addressed to you. We see it is received in your office,
6 7th January. What he tells you is:
7 "Please be informed that the Minister of Legal
8 Affairs and the Attorney General is having conduct of
9 this matter and therefore the Ministry of Finance and
10 National Planning cannot deal with you directly. You
11 are therefore advised to enter into negotiations
12 directly with the Attorney General's chambers."
13 He says:
14 "By copy of this letter, the Attorney General's
15 chambers is being informed of this."
16 You received a copy of that, correct?
17 A. Yes, my Lord, I did.
18 Q. Then if you turn to page 191, the Attorney General wrote
19 to you on 8th January and you received a copy of this
20 letter too, correct?
21 A. Yes, my Lord, I did.
22 Q. By that letter the Attorney General advises you that,
23 further to his letter of 25th October:
24 "I am disappointed to note that you have been
25 negotiating directly with the Secretary to the Treasury,
9
1 the Ministry of Finance and National Planning, while
2 perfectly cognisant of the fact that I have conduct of
3 this matter."
4 The reason the Attorney General was writing in those
5 terms was because you, as a former Minister of Legal
6 Affairs, well knew that once the Republic was a party to
7 court proceedings it was the Attorney General and the
8 Attorney General alone who would be seized of the matter
9 on behalf of the Republic?
10 A. My Lord, that is looking at it from Mr Kunda's
11 perspective. I had given Mr Kunda advance papers of
12 an action earlier in the year, I think it was
13 September 2002. However, it was clear at that stage
14 that the Ministry of Legal Affairs did not have to do
15 anything about those papers because there was no
16 service -- no order for service out of jurisdiction.
17 I did continue to make contact with the Ministry of
18 Finance in relation to the resolution of this matter,
19 and it has really nothing to do with whether I knew that
20 at that stage the Attorney General was seized with the
21 matter. He was not. There was no court process that he
22 was required to respond to. In any event, it was up to
23 the Ministry of Finance, at that stage, to state that
24 "Look, we really cannot deal with this matter any more
25 with you. We feel that you should proceed and deal with
10
1 it with the Ministry of Legal Affairs". It was up to
2 them to do that. They did not, until this letter that
3 was received from Mr Lukwasa the following year, in
4 2003.
5 MR JUSTICE ANDREW SMITH: What puzzles me a little,
6 Mr Malambo, is that, as I understand it, the only source
7 of any encouragement that you had had to think that this
8 matter might be settled had come from the Attorney
9 General on 23rd October. Now, what puzzles me a little
10 is, leaving aside the proprieties which we may have to
11 examine later, as a matter of tactics it struck me as
12 a little strange that you did not go back to the man who
13 had showed interest in settlement. Do you understand my
14 point?
15 A. I understand your point, my Lord, except that you will
16 probably see from the documents that the secretaries to
17 the Treasury, including Mr Diangamo, who I continued to
18 deal with after that, before this letter, before the
19 letter of 6th -- I will give you the correct date,
20 my Lord. The letter was referred to earlier from
21 Mr Lukwasa. I had been dealing with Mr Diangamo and he
22 had written to me indicating that there was
23 a possibility for settlement. In fact he was talking
24 about making a payment in December.
25 MR JUSTICE ANDREW SMITH: I see. Could I just ask you this
11
1 while I am on the telephone call of 23rd October.
2 I take it you have not got an attendance note of that?
3 A. No, I do not.
4 MR JUSTICE ANDREW SMITH: Would I be right in supposing that
5 you would report back on such an encouraging response to
6 your principals?
7 A. My Lord, I had been receiving encouraging responses from
8 the representatives of GRZ from as early as
9 December 2002 from Mr Mtonga.
10 MR JUSTICE ANDREW SMITH: 2002?
11 A. No, my Lord, 2001. I am sorry. From Mr Mtonga. I then
12 continued -- when we had the meeting with Mr Nonde in
13 early 2003 I believe, every time I received
14 an encouraging response was after threatening
15 litigation. Their conduct was quite consistent. The
16 only time I received any sort of encouraging response at
17 all was after threatening litigation in a sustained way.
18 It was for me -- the conduct was the same. The Attorney
19 General said he would like to discuss it, but that was
20 after he had been given court papers.
21 MR JUSTICE ANDREW SMITH: But my question was whether you
22 reported this back to your principals?
23 A. I must have, because I was in telephonic contact with
24 a gentleman called Mr Mark Slater all the time.
25 MR JUSTICE ANDREW SMITH: That may answer my follow-up
12
1 question, but just to be sure: you regarded your
2 principal in this matter as Mr Slater, did you report
3 back to Harney Westwood & Riegels?
4 A. No, I have not spoken with any attorney from the firm of
5 lawyers in the BVI. No one contacted me. I actually
6 believe that even the papers, the court papers, were
7 sent to me by Mr Mark Slater.
8 MR JUSTICE ANDREW SMITH: Could I just make sure
9 I understand it. Did it come as a surprise to you in
10 view of that response that in fact Harneys went ahead
11 and applied about a week later for the leave to serve
12 out before Mr Kunda had had the chance to take the
13 matter any further?
14 A. No, I am not surprised. I would not be because I would
15 have expected that they in fact would, as attorneys,
16 proceed to take -- to get the order for service out of
17 jurisdiction.
18 MR SULLIVAN: Mr Malambo, you talked about previous
19 discussions, and previous discussions with Mr Mtonga,
20 but this was at an altogether different level. You were
21 now engaged for the first time with the senior law
22 officer of the Government of the Republic of Zambia and
23 that was the difference. And on your own evidence
24 a senior law officer of the Government of Zambia was
25 saying that he wanted to do a settlement. Now, in those
13
1 circumstances, given that -- and just pausing there. If
2 we look at paragraph 18 of your statement, the second
3 line. Donegal were happy, were they not, that, as we
4 see at the second sentence, the Attorney General was
5 engaged:
6 "Donegal was very happy to negotiate at such a high
7 level, especially as a result of GRZ's own initiative,
8 and welcomed the opportunity to explain the history of
9 the Romanian debt to the Attorney General with a view to
10 avoiding legal proceedings."
11 In those circumstances why was all risked by making
12 an application in the courts of the BVI on 15th
13 November 2002 for permission to serve out of the
14 jurisdiction on Zambia?
15 A. My Lord, I am not sure I can respond on behalf of the
16 law firm in the BVI, except for me to say that we
17 started negotiating with the Attorney General after
18 receipt of his letter saying that we had to deal with
19 him henceforth. This letter, my Lord, was in
20 January 2003.
21 Q. Do you have a copy of the letter of advice you gave to
22 Mr Slater concerning your oral discussion with the
23 Attorney General?
24 A. No, I did not write to Mr Slater, my Lord.
25 Q. You see, I suggest the reason an application was made,
14
1 that that application on 15th November 2002 is
2 consistent only with you not having had an indication
3 from the Attorney General that he was willing to settle
4 with Donegal?
5 A. My Lord, I am not sure I follow. But every single
6 officer of government I dealt with, including the
7 Attorney General, were all extremely keen to settle this
8 matter out of court once they realised that really
9 litigation was imminent. They always indicated that
10 they would like to settle the matter outside court.
11 Q. Given the indication that you had had from the Attorney
12 General, why did you not seek to engage him in further
13 discussions, given that discussions with the Ministry of
14 Finance had been unsuccessful over the last two years;
15 why not engage the Attorney General who was receptive,
16 you say?
17 A. My Lord, I was dealing with the Ministry of Finance on
18 a day-to-day basis in respect of this matter, and there
19 will be documents from the Secretary to the Treasury
20 then, Mr Diangamo, which indicated that GRZ was going to
21 settle this matter without the necessity of litigation.
22 And if I was going to discuss with the Attorney General
23 at that stage and forget the Ministry of Finance,
24 my Lord, it is just that it is a judgment call I made
25 that my client's interests would be best served by my
15
1 continuing the level of discussion I had with the
2 Ministry of Finance, with the senior officials in the
3 Ministry of Finance who were familiar with this matter
4 already and had already indicated that they would settle
5 out of court.
6 It is my judgment call.
7 Q. Can we go back then to the correspondence. I have taken
8 you to page 191. When I read out the first paragraph we
9 see that the Attorney General expresses his dismay that
10 you have had contact with the Secretary to the Treasury.
11 Accordingly he says:
12 "You are requested to direct all future
13 correspondence on this matter to me."
14 Now, you respond to that letter -- we will come back
15 to this in a minute -- as we shall see at page 196.
16 That is a letter to the Attorney General from you,
17 correct?
18 A. No, my Lord, this was a draft.
19 Q. A draft, exactly.
20 A. This is a draft that I prepared on receipt of this
21 letter and then I passed the draft on to my clients.
22 Q. I am grateful for that. Turn to the letter in full at
23 page 200, we will come back to the draft in due course.
24 You explain to the Attorney General why it is you have
25 had conduct with the Ministry of Finance. In the
16
1 pre-penultimate paragraph:
2 "We then proceeded to continue with the four year
3 period of negotiation with the Ministry of Finance."
4 Pausing there. When you talk about the four year
5 period, that included the period during which you were
6 receiving correspondence from Mr Mtonga in relation to
7 this debt as a representative of government, correct?
8 A. I am not sure I follow the question, my Lord. Perhaps
9 it could be clarified.
10 Q. We saw a letter yesterday in early 2001 copied to you.
11 You said you did not receive it, but the four year
12 period to which you refer is a four year period of
13 negotiation during which you were a member of the
14 Government of the Republic of Zambia, correct?
15 A. My Lord, it is right that I only left government in
16 2001, and prior to that my clients had been in
17 negotiations with the Republic, they had not been in
18 negotiations with me, neither had my advice been sought
19 from the Ministry of Finance on this matter.
20 Q. What you then say, in this letter, is:
21 "This made sense as proceedings had not yet formally
22 commenced against the Republic, as represented by the
23 Ministry, has never denied the validity of the debt and
24 the amounts claimed. It has always been our
25 understanding in the course of four years of
17
1 negotiations that the Ministry of Finance is solely
2 responsible for the negotiation of rescheduling of
3 external indebtedness. This is also our understanding.
4 Needless to say, if the Ministry of Finance had informed
5 us that your Ministry had sole conduct of the matter and
6 instructed us to take up negotiations with you, we would
7 have immediately complied, as we are now doing."
8 What I am suggesting to you is that if you had had
9 a conversation with the Attorney General of the type you
10 refer to, you would have here told him that, "Well, the
11 reason we have been conducting negotiations latterly
12 with the Ministry of Finance is because we understood
13 you wanted to achieve a settlement". That is not what
14 you said.
15 A. My Lord, perhaps if you were acting for Donegal you
16 would have put it that way, but my judgment and that of
17 my client's at that stage who, I must add, my Lord, this
18 letter -- I sent them the draft and they were not happy
19 with my draft. They thought it was not very diplomatic.
20 They re-drafted this letter and then sent it back to me
21 and I sent it to the Attorney General.
22 But there is nothing contradictory in that letter
23 about the position that we -- I now take about the
24 position that I took at the time that the letter was
25 written.
18
1 Q. When you say "they" re-drafted it, who redrafted it?
2 A. Mr Mark Slater.
3 Q. In any event, proceedings had not only been commenced
4 but an order for leave to serve out of the jurisdiction
5 had been obtained on 15th November 2002.
6 Given your own knowledge as a former Minister of
7 Legal Affairs, why from that date did you not ensure
8 that all communications with Zambia were through the
9 office of the Attorney General?
10 A. My Lord, if "from that date" it is meant to refer to the
11 date of obtaining the order for service out, I just need
12 to say that I never received the order for service out,
13 for purposes of serving it on GRZ. It was never in fact
14 brought to my attention and I am not aware that that
15 order was ever served on GRZ.
16 Q. So your clients did not inform you, is that what you are
17 saying, that they could obtain leave to serve out of the
18 jurisdiction?
19 A. I later learned of that fact.
20 Q. When did you learn?
21 A. But they never sent me the order.
22 Q. When did you learn of that fact?
23 A. I cannot fix the date, my Lord, but it must have been in
24 the year 2003, somewhere around the year 2003.
25 Q. Sticking with that letter, and the sentence I have just
19
1 read out, what you say is:
2 "Needless to say, if the Ministry of Finance had
3 informed us that your Ministry had sole conduct of the
4 matter and instructed us to take up negotiations with
5 you, we would have immediately complied, as we are now
6 doing."
7 So you accepted the basis from this moment in time
8 upon which the Attorney General had said that matters
9 would proceed, namely by acting in accordance with his
10 letter of 8th January to you, correct?
11 A. There was an earlier letter, my Lord, from Mr Lukwasa
12 which I received two days earlier. It must have been
13 just two days earlier, and then the subsequent letter
14 from the Attorney General which really meant that
15 between the Ministry of Finance and the Ministry of
16 Legal Affairs they had discussed the matter and that the
17 Attorney General would now take sole conduct of the
18 matter.
19 Q. And you accepted that as the basis upon which matters
20 would henceforth proceed, did you not?
21 A. Correct, my Lord.
22 Q. Can we turn back a few pages to page 191. This is the
23 letter of 8th January 2003. You will see at page 192
24 that the Attorney General writes in these terms:
25 "I have also been advised that you are willing to
20
1 negotiate the settlement of the debt and to reduce the
2 same by 33 per cent. I have had sight of the proposed
3 agreement in this regard, however in order for us to
4 negotiate meaningfully please furnish us with the
5 following: (1) justify the escalation of the alleged
6 debt from US$5.5 million as pleaded to US$43 million.
7 Does this figure include compound interest and, if so,
8 at what rate? Was there any agreement to pay this type
9 of interest, if so let us have a copy thereof?"
10 So the Attorney General there, as you understood it,
11 quite properly asking you to justify the figure of
12 43 million, correct?
13 A. Yes, that is what he was doing, my Lord.
14 Q. Then if you turn to page 196, please. This is your
15 draft response, as you rightly pointed out a few moments
16 ago, correct?
17 A. Yes, my Lord.
18 Q. This was the document which I think also you have
19 indicated you sent to Mr Mark Slater for approval?
20 A. Correct.
21 Q. If we look at paragraph 1, you answer the Attorney
22 General's request by his letter of 8th January by
23 saying:
24 "You will notice from your records that the sum of
25 US$5.5 million was the sum acknowledged as outstanding
21
1 on 4th August 1985 when the Government of Zambia and the
2 Socialist Republic of Romania signed the agreement
3 reflecting the repayment terms which were never
4 fulfilled by GRZ. We encourage you to re-examine this
5 agreement. Our clients are in possession of this
6 agreement. Your records should further reflect
7 a memorandum signed on 18th December 1998 between the
8 Government of Romania and the Government of the Republic
9 of Zambia, where the parties acknowledge and agree the
10 sum due, principal and interest, the sum of 29.8 million
11 with an interest rate of 12 per cent. Our clients are
12 in possession of this agreement."
13 Now, pausing there. You obtained that information
14 from the documents you had which included obviously the
15 Memorandum of Understanding, correct?
16 A. That is correct, my Lord.
17 Q. If we look at the Memorandum of Understanding at 17.1
18 please. Flag 11. This is the memorandum. But if you
19 turn over the page to page 130 we shall see how you were
20 able to write in those terms and you will see that there
21 is:
22 "Rescheduled instalments, interest penalties 9 per
23 cent".
24 Then:
25 "Non-rescheduled instalments", the figure given,
22
1 "interest penalties LIBOR rate plus 2 per cent".
2 Do you see that?
3 A. I was looking at the wrong page, my Lord.
4 MR JUSTICE ANDREW SMITH: 130.
5 A. Yes.
6 MR SULLIVAN: Take your time. Pages 130 and 131 are
7 similar.
8 A. Yes, I see that.
9 Q. That was the source of your information. That was the
10 information upon which you were relying, correct?
11 A. My Lord, it is very clear, and my recollection of this
12 matter is extremely clear as to what I did. I actually
13 did not even look at this page, what is now at page 130.
14 I looked at page 129 and it is obvious that I misread
15 that, the clause, my Lord, at page 3, at paragraph 3,
16 relating to the recovery percentage and that is what
17 I reflected in that letter. It is a mistake that
18 I acknowledge.
19 However, at the meetings that we had earlier with
20 Mr Nonde, this is on the 16th -- no, 6th February 2002,
21 there was an agreement that I had given to Mr Mtonga the
22 previous year in 2001, at the end of 2001, around which
23 we discussed that meeting and we discussed the meeting
24 with Mr Nonde. And in that agreement there were figures
25 as to what the principal was, as to what the interest
23
1 was, and when you look at what the principal was and
2 what the interest was, my Lord, the discussion was -- we
3 are talking about a rate of 12 per cent per annum on the
4 figure of US$29 plus million.
5 Q. Two things arising out of that, can I ask you please to
6 turn to page 200.
7 MR JUSTICE ANDREW SMITH: In 16.2?
8 MR SULLIVAN: My Lord, indeed. 16.2, page 200. Are you
9 there? This is the letter which in fact you send. If
10 you turn to page 201, you write:
11 "For this purpose I will now attempt to address the
12 queries expressed in your letter in the order in which
13 you have posed them."
14 The first, number 1:
15 "The debt was sold by the Government of Romania to
16 our client on the basis that it consisted of a principal
17 figure of 29.8 million. The figure has never been
18 disputed in four years of negotiations. Interest
19 accruals on this amount from the date of our client's
20 acquisition are based on the capitalisation of interest
21 agreed during negotiations for the buy-back."
22 What I suggest to you is that your own draft
23 identified it correctly as principal plus interest, and
24 that it was wrong to assert in this letter that the
25 figure of $29 million represented principal only.
24
1 A. My Lord, I understood this to be principal plus
2 capitalised interest, and my understanding is that when
3 you capitalise interest it becomes principal on which
4 you can then calculate interest.
5 Q. Why then in the draft letter that you wrote did you
6 identify it as principal plus interest as opposed to
7 capitalised interest?
8 A. My Lord, because that is what it is. It is principal
9 plus capitalised interest.
10 Q. Let us look at the documents then at 17.1. Page 128.
11 You identify for us where there is an agreement to
12 capitalise interest in this Memorandum of Understanding,
13 let alone -- first of all, you identify for us where you
14 say there is an agreement to be found to capitalise
15 interest.
16 A. My Lord, that impression for me to capitalise interest I
17 think is in the agreement between Donegal and the
18 Romanian Government, the transfer agreement. Not in
19 this memorandum.
20 MR JUSTICE ANDREW SMITH: How would the agreement, the
21 assignment, affect the amount of the debt or how
22 interest was going to accrue on the debt of Zambia?
23 A. My Lord, I am not sure that I can conclusively respond
24 to that except that it was in the agreement.
25 MR JUSTICE ANDREW SMITH: But an agreement of assignment
25
1 does not affect the underlying chose of action.
2 A. Yes, it does not, I appreciate that, my Lord.
3 MR SULLIVAN: If that was your understanding, Mr Malambo,
4 turn, please, to page 16.2, 201. Why then did you say
5 under paragraph numbered 1, on page 201:
6 "Interest accruals on this amount from the date of
7 our client's acquisition are based on the capitalisation
8 of interest agreed in the negotiations for the buy-back
9 of the debt by the GRZ and the Government of Romania
10 that took place over the course of 1998."
11 A. My Lord, this letter, as I said, was substantially
12 re-drafted. My original letter is at page 198, which
13 I sent to the client. The client then came back with
14 this re-draft of the way that they wanted the case put
15 across to GRZ and that is what went to GRZ.
16 These are what my then instructions came to be.
17 Q. But here you are, you are writing to the senior law
18 officer of the Government of Zambia, and you knew that
19 that sentence, that I just read out, was materially and
20 wholly inaccurate because you knew that the reference to
21 capitalisation of interest was not something which had
22 been agreed by the Government of Zambia in the
23 Memorandum of Understanding.
24 A. No, my Lord, I would not say that I knew that the
25 Government of Zambia had not agreed to capitalisation of
26
1 interest with the Romanian Government. My instruction
2 from the client at that stage was that the sum of
3 $29 million that had been transferred to them for
4 purposes of negotiations with the Zambian Government
5 later would accrue interest at 12 per cent. Those were
6 my instructions.
7 Q. Sorry, Mr Malambo, that is not an answer to why it was
8 that you sent out a letter which purported to record
9 an agreement between the Government of Zambia and the
10 Government of Romania concerning the capitalisation of
11 interest?
12 MR JUSTICE ANDREW SMITH: Does it, Mr Sullivan? Does it?
13 Does the letter say that?
14 MR SULLIVAN: It says:
15 "Interest accruals on this amount from the date of
16 our client's acquisition are based on the capitalisation
17 of interest agreed in the negotiations for the buy-back
18 of the debt by the GRZ and the Government of Romania
19 that took place in the course of 1998."
20 My Lord, I think the answer to your Lordship's
21 question is yes.
22 Would your Lordship give me one second, please?
23 (Pause)
24 I am grateful, my Lord.
25 You referred to the meeting on 6th February 2003.
27
1 There was no agreement reached at that meeting, was
2 there?
3 A. My Lord, there was, conditional on the IMF approving.
4 Q. Was there any agreement on interest agreed at that
5 meeting?
6 A. My Lord, as I stated earlier, I had initially sent
7 a copy of the agreement to Mr Mtonga at the end of 2000.
8 Mr Mtonga in fact was the one who invited me and the
9 client to the discussions which he hoped he would be
10 involved in himself, but soon thereafter he was removed
11 and Mr Nonde came on the scene. The whole discussion
12 with Mr Nonde and his officers revolved around the draft
13 agreement that had been sent to them. My Lord, they
14 raised those issues that they wanted amended in that
15 agreement, and where Mr Slater felt that he could give,
16 he did give.
17 If you examine that agreement, my Lord -- the draft
18 agreement -- the initial rate at which the debt was to
19 be purchased was actually 37 per cent. Mr Nonde
20 negotiated that downwards to 33 per cent. He dealt with
21 the issues of what the principal was and what the
22 interest accrued to date was.
23 My recollection, my Lord, is that at that time there
24 was just slightly below $10 million of interest accrued.
25 We looked at that figure and how that figure had been
28
1 arrived at, that it had been -- if my recollection is
2 correct -- had been calculated on the basis that it was
3 12 per cent accruing as at that date, the end of
4 December in 2001.
5 So all the issues they were dissatisfied with were
6 dealt with. The rate at which the debt buy-back would
7 be done was addressed and, as I said, it was reduced to
8 33 per cent in that agreement but Mr Nonde said he had
9 to get the permission -- not the permission, the
10 concurrence of the IMF under the HIPC conditions for
11 them to proceed with that. That is my recollection of
12 the meeting as we dealt with the issues of interest. It
13 was based on a figure that was there and what that
14 figure was calculated at.
15 Q. So do you say that an interest rate figure was agreed at
16 the meeting on 6th February, yes or no?
17 A. The figure of $10 million, my Lord, was agreed as the
18 interest accrued to that debt.
19 Q. Was an interest rate figure agreed?
20 A. I do not recall specifically that, my Lord. Because as
21 I said, the figure just slightly below $10 million was
22 what was reflected in the agreement.
23 Q. Do you have an attendance note of this meeting?
24 A. No, I did not, but I did record, my Lord, in a letter
25 subsequently to the Secretary to the Treasury the point
29
1 that -- one point that had been amended from the
2 original draft, which is the issue of 33 per cent.
3 Q. Can you please look at volume 3.1, page 4.
4 I want to look at paragraph 13 of your witness
5 statement. You refer in the fourth line:
6 "Subsequent to this correspondence, a meeting with
7 Donegal and MOF officials, including the new Secretary
8 to the Treasury, Mr Nonde, was held on 6th February.
9 Again, however, no settlement was agreed."
10 That is right, is it not, no settlement was agreed
11 at that meeting?
12 A. Because he said that he needed the approval of the IMF.
13 Q. Turn, if you will, to page 16.2, page 150. Do you have
14 that?
15 A. Yes, my Lord.
16 Q. This is a letter that you wrote subsequent to the
17 meeting and you say:
18 "Further, in the above, we wish to record our
19 understanding of the meeting of 6th February 2002 in
20 your office at which Mr Mark Slater, Mr Patrick Mitchell
21 [who I think also is in court] Vincent Malambo and
22 Fisho Mwale represented the creditors. It is our
23 understanding that the government will consider settling
24 this matter at 33 per cent of the face value of the debt
25 at the time of settling. The period over which the
30
1 instalments will be paid will be contingent on the
2 down-payment the government will be ready to make at the
3 time of signing the agreement. It is further intimated
4 that a longer period would attract an interest charge on
5 the declining balance. We trust that we will be able to
6 firmly conclude this matter in the near future."
7 If you turn over the page, page 151, the letter:
8 "We should be grateful if you would confirm that we
9 can draw the final agreement on the basis of the results
10 of our first meeting."
11 If you turn over you get Mr Nonde's response at
12 page 152. What Mr Nonde advises you is that, he refers
13 to your letter:
14 "I have taken note of its contents and would like to
15 state that the negotiations did not lead to any
16 conclusions over this matter as this was still subject
17 to reaching an agreement with the fund in view of the
18 HIPC conditionality. We are still awaiting a position
19 from the fund before we can finally conclude this
20 matter. In the circumstances, I regret that I cannot
21 confirm that we can draw the final agreement on the
22 basis of the results of our first meeting. I shall be
23 informing you of the outcome of our deliberations with
24 the fund in due course."
25 What I suggest the contemporaneous correspondence
31
1 shows is that the meeting on 6th February was
2 inconclusive and there was no agreement between the
3 Government of Zambia and Donegal arising from that
4 meeting, and that is correct, is it not?
5 A. No, my Lord. The broad outlines of how the agreement
6 would look were discussed and agreed, but this was
7 specifically made clear that Mr Nonde required to have
8 the concurrence of the IMF to proceed with conclusion.
9 Q. Can we turn to the March meetings now.
10 MR JUSTICE ANDREW SMITH: Just before you do that, can I go
11 back for a moment, please to, this letter at 16.2, 201.
12 Do you still have that, Mr Malambo, file 16.2?
13 A. Yes, my Lord.
14 MR JUSTICE ANDREW SMITH: It is the letter that starts at
15 page 200 and goes on to 201.
16 A. Yes, my Lord.
17 MR JUSTICE ANDREW SMITH: You have been pressed about this
18 passage in which you address the first of the queries.
19 A. Yes, my Lord.
20 MR JUSTICE ANDREW SMITH: In particular the first sentence
21 of the sentence paragraph:
22 "Interest accruals on this amount on the date of our
23 client's acquisition are based on the capitalisation of
24 interest agreed in the negotiations for the buy-back of
25 the debt."
32
1 Now, this may be a rather artificial question
2 because I appreciate you were using the draft which
3 I understand came from Mr Slater?
4 A. That is correct, my Lord.
5 MR JUSTICE ANDREW SMITH: But do you understand the
6 reference to "agreed in the negotiations" to be
7 a reference to the capitalisation being agreed or the
8 interest being agreed?
9 A. My Lord, this would refer to the capitalisation.
10 MR JUSTICE ANDREW SMITH: It was the capitalisation.
11 A. Yes.
12 MR JUSTICE ANDREW SMITH: You do agree with the basis upon
13 which it was put by Mr Sullivan, that it was the
14 capitalisation that was agreed in the negotiations, not
15 the capitalisation of interest that had been agreed?
16 That is to say, the interest had been agreed and it was
17 capitalised in the assignment.
18 A. I understand this to mean, my Lord, that the interest in
19 the negotiations had been agreed and then it had been
20 capitalised.
21 MR JUSTICE ANDREW SMITH: As a matter of agreement in the
22 negotiations between governments.
23 A. Yes.
24 MR JUSTICE ANDREW SMITH: Mr Sullivan, I did see
25 an ambiguity in the letter but Mr Malambo reads it as
33
1 you do.
2 MR SULLIVAN: I understand.
3 MR JUSTICE ANDREW SMITH: That is why I asked the question.
4 MR SULLIVAN: Absolutely correctly, my Lord.
5 Might I move on, please. I think one thing is
6 common, I am glad to say, and that is that there was
7 a meeting which you attended and the Attorney General
8 attended and that that meeting took place on the 14th
9 March 2003. What is not agreed is whether the meeting
10 took place over two days or one day. Now, the Attorney
11 General gave evidence to his Lordship last week, as did
12 Mr Lintini, as did Miss Olive Chiboola, and all of them
13 have a recollection of a meeting, a day-long meeting,
14 which was broken up with breaks in between, or
15 break-outs I think Mr Lintini called them. But it was
16 over one day rather than two.
17 I suggest that --
18 MR JUSTICE ANDREW SMITH: Sorry to question you, but did all
19 give evidence that it was day long? I think you
20 presented the evidence to Mr Malambo, who I think was
21 not in court when it was given, on the basis that all
22 gave evidence that it was a day-long meeting, and I do
23 not recall that.
24 MR SULLIVAN: There was a meeting on 14th March attended by
25 you and the Attorney General. First of all, there was
34
1 only one meeting or series of meetings on 14th March and
2 there were not meetings over the course of two days.
3 Now, what is your recollection?
4 A. My recollection, my Lord, is that there were two
5 meetings, at least two meetings, held on two different
6 days at two venues.
7 The first meeting was held in the office or in the
8 conference room of the Minister of Justice now, the
9 Attorney General, on 13th March, at which the
10 substantial issues were dealt with. The next meeting,
11 my Lord, was the following day, 14th March, this time in
12 the Ministry of Finance conference room, not in the
13 Attorney General's chambers. So my recollection is of
14 two meetings over a period two of days in two different
15 venues.
16 Q. Can you please turn in volume 16.2 to page 210(a).
17 This is an attendance note signed by the Attorney
18 General and you will see that he has dated it the 15th,
19 and I should draw to your attention that in the first
20 paragraph he says:
21 "A meeting was held today..."
22 He accepts that the meeting was not on the 15th.
23 Have you got an attendance note of this meeting?
24 A. No, my Lord, I did not. I did not prepare any
25 attendance note at all.
35
1 Q. Do you have an attendance note of the meeting on the
2 13th?
3 A. No, I do not.
4 Q. Do you, as a matter of course, not take minutes or
5 attendance notes of meetings that you attend with your
6 clients and the counterparty?
7 A. I decide when to do it and when not to. This time I did
8 not do it because I decided not to.
9 Q. If you look at this attendance note, the Attorney
10 General sets out those present. You see yourself
11 identified. Then -- before I do that can I just ask you
12 to keep that page open and turn to page 310(c). It
13 should be a letter from the Minister of Legal Affairs
14 dated 17th March, do you have that?
15 A. Yes, my Lord.
16 Q. What the Attorney General told the Minister there was:
17 "As discussed verbally with you on Friday 14th
18 March 2003, I write to formally inform you of a meeting
19 held on the same day with representatives from Donegal,
20 the creditors herein."
21 What I suggest to you is that the Attorney General's
22 contemporaneous record is correct and that your
23 recollection is mistaken, and that there was a meeting
24 only on one day, namely 14th March?
25 A. No, my Lord, my recollection is correct. I believe that
36
1 the Attorney General's recollection could not be right.
2 I am reading this letter, my Lord, the letter of --
3 the one I have been referred to at page 16, 210(c). The
4 next paragraph here, the Attorney General is referring
5 to having been assisted by two officers. I recall
6 a third officer, a lady, who was in the delegation of
7 the Attorney General at the meeting. He does not
8 mention her in this letter to the Minister.
9 Q. I think you will see, in fairness to the Attorney
10 General, if you turn back to the attendance note, he
11 obviously does not know the identity of the lady from
12 the Ministry of Finance. You see at 210(a) he lists
13 those present and he says:
14 "Official lady from the Ministry of Finance and
15 National Planning."
16 So he obviously had not taken on board that it was
17 Miss Chiboola.
18 You see what the Attorney General records as the
19 substance of the meeting in the main paragraph on
20 210(a). It says:
21 "The agreement presented to government also provided
22 that in the case of default the entire amount of
23 US43.8 million would become due. Further, the agreement
24 provided for a waiver of immunity on the assets of the
25 government, I objected to these clauses."
37
1 Then if you turn over the page he sets out
2 a conversation he had with his own representatives. He
3 puts there note bene:
4 "Communication with my officials was done in the
5 absence of Donegal representatives. After further
6 discussions it was agreed to postpone the meeting for at
7 least 14 days to allow for consultations. I then
8 promised to get back to Donegal International Limited."
9 It is right, is it not, that during the course of
10 the discussions on 14th March the Attorney General did
11 indeed object to the default clause and to the waiver of
12 immunity clause, correct?
13 A. This, my Lord, I confirm was an issue that was discussed
14 at length. The Attorney General was not comfortable
15 with these clauses. The client insisted on these
16 clauses being in the agreement. I recall Mr Slater
17 saying that these were actually deal breakers, you
18 cannot remove these.
19 MR JUSTICE ANDREW SMITH: Mr Slater?
20 A. Mr Sheehan, my Lord. Thank you for your correction,
21 Mr Sheehan, saying that these two clauses were deal
22 breakers, it is not possible to negotiate an agreement
23 of this nature without them.
24 The Attorney General was very uncomfortable but at
25 the end of the day these clauses remained in the
38
1 agreement, my Lord.
2 MR JUSTICE ANDREW SMITH: When you say "at the end of the
3 day", do you mean at the end of the 14th or when the
4 agreement was signed?
5 A. Well, at the end of -- Mr Sheehan did not agree to their
6 removal. By "at the end of the day" I meant after the
7 negotiations, my Lord.
8 MR SULLIVAN: Likewise the Attorney General --
9 MR JUSTICE ANDREW SMITH: Sorry, I must understand. You are
10 not suggesting that at the end of the day of the 14th
11 the Attorney General had agreed to them, or are you?
12 A. No. There is no indication, my Lord, that there was, as
13 I recall, that there was any question of adjourning the
14 meeting for 14 days.
15 MR JUSTICE ANDREW SMITH: Maybe that is another point.
16 But --
17 A. When you are talking about the 14th, as in the date the
18 14th, my recollection is that the negotiations actually
19 most of them took place on the 13th.
20 MR JUSTICE ANDREW SMITH: I am sorry, just focusing on the
21 point where I do not want to misunderstand what you are
22 saying. When you said that at the end of the day those
23 clauses remained in the agreement, were you intending to
24 suggest that at the end of the discussions on the 14th
25 the Attorney General had agreed to those two provisions?
39
1 A. No, I would not say that, that the Attorney General had
2 agreed. What I am saying is that at the end of the
3 discussions, my Lord, Mr Sheehan refused to remove those
4 clauses from the agreement and they remained part of the
5 proposed agreement.
6 MR SULLIVAN: This was a short meeting, was it?
7 A. On the 13th?
8 Q. You tell me. 13th, was that a short meeting?
9 A. No, the 13th was the initial day of our meetings; the
10 13th March 2003, my Lord. That was the initial day of
11 our meetings in the Ministry of Legal Affairs conference
12 room.
13 Q. And the 14th, was that a short meeting?
14 A. The 14th, my recollection is that it was a very, very
15 short meeting. The Attorney General had said he was
16 going to meet us at 16.00 hours, at 4 o'clock, on the
17 14th. We went to the Ministry of Finance and we waited
18 for him. Actually he came quite late. Then at the end
19 we went into the boardroom of the Minister of Finance
20 and the Attorney General was given the documents and
21 soon thereafter the meeting then ended.
22 Q. I want to try to understand, if I may, what the outcome
23 of -- let us put to one side whether there were meetings
24 over one or two days. At the end of those meetings, the
25 culmination of those negotiations, what was the Attorney
40
1 General's position on the default clause and on the
2 waiver of immunity clause?
3 A. My Lord, because of those two clauses that the Attorney
4 General was unhappy about, a concession was made by
5 Mr Sheehan who was negotiating on behalf of Donegal to
6 include clauses that would make it possible for the
7 state not to default if they had a real problem of not
8 having money to pay. Those suggestions which were
9 discussed in the meeting, my Lord, on the 13th, after
10 that Mr Sheehan and I went back to my chambers. The
11 agreement was re-drafted to add these new clauses on
12 default, and on the 14th this re-drafted agreement was
13 then handed over to the Attorney General at the Ministry
14 of Finance.
15 Q. Just two matters arising from that.
16 I asked you what the Attorney General's position was
17 in relation to the two clauses. Could you tell me, at
18 the culmination of those meetings, what was the Attorney
19 General's position on the waiver of immunity clause?
20 A. My Lord, the Attorney General was still unhappy about
21 the waiver of immunity. However, I did state that in
22 order to take account of the Attorney General's
23 unhappiness or misgivings a concession was made by
24 Mr Sheehan to deal with the issues of default that would
25 relax the impact of those clauses that the Attorney
41
1 General was uncomfortable with.
2 Q. Are you saying that the effect of that concession was
3 such that the Attorney General then agreed to the
4 inclusion in the draft agreement of the waiver of
5 immunity clause?
6 A. At the end of the day, my Lord -- that is at the end of
7 the discussions -- after the concessions had been made
8 and incorporated in the proposed agreement, the Attorney
9 General was given the agreement on 14th March 2003. As
10 I said, that meeting was really brief. There was not
11 too much discussion but he was given a copy of the
12 re-drafted agreement.
13 What happened thereafter I cannot tell, what
14 decisions he finally made.
15 Q. I am trying to understand what your understanding of the
16 Attorney General's position was. You talk about
17 concessions being made by Mr Sheehan being incorporated
18 in a document. We will look at that document in
19 a minute. Being incorporated in a document. Those
20 concessions having been made, as you said, by
21 Mr Sheehan, what was your understanding of the Attorney
22 General's position on the waiver of immunity clause?
23 A. The Attorney General was still unhappy.
24 Q. And had not agreed to its inclusion in an agreement
25 between Donegal and the Republic?
42
1 A. My Lord, for me to say that he agreed, that would be
2 taking it too far.
3 I would say the Attorney General was still unhappy
4 about the presence of those clauses in the agreement.
5 Q. It was because of his unhappiness and his misgivings, as
6 you say, that at the end of the 14th the negotiations
7 were postponed, the meeting was postponed for a period
8 of 14 days to allow for consultations?
9 A. My Lord, the meeting was not postponed for 14 days. The
10 Attorney General received the draft agreement and then
11 said he would come back to us. That is how that meeting
12 ended.
13 Q. What did you expect him to come back in relation to?
14 A. Two things, my Lord. The Attorney General would say "I
15 am not signing, proceed with court litigation", or "I am
16 signing". That is how I understand that.
17 Q. So if you turn, please, to 3.1, your witness statement,
18 paragraph 20, page 6. What you say is that:
19 "He stated that he would come back to us."
20 In fact you then say:
21 "In addition, I did not anticipate any further
22 negotiations after the conclusion of these meetings.
23 The negotiations had been hard ...(Reading to the
24 words)... In these circumstances, I understood that GRZ
25 would sign the proposed agreement or, if not, Donegal
43
1 would have no choice but to pursue the litigation in the
2 BVI."
3 I think, as you have just told his Lordship, you
4 certainly expected a further response from the Attorney
5 General, either a negative response, saying "I am not
6 signing", or a positive signing saying "I am signing".
7 Is that what you are saying?
8 A. Correct, my Lord.
9 Q. At paragraph 21 of the same witness statement -- before
10 I do that, can I just ask you to look at volume 17.2
11 flag 27. It is page 1 of the bundle. This is
12 a document produced by Donegal in this litigation. It
13 has been disclosed by Donegal. If you have a look at
14 it. Is this the document you say that was --
15 MR TRACE: My Lord, that is not correct. This document has
16 also been disclosed, as I understand it, by Zambia. It
17 is the document behind it apparently.
18 MR JUSTICE ANDREW SMITH: I am sorry, what is the document
19 behind it?
20 MR TRACE: It is the agreement, dated 14th March.
21 MR SULLIVAN: There may be an issue about that. Can I ask
22 my question?
23 MR JUSTICE ANDREW SMITH: Wait a moment, let us make sure
24 that we know what document we are looking at.
25 MR SULLIVAN: I am looking at page 1 of 17.2.
44
1 First of all, is this the copy of the document that
2 you say was revised in your offices on 13th March?
3 A. My Lord, I would have to read it.
4 Q. Sorry?
5 A. I would have to read it for me to answer it.
6 Q. Have a look at it.
7 Do you recognise it?
8 A. My Lord, I recognise the amendments that were made as
9 a result of the negotiations.
10 Q. If I tell you that there is -- and I shall be corrected
11 if I am wrong -- no earlier document in March than this
12 one, can you help his Lordship with this. If it was
13 revised in your offices on 13th March, if you look at
14 page 1, can you explain why it is dated 14th March?
15 A. My Lord, the Attorney General and us were discussing
16 a document that had been given at the meeting on 13th
17 March, and on 14th March we went to my office and
18 amended the document we were discussing on the 13th
19 March. If it reflects the 14th March perhaps it is
20 because that is when we actually went to amend it at my
21 office.
22 Q. I see. Perhaps you can just look in volume 3.1 at
23 page 44. This is Mr Sheehan's witness statement.
24 Paragraph 107. He is speaking about the revised draft:
25 "Immediately following this meeting..."
45
1 He is talking about a meeting on the 13th.
2 A. My Lord, I cannot read the paragraph you are referring
3 to.
4 MR JUSTICE ANDREW SMITH: Page 44, you say?
5 MR SULLIVAN: Page 44, paragraph 107.
6 MR JUSTICE ANDREW SMITH: "Immediately following this
7 meeting ..."
8 You need to glance back to the previous page, I dare
9 say, Mr Malambo.
10 MR SULLIVAN: If you see at 103 he is talking of a meeting
11 on 13th March. He then says at 107:
12 "Immediately following this meeting we submitted
13 a revised draft of the settlement agreement to reflect
14 the changes agreed."
15 108:
16 "The meeting was then reconvened by the Attorney
17 General on the next day, 14th March."
18 Mr Sheehan appears to think that the document was
19 provided on the 13th and not the 14th, does that not
20 accord with your recollection?
21 A. No, my recollection, my Lord, is that we went to my
22 office and redrafted the document and then resubmitted
23 it on the 14th.
24 MR JUSTICE ANDREW SMITH: You went to your office and did
25 this work on the 14th or the 13th?
46
1 A. No, on the 13th.
2 MR SULLIVAN: Lastly, if you look at your paragraph 21 of
3 your witness statement. You say:
4 "The last time I saw Mr Kunda with respect to the
5 Romanian debt..."
6 This is page 6, Mr Malambo. It is 3.1, flag 1,
7 page 6, paragraph 21:
8 "Last time I saw Mr Kunda with respect to the
9 Romanian debt was 14th March. However, I remained
10 concerned that with Mr Sheehan in the country the
11 opportunity to conclude an agreement on the debt should
12 not be wasted. I therefore called Mr Lukwasa, who as
13 I have said was responsible for day to day conduct of
14 the progress of the settlement agreement."
15 Pausing there. In the light of the letter that you
16 had received from the Attorney General on 8th
17 January 2003, which we have looked at, and in the light
18 of the Attorney General's promise that he would get back
19 to you, why did you contact Mr Lukwasa rather than the
20 Attorney General?
21 A. Because Mr Lukwasa, my Lord, was the Treasury Counsel in
22 the Ministry of Finance. He is the one responsible for
23 the agreements in that Ministry.
24 We had had the negotiations with the Attorney
25 General and Mr Lukwasa was one of his attending
47
1 officers, plus two other officers. They were not there
2 for purposes of presence only, they were functional
3 officers. They were supposed to be dealing with this
4 matter, helping the Attorney General. If I contact
5 an officer who was responsible for a matter, surely it
6 is for him to liaise with the Attorney General, and I
7 would not always have access to the high office of the
8 Attorney General. I was a legal practitioner.
9 Q. I suggest that in the light of the indications the
10 Attorney General had given to you, it was wrong of you
11 to get in touch with Mr Lukwasa instead of getting in
12 touch with the Attorney General who had told you quite
13 clearly that he was seized of the matter?
14 A. I made a judgment call, my Lord. I contacted
15 Mr Lukwasa. I did not contact the Attorney General and
16 I did not think that I was wrong in any way.
17 MR SULLIVAN: I have no further questions.
18 Re-examination by MR TRACE
19 MR TRACE: Mr Malambo, I have a few questions for you
20 please.
21 You were asked about when you went to see the
22 Attorney General on 27th September and you handed him
23 the documents in relation to the BVI proceedings?
24 A. Yes, my Lord.
25 Q. You were challenged about whether the Attorney General
48
1 knew that leave to serve out had not been obtained, do
2 you remember that?
3 A. Yes, my Lord.
4 Q. Could I ask you to look at one document, please, in
5 file 16.2 at 178. You were shown this letter by
6 Mr Sullivan. You were shown the first page, you were
7 not shown the second page. Can I ask you just to look
8 at the second page?
9 A. Yes, my Lord.
10 Q. This is Mr Kunda's letter to you on October 20th. He
11 says this:
12 "The advocates I have appointed in the
13 British Virgin Islands have indicated that the court
14 will deal with the application for service out of the
15 jurisdiction on 1st November 2002."
16 Can you help us, what discussion did you have at the
17 meeting you had with him on 27th September about service
18 out?
19 A. My Lord, it is also the law in Zambia that when you are
20 issuing process for service outside jurisdiction, you
21 require leave. It is much like here. I did tell the
22 Attorney General that, looking -- the letter actually
23 was addressed to the Secretary to the Treasury. I think
24 the letter that came from the advocates in the BVI was
25 addressed to the Secretary to the Treasury. I made the
49
1 decision that instead of sending the letter to the
2 Secretary to the Treasury, I would give the papers to
3 the Attorney General. He is the law officer of the
4 government. I told him, "As you can see, there is no
5 order for service out".
6 Q. Thank you. You also in answer to some questions from
7 Mr Sullivan said that you continued negotiating with the
8 Ministry of Finance because you had received some
9 correspondence and a suggestion of the Ministry of
10 Finance paying a sum of money. Do you remember that
11 answer?
12 A. Correct, my Lord.
13 Q. Can I ask you to identify that correspondence. Could
14 you please turn in the bundle to page 182. It is the
15 same bundle you have.
16 A. Yes, my Lord, I have seen this letter.
17 Q. Is that the letter you were referring to?
18 A. Correct, my Lord.
19 Q. It says in there:
20 "We are agreeable to your proposal which would allow
21 the Zambian Government to meet its obligations towards
22 your client in the national budget. The Zambian
23 Government shall endeavour to make the first payment of
24 US$500,000 during the first week of December 2002."
25 A. That is correct, my Lord.
50
1 Q. It was also suggested to you that negotiating with
2 Mr Diangamo was a low level of negotiation. Can you
3 help us in relation to this: what level of seniority was
4 Mr Diangamo?
5 A. My Lord, in this capacity as Secretary to the Treasury
6 he held the rank that is just below the Secretary to the
7 Cabinet. He is the same level as Deputy Secretary to
8 the Cabinet. So if he was in the Cabinet Office he
9 would have been called Deputy Secretary to the Cabinet,
10 but he was in the Ministry of Finance. That is the
11 equivalent position in the Ministry of Finance. It is
12 senior to a permanent secretary.
13 Q. You were also continuing to be challenged about why did
14 you not deal with the Attorney General. You mentioned
15 that there had been an earlier letter from Mr Lukwasa.
16 Can I ask you please to identify that letter. Could you
17 please turn to page 190 in the same bundle.
18 A. Yes, my Lord.
19 Q. Is that the letter that you were referring to?
20 A. No, my Lord. This is the letter at page 190 where he
21 was advising me to deal with the Attorney General's
22 chambers. But there was a letter where he had said that
23 you would be receiving a favourable reply, and I am not
24 sure what page it is. This particular one at page 190,
25 he is referring me to the Attorney General's chambers.
51
1 Q. Could I just get that in context so that we see that.
2 Did you respond to that letter, can you remember?
3 A. The letter at page 190?
4 Q. Yes.
5 A. No, I did not. Because I said soon thereafter we
6 received this letter from the Treasury Counsel, and on
7 14th January we received the letter from the Attorney
8 General.
9 Q. That is right. You are quite right, Mr Malambo. Can
10 I just show you, you did not respond to Mr Lukwasa. Can
11 I show you at page 195 who you did respond to.
12 A. Yes, my Lord.
13 Q. Is that your response to the Attorney General?
14 A. No. I had not received a letter from the Attorney
15 General at this stage. I wrote to the Attorney General
16 before we received the Attorney General's letter four
17 days later.
18 Q. Absolutely. Can we just clarify that by looking at
19 that. That letter you wrote on 10th January and the
20 letter from the Attorney General, just to show that, if
21 we can look at that, that is at page 191.
22 A. Yes, my Lord.
23 Q. Is that the "received" stamped in the top right-hand
24 corner? It says "14th January 2003".
25 A. Correct, my Lord.
52
1 Q. That is the history. You only received that then, and
2 then you negotiated with the Attorney General?
3 A. Correct. But when I received the letter, as you have
4 correctly drawn my attention, when I received the letter
5 from Mr Lukwasa I then wrote to the Attorney General and
6 said "We have received this letter from the Treasury
7 Counsel, could you indicate when you would be willing to
8 meet the undersigned for purposes of taking this matter
9 forward".
10 Q. You mentioned in answer just now that in fact it was
11 a earlier letter from Mr Lukwasa. Can we identify that,
12 please. Is that the letter at page 159, if you could
13 turn to that please?
14 A. Yes, my Lord.
15 Q. Could you identify, is that the letter you were
16 referring to?
17 A. This is the letter I was referring to about this series
18 of favourable responses, stalling, favourable response
19 then they stall.
20 Q. Then you were challenged about not having an attendance
21 note of the meeting you had on 6th February; do you
22 remember that?
23 A. Correct, my Lord.
24 Q. You said you had written to the Secretary of the
25 Treasury even though you had not made an attendance
53
1 note. Can I identify which letter that is, please. Can
2 you turn in the bundle to page 150.
3 A. Yes, my Lord.
4 Q. Is that the letter that --
5 A. This is the letter I wrote to record my understanding of
6 the meeting of the 6th February 2002.
7 Q. You can put that bundle away and I have just one last
8 question for you, Mr Malambo.
9 Could you please take up file 17.2. Do you have
10 file 17.2?
11 A. Yes, my Lord.
12 Q. You were challenged over whether this document at page 1
13 in that bundle was the document you handed over on 14th
14 March after the meeting on 13th March.
15 Can I ask you please to look on in that bundle to
16 page 15. This is another version of the document that
17 has been disclosed. For your Lordship's reference, in
18 the top right-hand corner the number that begins "100"
19 is a reference to Zambia disclosure on the Allen & Overy
20 system.
21 Can you just identify for us, Mr Malambo, if you
22 can, you see there is some handwriting on that document.
23 Is that your handwriting?
24 A. No, my Lord, it is not.
25 Q. Is that any handwriting that you recognise from anyone
54
1 on the Donegal side?
2 A. No, my Lord. There is obviously a position indicated
3 under the signature. This is acting director IDM, that
4 is a position in the Ministry of Finance.
5 Q. Do you know what IDM stands for?
6 A. This is Investment and Debt Management I think, or
7 International Debt Management. But it is a position
8 dealing with debt management in the Ministry of Finance.
9 MR TRACE: Thank you very much indeed, Mr Malambo.
10 MR JUSTICE ANDREW SMITH: Mr Malambo, could I just ask you
11 one question. You were asked whether you made
12 attendance notes on 13th and 14th March and you said no,
13 and you said that you took a decision not to do so,
14 sometimes you do and sometimes you do not, from which
15 I understood that it would not be unusual for you to
16 take an attendance note.
17 A. Correct.
18 MR JUSTICE ANDREW SMITH: Can you tell me why you took that
19 decision in respect of what on the face of it was
20 an important meeting?
21 A. My Lord, because there was an agreement that had been
22 earlier on given to the government on which we were
23 having the discussion.
24 MR JUSTICE ANDREW SMITH: You mean a draft agreement?
25 A. I am sorry, a draft agreement. My apologies. The
55
1 discussion was revolving around the content of that
2 draft agreement. If there were issues that would stand
3 out of that agreement, I probably would have taken
4 a note, and that is why we went and re-drafted it. But
5 it is not an attendance note in the sense that I would
6 be sitting there and taking notes of what happened then
7 and filed it away. I would not do that. I would have
8 noted the issues of concern and how we were going to
9 deal with them, which is what happened in this meeting.
10 MR JUSTICE ANDREW SMITH: You said you would have noted
11 issues of concern where? In a note, in a separate note?
12 A. No, my Lord, I said we had an agreement, but we noted
13 what concerns the Attorney General had with the draft
14 agreement, and on the basis of having noted the issues
15 we went and re-drafted the agreement.
16 MR JUSTICE ANDREW SMITH: When you say you noted the issues,
17 do you mean you mentally took them on board?
18 A. Correct.
19 MR JUSTICE ANDREW SMITH: The reason I ask is that the
20 picture I have got is that you were the lawyer for
21 Donegal at this meeting on 13th and you presented
22 a draft agreement. You appreciated issues would arise
23 upon it and you anticipated, as indeed happened, going
24 away to re-draft.
25 It struck me that just in those circumstances
56
1 a lawyer would be taking notes to make sure that he did
2 pick up in his re-draft the points of concern and the
3 points that were dealt with. But you looked at it
4 otherwise?
5 A. I did not do that, my Lord. One, I was dealing with
6 a client who was also a lawyer. I was dealing with
7 a lawyer who had drafted -- I did not draft the
8 agreement, the draft was prepared by the client. The
9 negotiations actually were -- the whole of the
10 negotiations were conducted by the client.
11 MR JUSTICE ANDREW SMITH: But neither he nor you were taking
12 notes?
13 A. No.
14 MR JUSTICE ANDREW SMITH: Thank you very much.
15 MR TRACE: Mr Malambo, you may leave.
16 MR JUSTICE ANDREW SMITH: Perhaps it would be sensible to
17 have our break before Mr O'Rourke.
18 MR BLAIR: My Lord, just a point to note if I may. It
19 relates to an issue I have raised a number of times as
20 regards requests for documentation from Mr O'Rourke and
21 Mr Mwale.
22 I thought I ought to just mention to the court that
23 this morning we did receive a letter from the solicitors
24 representing both Mr O'Rourke and Mr Mwale, that the
25 court I think should, in fairness to them, see.
57
1 I am not sure if there are copies available.
2 MR JUSTICE ANDREW SMITH: I take it first of all that
3 Mr Trace is familiar with this letter?
4 MR BLAIR: It was copied to Allen & Overy.
5 MR TRACE: I have seen it.
6 MR JUSTICE ANDREW SMITH: You have no difficulty in me
7 seeing it?
8 MR TRACE: No, my Lord.
9 MR JUSTICE ANDREW SMITH: In that case if I am handed a copy
10 I will glance over it during the 5 minutes.
11 MR TRACE: My Lord, I have some copies for your Lordship.
12 MR JUSTICE ANDREW SMITH: The suspense file document, I take
13 it?
14 MR TRACE: My Lord, until we can find a home for it.
15 MR JUSTICE ANDREW SMITH: Right. Thank you very much.
16 (11.50 am)
17 (A short break)
18 (11.55 am)
19 MR TRACE: My Lord, I now call Mr O'Rourke.
20 MR PHILIP O'ROURKE (sworn)
21 Examination in chief by MR TRACE
22 MR TRACE: Mr O'Rourke, can you give your full name to the
23 court please.
24 A. My full name is Philip Gerard O'Rourke.
25 Q. What is your address?
58
1 A. 7506 Hamilton Spring Road, Bethesda, Maryland 20817,
2 USA.
3 Q. Could you please take up file 3.1. Would you be so kind
4 to turn in there, please, to tab 4.
5 A. Yes.
6 Q. Could you please identify for us, is this a witness
7 statement that you provided in this action?
8 A. Yes, it is.
9 Q. If you could look at page 56, please.
10 A. Yes.
11 Q. Did you sign that witness statement on 4th April 2006?
12 A. Yes, I did.
13 Q. Are there any corrections you would like to make to that
14 witness statement?
15 A. No, it is okay.
16 Q. Is it true?
17 A. Yes, it is true.
18 Q. Are you happy for that to stand as your evidence in
19 chief in this case?
20 A. Yes, I am.
21 MR TRACE: If you would like to wait there, Mr Sullivan may
22 have some questions for you.
23 Cross-examination by MR SULLIVAN
24 MR SULLIVAN: Mr O'Rourke, good afternoon.
25 A. Good afternoon.
59
1 Q. You told his Lordship you live in Maryland, USA?
2 A. Yes, sir.
3 Q. You are the principal and beneficial owner of Morena
4 International Limited, correct?
5 A. Correct.
6 Q. A BVI-registered company?
7 A. Correct.
8 Q. You work in Washington DC?
9 A. Yes.
10 Q. You are a businessman with no doubt many commitments and
11 engagements, correct?
12 A. Yes.
13 Q. You have been in court for much of this week?
14 A. Yes I have, sir.
15 Q. You are no doubt anxious to assist his Lordship in
16 reaching the right result on the available evidence?
17 A. Of course.
18 Q. DLA, the solicitors acting for the Government of Zambia,
19 have requested from you a number of documents. They
20 have sent requests to you both at your home address in
21 Maryland, your business address in Washington DC, to
22 Moreno International and to your lawyers, and a copy to
23 Allen & Overy, on the 1st, 13th and I think 16th May.
24 Now, one of the issues that has arisen is the
25 application of a sum of $372,000 remitted by Donegal to
60
1 Froriep Renggli on 1st March 1999. You are aware of
2 that?
3 A. From proceedings in court, yes I am.
4 Q. If we look at this schedule, I do not know where it is
5 numbered but it is in that form.
6 MR JUSTICE ANDREW SMITH: Mr O'Rourke, it will come to you
7 sooner or later no doubt.
8 MR SULLIVAN: It is the detailed schedule I am looking for.
9 It appears at the back of the skeleton argument but
10 a copy has been provided. If you look at the first page
11 of that, item number 1. You see that payment referred
12 to: 1st March 1999, $372,000-odd.
13 A. Yes, I do.
14 MR TRACE: Does your Lordship have a copy or would your
15 Lordship like another copy?
16 MR JUSTICE ANDREW SMITH: I have it, thank you very much.
17 MR SULLIVAN: You can see it is transferred by Donegal
18 International Limited to Froriep Renggli. Comment:
19 "No supporting documents."
20 So Donegal have no documents other than their bank
21 statements, from which we glean the information I have
22 just read out, which can assist his Lordship in
23 ascertaining the application of those monies. In other
24 words, the audit trail runs dry.
25 Can I then ask you to look please at this document,
61
1 if the witness can be given this: the Foreign Corrupt
2 Practices Act. It is an extract from O'Melveny & Myers,
3 a well-known firm of attorneys in the United States.
4 I would ask you to turn to page 17. Of course as
5 an American businessman you are very familiar with the
6 FCPA, correct?
7 A. I am familiar with the Act generally.
8 Q. And the --
9 A. But I am not a lawyer I must say, so please forgive me
10 for that.
11 MR JUSTICE ANDREW SMITH: Some people feel they should seek
12 forgiveness for being a lawyer.
13 MR SULLIVAN: Page 17, Mr O'Rourke, please.
14 A. Yes, I see it.
15 Q. These are frequently asked questions about the FCPA:
16 "What are red flags for dealing with consultants and
17 for investment opportunities?"
18 It tells us that:
19 "The federal enforcement agencies and commentators
20 have cited various red flags which should put US
21 businesses on notice that they may encounter pitfalls
22 under the FCPA."
23 Then if you go down two paragraphs it says:
24 "Intermediaries or consultants present red flags by
25 taking certain unreasonable positions. If a potential
62
1 consultant offers any of the following comments a US
2 company should take heed of the red flag warning."
3 You will see a number of examples are given. Look
4 at the second one:
5 "Pay me through my Swiss or offshore bank account."
6 If you look two down:
7 "I have never worked in your industry but I know the
8 right people."
9 Pausing there. The payment to Froriep Renggli,
10 those are the attorneys for Moreno International
11 Limited, correct?
12 A. Yes, that is correct. In addition, they serve another
13 function for me.
14 Q. What other function do they serve for you?
15 A. They set up Moreno International.
16 Q. We will come back to that in a minute. You have heard
17 the issues being canvassed. It is important to know
18 whether or not this payment of $372,000 was a legitimate
19 payment for services properly rendered. You will also
20 see, as I have indicated, that the audit trail runs cold
21 with the remittance to your Swiss lawyers of this
22 monies.
23 Given that you have indicated that you are anxious
24 to assist his Lordship in reaching the right
25 determination in this case, are you content to disclose
63
1 to the Republic of Zambia documents in the possession of
2 your lawyers in Switzerland concerning the onward
3 transmission of these monies?
4 A. Which monies are you referring to?
5 Q. The 372,000 in particular.
6 A. In principle of course, sure. You have to understand I
7 do not know if your Lordship realises this: the reason I
8 was not able to respond for -- so some specific
9 information that was given to me, that was sent to my
10 home on 1st May, is I have been on a business trip
11 since April 24th. I was nearly two weeks in East
12 Africa, then I came up here to the UK for two days, then
13 I had to go to Bulgaria, and the point of fact is I have
14 not been back in the United States since April 25th so
15 I did not receive them until a few days ago.
16 Q. Okay, but can I ask you this, and thank you very much
17 for that assistance.
18 Are you content, then, that Froriep Renggli should
19 disclose to the Government of Zambia the payment
20 authorisations for onward transmissions of monies, and
21 also Froriep Renggli to disclose their ledger accounts
22 in the name of Moreno International Limited to which the
23 monies were credited and the identity of the accounts to
24 which the payments were then made?
25 A. As it relates to the matter before the court?
64
1 Q. Absolutely.
2 A. Here is what I did, because I am not a lawyer and I am
3 really not terribly familiar with your legal system.
4 I contacted a solicitor, Hextalls, yesterday and met
5 with them yesterday afternoon for the purpose of getting
6 their advice as to how best I can cooperate with all of
7 you and I have not heard back from them. So if I am not
8 as specific to this question you have made I just have
9 not heard from them since I met with them yesterday. Is
10 that acceptable?
11 MR JUSTICE ANDREW SMITH: I have not intervened, but I have
12 seen this letter from Hextalls about Mr O'Rourke's
13 position, and I dare say you have seen that as well.
14 A. No, I have not.
15 MR JUSTICE ANDREW SMITH: You have not even seen that?
16 A. No.
17 MR JUSTICE ANDREW SMITH: I think that he certainly should
18 be provided with a copy of that and given a moment to
19 look at it, and then I would be reluctant to press him
20 further this morning -- we are finishing at 1 after
21 all -- until he has had the opportunity to speak further
22 to Hextalls.
23 I was going to remind myself that I must qualify the
24 usual prohibition on conversation about the case I dare
25 say.
65
1 Would you like to glance over that letter,
2 Mr O'Rourke, because I think you should see what we are
3 talking about.
4 A. Thank you very much, my Lord.
5 MR JUSTICE ANDREW SMITH: I am not pressing you to comment
6 on it.
7 MR SULLIVAN: Perhaps that matter can be put to one side,
8 then, in the light of ... (Pause).
9 A. Thank you, my Lord.
10 MR JUSTICE ANDREW SMITH: You will be provided with a copy
11 of that no doubt in due course.
12 A. Thank you so much.
13 MR JUSTICE ANDREW SMITH: Right. Mr Sullivan.
14 MR SULLIVAN: My Lord, I am grateful.
15 If you take volume 3.1, flag 4. It is your witness
16 statement. At paragraph 1 we see you say:
17 "I am the principal and beneficial owner of Moreno
18 International Limited (Moreno), a company registered in
19 the British Virgin Islands."
20 Then you refer to Somerset.
21 A. Where is my witness statement, please? (Pause).
22 Q. It is at page 50, Mr O'Rourke.
23 A. I see it now, thank you.
24 Q. You tell us you are the principal and beneficial owner
25 of Moreno, Moreno International, and you identify that
66
1 as a company registered in the British Virgin Islands.
2 Thereafter we see at paragraph 6 you say that in 1998
3 you were asked by Michael Sheehan if you wished to
4 become involved:
5 "It was agreed that Moreno would be retained as
6 a consultant in respect of the debt by Donegal. As
7 consultant, Moreno was instructed to carry out due
8 diligence."
9 As you have identified in paragraph 1, that is
10 Moreno BVI, correct?
11 A. Yes. I did not make the distinction in my mind.
12 Q. Then at paragraph 7 you say:
13 "Accordingly I, on behalf of Moreno, acted as
14 a consultant to Donegal."
15 Again, you are referring to Moreno as defined in
16 paragraph 1, namely Moreno International, the BVI
17 company, correct?
18 A. No, not really. I referred to it as Moreno
19 International in my mind.
20 Q. Tell me this then, if you are not referring to Moreno
21 International Limited, the BVI company, which entity are
22 you referring to?
23 A. As I told you, Mr Sullivan, I am really not a lawyer but
24 I established -- Froriep Renggli, I seem to recall, it
25 is ten years ago, established a company Moreno
67
1 International, and originally it was an Irish company.
2 Then Froriep Renggli advised me and I actually forgot
3 about it in fact, there had been so much going on, in
4 1999 that the administration costs and capital costs of
5 an Irish company would be more than a BVI company. So
6 Moreno International in BVI was acquired but there was
7 no gap as far as I understand. I just considered it
8 Moreno International.
9 Q. So which company was acting as consultant for Donegal
10 International Limited in late 1998 and early 1999?
11 A. Moreno International.
12 Q. Incorporated where?
13 A. I did not make the distinction because Moreno BVI, I
14 think, was incorporated in September 1999 or
15 September 1998. I think it was September 1999. Moreno
16 Ireland was inactive in 2000, so there was -- I was
17 never without a Moreno, so to speak.
18 Q. Let us look. If you take volume 18.2 please, and turn
19 to flag 4. This is the company search done in the name
20 of Moreno International BVI. As you rightly pointed
21 out, the date of incorporation of that company is 24th
22 September 1999. Then if you turn over the flag, flag 5,
23 page 64, Moreno International Irish Republic. Now if we
24 look at that, first of all we see the date of
25 incorporation, January 1997, at page 65. Then we have
68
1 details of the company secretary at page 67. Then we
2 have details of company directors, starting at, I
3 believe, 88. Shareholders at 88, particulars of
4 directors, 89.
5 You are not named as a director of Moreno
6 International Ireland, are you?
7 A. No.
8 Q. If you turn, please, in the same bundle, the same
9 section, to page 125. Do you have that?
10 A. Yes.
11 Q. This is the abbreviated balance sheet of the Irish
12 company. It is showing that, 8th July:
13 "Financial statements approved by the board, 8th
14 July 1999. Current assets: 2 Irish punts."
15 You call that share capital 2.
16 Moreno International Limited Ireland was a dormant
17 company in 1998/1999, was it not?
18 A. No, it was not.
19 Q. First of all, what interest did you have in Moreno
20 International Limited Ireland?
21 A. You know I would have to ask Froriep Renggli. I was the
22 beneficial owner, they took instructions from me on
23 Moreno Ireland and subsequently Moreno BVI. That is my
24 answer. That is the only answer that I know.
25 I consider myself the beneficial owner and I think --
69
1 I mean I do not know -- I would expect that
2 Froriep Renggli could confirm that I was the only one
3 authorised to give instructions on any matter relating
4 to that company.
5 Q. Right. Who signed the consultancy agreement that you
6 refer to with Donegal in 1998 on behalf of the Irish
7 company?
8 A. You know I really cannot recall.
9 Q. Was it you or one of the directors?
10 A. It could have been either. I do not have a copy of that
11 document.
12 Q. Are you able to tell us whether the accounts for Moreno
13 Ireland show the credit of $379,000 which was made by
14 Donegal on 1st March 1999?
15 A. You know, subject to -- to answer your question,
16 I cannot.
17 Q. But you would agree that in the light of your evidence
18 that payment should appear in the financial statements
19 and accounts of Moreno International Ireland?
20 A. Not as far as I understand it in accounting, not
21 necessarily. Because if you have -- when you do
22 a financial statement, a financial statement reflects
23 income and expenses and Moreno International's account
24 from an accounting standpoint does not necessarily
25 reflect the fact that fee income that I derived as the
70
1 beneficial owner of Moreno would be reflected in that
2 statement.
3 Q. If the payment is made to Moreno International Ireland
4 Limited, I suggest that it would be Moreno International
5 Ireland Limited money and so would be reflected in their
6 accounts?
7 A. I instructed payments to be made to the client account
8 of Froriep Renggli for the benefit of Moreno
9 International and that is my instructions. I have been
10 doing that for this transaction and others as well.
11 Q. What I am seeking to elicit is: is it your evidence that
12 the accounts of Moreno Ireland Limited do not reflect
13 this payment $372,000 and, if not, I want to try to
14 understand why they do not?
15 MR JUSTICE ANDREW SMITH: Let us take it in two stages.
16 That is two questions. The first question is whether
17 the accounts of the Irish company reflect the receipt of
18 the $372,000.
19 A. Not from these financial statements, my Lord, no.
20 MR JUSTICE ANDREW SMITH: Not from the balance sheet, I can
21 understand that. But do you know whether the financial
22 statements reflect it at all?
23 A. I cannot answer that question precisely.
24 MR SULLIVAN: Do you have yourself a copy of the financial
25 statements of Moreno International Ireland Limited?
71
1 A. No, I do not.
2 Q. Does anyone have them, to your knowledge?
3 A. To my knowledge I do not know. Moreno International is
4 a company that was created so that I could segregate my
5 business, so I had Somerset Investments, which is
6 a Delaware registered corporation, do my domestic
7 business, and largely do the trade finance business in
8 the Balkans in which I have been particularly active in
9 the past few years given the lack of progress in this
10 issue before the court.
11 So I used Moreno International specifically for the
12 Donegal matter, and I have done something else in
13 a related field with Moreno International.
14 Q. Who are the accountants of the Irish company?
15 A. I have no idea.
16 Q. Are you able to find out for us?
17 A. Yes, I guess I could call. I could find out and see.
18 Q. If you look at paragraph 7 of your witness statement.
19 What you also say to --
20 MR JUSTICE ANDREW SMITH: Wait a moment. When you say: who
21 are the accountants? We can see who signed the
22 auditor's report.
23 MR SULLIVAN: Yes. I was asking --
24 MR JUSTICE ANDREW SMITH: Do you not want to put it to him?
25 MR SULLIVAN: My Lord, yes I can. I wondered who the
72
1 present accountants are for the purpose of identifying
2 where such documents may now be found.
3 Moreno International Ireland, is it right that that
4 company has now been struck off the register?
5 A. Yes.
6 Q. The previous auditors were OSK Accountants and
7 Registered Auditors, correct?
8 A. Presumably.
9 Q. You do not know?
10 A. No, I did not manage the company. I had directors. I
11 have never met any of the directors, I have never talked
12 to any of the directors. It is not unusual. It is very
13 common.
14 Q. When you made this witness statement, why did you not
15 refer to Moreno International Limited Ireland?
16 A. I can tell you exactly why, because I forgot about it.
17 I am actually at the stage now where I walk down the
18 stairs and I get to my destination and I do not know why
19 I went down the stairs. It is not a -- it is just that
20 there has been so much activity and I have done so many
21 things in the last nine years I really did not -- I even
22 forgot that there was a Moreno International Ireland for
23 the simple reason that I did not correspond with them,
24 I did not know who the directors were. It was simply
25 a way of segregating business activity, pure and simple.
73
1 I could have done it in Las Vegas, I guess, if
2 I wanted to, or any other tax efficient jurisdiction.
3 Q. Would the Swiss lawyers be able to assist in shedding
4 more light on Moreno International Ireland Limited?
5 A. I could ask them.
6 Q. Can I ask you to look at paragraph 7 of your witness
7 statement, 3.1, page 51. You say, four lines down:
8 "As I understood the position, the point of
9 retaining Moreno was so that Donegal could take
10 advantage of the experience and knowledge that Moreno
11 and its principal had acquired over years of operation
12 in Zambia."
13 We have looked at Moreno Ireland and that was
14 incorporated in 1997. Can you give his Lordship the
15 particulars of the operations over the years in Zambia
16 of Moreno?
17 A. If I am allowed to say that I am the principal of
18 Moreno, is that permitted? Then I can answer the
19 question.
20 MR JUSTICE ANDREW SMITH: Yes, I think we can take it that
21 you were the principal.
22 A. Thank you, my Lord. Yes, I was involved in the late
23 1980s with some other colleagues in purchasing
24 commercial debt owed to the Government of Zambia,
25 issuing assignments and notices of assignment to the
74
1 Government of Zambia and then selling this debt back to
2 the Government of Zambia at an agreed redemption rate,
3 from the late 1980s.
4 Also, as a principal -- you were asking about my
5 Zambian experience? Then when I went to Washington in
6 January 1993, I became involved with a prominent
7 Republican lobbying firm called Black Manafort Stone and
8 Kelly. I advised them on issues dealing with the
9 forgiveness or the redemption of the debt owed to the
10 People's Republic of China by Zambia, as well as making
11 an attempt to enlist our services for the Republic of
12 Zambia to act as their representative with the US
13 government.
14 So I have considerable experience in Zambia,
15 I presume which is what you --
16 MR SULLIVAN: I understand. It would be right then, would
17 it, when it says:
18 "... take advantage of the experience and knowledge
19 that Moreno and its principal had acquired over years of
20 operation in Zambia."
21 It would perhaps be more accurate to say "the
22 experience and knowledge that Moreno's principal had
23 acquired."
24 A. Absolutely, I apologise for that. Sorry about that.
25 Q. Paragraph 8, you refer to a consultancy agreement?
75
1 A. Right.
2 Q. I think you have told us that you are not sure who
3 signed it?
4 A. Which one? Are you talking about --
5 Q. The earlier one.
6 A. The earlier one I am really not sure. It was ten years
7 ago.
8 Q. Do you have a copy of that earlier agreement?
9 A. No, I do not.
10 Q. Is it not in your business files?
11 A. No, it is not.
12 Q. Did you provide a copy to your accountants?
13 A. No -- you mean the accountant for Moreno? No, of course
14 not.
15 Q. Paragraph 9, you say that pursuant to the terms of the
16 original agreement in the consultancy agreement, Moreno
17 signed an FCPA certificate?
18 A. Correct.
19 Q. You say that you signed an FCPA certificate pursuant to
20 its consultancy agreements since first instructed.
21 Again, when you refer to Moreno it should not be the BVI
22 company but the Irish company, is that right?
23 A. You know, for me they were interchangeable, Mr Sullivan.
24 As I said, I always had a Moreno International. I was
25 not really concerned whether it was domiciled, as
76
1 I learned recently, in Ireland and then the BVI. It was
2 just a matter -- a way of organising my business.
3 Q. Do you have a copy of the certificate?
4 A. Not with me.
5 Q. Have you got any communication by way of e-mail or
6 letter that you can show us in 1998/1999 between Donegal
7 International and Moreno International Ireland?
8 A. Between Donegal International and Moreno International
9 Ireland?
10 Q. Yes.
11 A. Probably not, the reason being I administered -- in
12 terms of correspondence, Moreno International, whether
13 it was a BVI company or an Irish company, was just
14 advice that I used to organise the business. So since
15 it did not have a telephone, since I did not know the
16 directors, there was nothing improper about it. It was
17 not designed in any way to hide or conceal money. It
18 was designed to organise business. So I used Moreno for
19 offshore and Somerset Investments for onshore.
20 Q. When you were corresponding with Mr Sheehan on whose
21 notepaper were you writing?
22 A. You know, probably whatever I could grab. I am not
23 a lawyer. I grab notepaper. In terms of -- in relation
24 to what?
25 Q. When you needed to correspond did you write on Moreno
77
1 International Ireland?
2 A. Specifically? No. I cannot remember any times, or
3 maybe very few, using -- corresponding with Donegal from
4 Moreno Ireland or Moreno BVI simply because the sole
5 purpose of Moreno was to organise my business and
6 I conducted my business in fact in Washington DC at
7 premises that I have leased from Debt Advisory
8 International since January of 1998.
9 MR JUSTICE ANDREW SMITH: There was Moreno letter paper, was
10 there, in 1998 when you were dealing through the Irish
11 company?
12 A. Yes, there was, my Lord, but what I did was I just -- if
13 I needed it I used it, and typically what I did was I
14 had -- since the company was formed by our attorneys,
15 Froriep Renggli, my attorneys in Switzerland of
16 long-standing, 20 years actually. Then I would just use
17 their address for correspondence. So if somebody wanted
18 to communicate directly with Moreno in Europe they could
19 contact my lawyers. But I did not use a US address for
20 Moreno. Does that answer the question?
21 MR JUSTICE ANDREW SMITH: I think you are saying that the
22 Irish company did have writing paper and you had some of
23 it, is that right?
24 A. I just used it in my computer. It was very informal.
25 If I had to -- I cannot recall many times communicating
78
1 with anybody on Moreno International letterhead. There
2 would be some occasions but infrequently. More often
3 than not I just would -- I just do not even communicate
4 with anybody on paper since Mr Sheehan's office is about
5 50 feet away from mine. I would just yell at him.
6 Q. Mr Sheehan is 50 feet away. You are on the same floor,
7 are you?
8 A. We are on the same floor.
9 Q. I see.
10 A. But actually in 1998 I was so busy with lotteries I had
11 a whole space, so we have -- I think the office is about
12 5,000 or 6,000 square feet and we had back offices --
13 about three offices. That was basically where I was
14 doing most of my lottery work. So in that case I was on
15 the same floor as Mr Sheehan but, you know, considerably
16 more than 50 feet away, maybe 150 feet away. We were
17 not even in the same space in fact in 1998/1999, maybe
18 2000 or 2001. After it was clear that the lottery
19 operation was not going to ever succeed then I moved my
20 office into the major office, which is 50 feet away from
21 Mr Sheehan, where I rent space.
22 Q. So Mr Sheehan was at least within reasonable distance,
23 however many feet?
24 A. In 1998?
25 Q. Yes.
79
1 A. And in 1999 he was not within shouting distance. He was
2 outside of my shouting distance, I would say.
3 Q. But still sufficiently close that you did not have to
4 write to him?
5 A. No.
6 Q. What about communicating with the local consultants that
7 you employed in Zambia, did you write to them on Moreno
8 Ireland notepaper?
9 A. No.
10 Q. Why not?
11 A. Because Moreno Ireland and Moreno BVI, as I keep trying
12 to say, was just a vehicle that I used to organise my
13 business and Mr Mwale, for example, who I have known
14 since 1985, I would just call him. I would just call
15 him up. We would just talk.
16 Q. If you look at paragraph 11 of your witness statement,
17 what you tell us is:
18 "As part of his retainer, Mr Mwale also agreed to
19 comply with the obligations imposed by the FCPA before
20 commencing his services."
21 Do you have a copy of the agreement you made with
22 Mr Mwale in that regard?
23 A. Yes, actually there are two agreements that I know of.
24 The first agreement is an agreement that I made and I
25 think -- I presume it is part of your record. I have
80
1 been so busy I honestly cannot tell you if it is. In
2 January 1998 with Somerset Investments -- and I think
3 you will find a reference -- there is a provision in
4 that agreement to the Foreign Corrupt Practices Act,
5 probably not as comprehensive as most lawyers would like
6 but the intent was clear.
7 We kept renewing that because there was a provision
8 in that agreement for a renewal, and the reason I did
9 that with Somerset Investments as opposed to Moreno was
10 twofold. Actually it was just one of convenience
11 because on technical issues I am not really -- I am not
12 a lawyer so I did not make the distinction. Secondly,
13 because Mr Mwale and I have done a lot of things over
14 the years together outside of just debt recoveries, for
15 example, in 1992 we went to Angola and that particular
16 trip, that was a dead issue. We went to Namibia where I
17 was retained by a Spanish company, whose fishing boats
18 were confiscated by the Namibian authorities for
19 violating international waters.
20 MR JUSTICE ANDREW SMITH: Mr O'Rourke, the question you were
21 asked was whether you had a copy of the agreement. If
22 you could just concentrate on the question with a view
23 to giving an answer rather than using it as a launching
24 pad for an explanation.
25 A. That is not my intention. I am sorry.
81
1 MR JUSTICE ANDREW SMITH: Not at all, do not worry. If you
2 could just bear that in mind.
3 A. Sir, your question is?
4 MR SULLIVAN: My question is: do you have a copy of the
5 agreement between Moreno Ireland and Fisho Mwale that
6 was made in late 1998?
7 A. No.
8 Q. Why not?
9 A. I cannot tell you why not.
10 Q. Was it not an important document to keep in your files?
11 A. No, not for me.
12 Q. Given the provisions of the FCPA and the need to ensure
13 that your local consultants comply with its terms, as
14 you said they did, would it not be important to be able
15 to demonstrate to the US Department of Justice that you
16 had taken all reasonable precautions and shown them the
17 relevant documents?
18 A. Sure, because I am the sole owner of Somerset
19 Investments, which is a US corporation registered in the
20 state of Delaware, and since I, as a person, as a US
21 citizen, and my companies are responsible for complying
22 with the Foreign Corrupt Practices Act provisions, which
23 I always have for years and years, always in my life,
24 then my thinking probably at the time was since he
25 signed an agreement with a company that I was the sole
82
1 owner of, that would be sufficient for covering the
2 activities that we were involved in. Subsequent to that
3 we have an agreement that I will get to you -- I think I
4 can get it to you tomorrow because I was travelling --
5 which is an agreement between Moreno International and
6 Mr Mwale for a later period of time.
7 Q. When you say Moreno International, is that Moreno
8 International Ireland or Moreno International BVI?
9 A. For me they are interchangeable.
10 Q. What is the date of the agreement?
11 A. I do not know. I am going to get the agreement for you.
12 You should have it.
13 Q. We will put documents to one side for a minute. At
14 paragraph 10 you say that:
15 "Moreno and on occasion Somerset therefore retained
16 Fisho Mwale."
17 Do you have any consultancy agreements between
18 Somerset international and Fisho Mwale?
19 A. Yes, sure.
20 Q. What are the dates of those?
21 A. January 1998, and it was replaced by, for sure,
22 an agreement between Moreno International and Mr Mwale
23 of a date I cannot tell you right now but we will have
24 the agreement here tomorrow.
25 Q. Somerset Investments is a Delaware company of which you
83
1 are the principal and beneficial owner, correct?
2 A. That is correct.
3 Q. That too operates on the premises of 1747 Pennsylvania
4 Avenue?
5 A. Correct.
6 Q. Moreno International Ireland, where did that operate
7 from? Where were its business premises?
8 A. It did not have business premises as far as I know, like
9 most offshore special purpose companies.
10 Q. If you turn please to bundle 20.3, page 234. This is
11 the subpoena in the United States, evidence given by
12 Mr Sheehan.
13 MR JUSTICE ANDREW SMITH: Wait a minute. The witness has
14 only just received the bundle. Page 234, are you there?
15 A. Yes I am, your Lordship.
16 MR JUSTICE ANDREW SMITH: Which line are we on?
17 MR SULLIVAN: My Lord, at the very top please. He is asked:
18 "What relationship if any does Somerset Investments
19 Incorporated have with Donegal?
20 "Answer: None.
21 "Question: Have they ever engaged in any business
22 transactions together?
23 "Answer: No."
24 Then he says at 235, lines 4 to 5, at the top there
25 he says they are subtenants and that DEI has tried to do
84
1 some business with them but has not succeeded. Is that
2 correct?
3 A. Which portion are you referring to?
4 Q. Is it correct that Somerset and Donegal, they tried to
5 do some business together but they were not successful
6 and so nothing was in fact --
7 A. Donegal and Somerset?
8 Q. Yes.
9 A. Philip O'Rourke and Donegal -- Somerset Investments --
10 you know, I cannot recall.
11 Q. The due diligence you say you did in 1998, that is not
12 due diligence which was done by Somerset Investments, is
13 that right?
14 A. In 1998?
15 Q. You say you did due diligence in 1998?
16 A. Yes.
17 Q. In Zambia.
18 A. Where are you referring to, please?
19 Q. I am talking about your evidence. What you tell us is
20 that, paragraph 7, you on behalf of Moreno agreed to act
21 as consultant. You then tell us that, at paragraph 12,
22 largely through Fisho Mwale you had a number of informal
23 meetings. You then tell us at paragraph 16 that Moreno
24 advised Michael Sheehan?
25 A. I am trying to just jigger my memory, it is such long
85
1 time ago.
2 Q. Right. I am trying to establish: Somerset Investments
3 was not retained to do the due diligence, correct?
4 A. No. I was working under the understanding that it was
5 Moreno, and I am trying to remember and I honestly
6 cannot as I am talking to you now when Moreno signed
7 a consultancy agreement with Donegal. I cannot remember
8 when.
9 Q. Turn if you will to 16.1, page 302, please. Do you see
10 that? This is on Somerset Investments Inc notepaper to
11 The Honourable Nawakwi from Fisho Mwale.
12 On the second page, 303, you see the second
13 paragraph. It refers to fixing up a meeting, it refers
14 to "Phil O'Rourke from Somerset."
15 He says:
16 "My managing director, Mr Phil O'Rourke from
17 Somerset... "
18 Can you help his Lordship: why was Fisho Mwale
19 writing on Somerset Investments Inc notepaper as its
20 executive director from the Lusaka office, instead of
21 Moreno Ireland notepaper.
22 A. You will have to ask Mr Mwale that, but do I notice
23 there is Gameco. You will have to ask Mr Mwale. Gameco
24 was 50 per cent owned by Somerset Investments, perhaps
25 that is why he did it. You will have to ask him.
86
1 Q. You are the principal, not him. Did you not say to him,
2 "It is not Somerset Investments Inc that is retaining
3 you, it is Moreno International Ireland who is retaining
4 you and you should write on Moreno International Ireland
5 notepaper?
6 A. I was not aware of the content or the date of this
7 letter.
8 Q. You saw this letter?
9 A. Yes, I saw this letter before too, but at the time he
10 wrote it I just cannot recall whether we -- I am sure we
11 discussed it and probably did not discuss whether or
12 not -- how he should present himself because Fisho has
13 other companies and other interests as well.
14 Q. Were you not concerned to ensure that the proper lines
15 of communication were properly delineated such that you
16 could demonstrate, if called upon, that you were acting
17 through Moreno Ireland Limited?
18 A. No, that is not a huge deal for me because I own Moreno
19 International Ireland BVI and Somerset Investments.
20 They are all me.
21 MR JUSTICE ANDREW SMITH: Did you provide Mr Mwale with
22 Somerset Investments letter paper?
23 A. You know, my Lord, I really do not know. Because of
24 this logo here it is quite possible because -- or he got
25 it on one of our visits. This is certainly how we are
87
1 set up. This is the letterhead. This is printed
2 letterhead. It is possible.
3 MR JUSTICE ANDREW SMITH: As I understood it, the purpose of
4 having Moreno on the one hand and Somerset Investments
5 on the other was to segregate your domestic activities,
6 possibly some of your Balkan activities, from other
7 overseas activities.
8 A. Exactly.
9 MR JUSTICE ANDREW SMITH: That being so, why would you
10 provide Mr Mwale with Somerset investment letter paper?
11 A. There are two reasons, the first was probably because of
12 Gameco. Somerset investments was an owner of Gameco and
13 actually Somerset Investments owned 50 per cent of
14 Gameco, which I worked two years on actually, almost
15 full-time.
16 Then on the Presidential Housing Initiative, we did
17 not want to politicise the debt because the Presidential
18 Housing Initiative was perceived at the time of
19 something that I think I recall recommending to my
20 client that it could generate goodwill and help in our
21 objective of getting a debt conversion.
22 I hope that answers the question. It is the best
23 answer I can give at the time.
24 MR JUSTICE ANDREW SMITH: I am not quite sure I fully
25 understand, because does this not defeat the purpose
88
1 that you outlined of having the two separate companies
2 to keep separate your overseas activities largely,
3 subject to the Balkans, from your domestic activities.
4 A. Largely, that is correct, but for example Somerset Trade
5 Finance which we established in, I do not know, I think
6 2002, was 50 per cent owned by Somerset Investments and
7 50 per cent owned by Debt Advisory International, as
8 I recall. That company was constituted to do trade
9 finance business, not only in the Balkans. Because of
10 my knowledge that Mr Mwale, when I first met him in the
11 late 1980s, mid-1980s, was doing a lot of trade finance
12 business in Angola I did not preclude the possibility
13 that we would be doing trade finance structures in
14 Zambia as well. But I mean the point is taken. I am
15 a little loose on that stuff.
16 MR JUSTICE ANDREW SMITH: It just seemed to me it made a
17 nonsense of your earlier explanation.
18 A. You will find perhaps a few more contradictions like
19 this, but the intent certainly was not anything --
20 MR JUSTICE ANDREW SMITH: Thank you.
21 A. Yes, my Lord.
22 MR SULLIVAN: It is your position that really in relation to
23 this matter he should not have been writing on Somerset
24 Investments notepaper?
25 A. Probably not.
89
1 Q. Turn, if you will, please, to 16.2, page 58.
2 A. Sure.
3 Q. This is a letter of 2nd November 1999 from you to Peter
4 Hock of Lazard Brothers advising Donegal International
5 Limited. You say:
6 "As you may know, my client Donegal International
7 Limited is owed 29 million."
8 You go on to detail various things. Nothing to do
9 with the lottery, as you will see.
10 Why, if Mr Mwale should not have written on Somerset
11 Investments Inc's notepaper in relation to this matter,
12 did you?
13 A. Because Peter is a friend of long standing. We did
14 a tremendous amount of business in the late 1980s
15 together and I wanted him to respond to me, my Lord. So
16 that since Moreno International was just a stand-alone
17 SPC that had no real address or telephone number, it was
18 for me. I wanted Peter to get back to me. So what is
19 he supposed to do? Send a fax to Ireland to some guy
20 that we do not know? It was just convenience.
21 Q. But when you say:
22 "As you may know, my client Donegal Limited... "
23 Was Donegal the client of Somerset Investments or of
24 Moreno Ireland?
25 A. Strictly speaking Donegal Investments was the client of
90
1 Moreno Ireland, which I was the beneficial owner of, and
2 since I was also the beneficial owner of Moreno -- of
3 Somerset Investments then I wanted Peter to be able to
4 respond to me. I did not see that that was a conflict.
5 Q. Why did you refer to Donegal -- you have not answered my
6 question -- why did you refer to Donegal as a client of
7 Somerset?
8 A. Just for the sake of communicating with Peter.
9 Q. If you turn please to page 100, there is a further
10 letter. Do you have that?
11 A. Sure.
12 Q. Somerset Investments Inc. From you to The Honourable
13 Vincent Malambo. This relates to a donation to be made
14 of $2 million to the Frederick JT Chiluba Centre.
15 Why did you write on Somerset Investments Inc's
16 notepaper in relation to this matter to Vincent Malambo
17 instead of Moreno notepaper?
18 A. For the purposes of communication.
19 Q. You could have as easily communicated on Moreno
20 International notepaper, could you not?
21 A. Sure.
22 Q. So why did you not?
23 A. This was just convenient.
24 Q. Why was it more convenient to write on Somerset
25 notepaper than Moreno notepaper?
91
1 A. Probably because I had this set up in my computer,
2 I suspect. That is the only difference.
3 Q. Page 102. Another letter written by you to Chima saying
4 you are intending to fax Vincent Malambo in Lusaka. Why
5 is it again you use Somerset notepaper instead of Moreno
6 notepaper?
7 A. The reason I used Somerset notepaper in this case and in
8 the other case would be because Richard Chima knows who
9 I am and Richard Chima does not know who Moreno is.
10 Q. If you look at 16.2 at 102, the letter to Richard Chima.
11 You say:
12 "As you may know, my client is Zambia's largest
13 private creditor."
14 Can you help again, why do you continue to represent
15 Donegal as the client of Somerset when you have told his
16 Lordship that Donegal was the client of Moreno Ireland?
17 A. It is the same answer because -- it is just for
18 communication purposes.
19 Q. Can you look at page 1 of the same bundle. This is
20 Mr Sheehan to Fisho Mwale copied to Somerset
21 Investments. Are you able to shed any light on why
22 Mr Sheehan should have been copying Somerset Investments
23 rather than Moreno?
24 A. I would imagine for the same reason, that Moreno did not
25 have a telephone number and fax and Somerset Investments
92
1 did. And it is just that simple.
2 Q. Did you see this document at the time?
3 A. I cannot recall. It has been a long time. I do not
4 remember probably, it does not jump out at me. But you
5 can see there is so much paper.
6 Q. What we do see is direct contact between Donegal and
7 Fisho Mwale, and I have just shown you that letter.
8 There are several other such instances. Had you told
9 Mr Sheehan that he should not have direct contact with
10 Fisho Mwale but he should route communications through
11 you?
12 A. Yes, initially that was certainly the case.
13 Q. If we turn to 16.2, page 243. This is Mr Fisho Mwale
14 writing to the Secretary to the Treasury. You will see
15 he is referring to Donegal, he refers to "my principal".
16 At 243, halfway down it says:
17 "I wish to discuss the issue of Donegal
18 International's outstanding, resulting in my principals
19 declaring pay default."
20 Then if you turn to 248 Fisho Mwale writes:
21 "My principals have been holding back further."
22 He signs himself as Fisho Mwale, Donegal. Again at
23 267 in the same bundle, do you have that?
24 A. Yes.
25 Q. Again Fisho Mwale, three lines from the bottom:
93
1 "As Donegal, we are still not aware as to the
2 problems."
3 It is right, is it not, that Fisho Mwale saw
4 himself, and you saw him, as the agent of Donegal and he
5 was right to represent himself as such?
6 A. No, that is not right.
7 Q. Did you allow him to represent himself as the agent of
8 Donegal?
9 A. Of course, never. I would never allow him to do that.
10 Q. So whose agent was he?
11 A. Fisho Mwale worked for Moreno. For me.
12 Q. If we look at the payments -- sorry?
13 A. Me, Moreno.
14 Q. So you, Mr O'Rourke --
15 A. Mr Moreno.
16 Q. Right. Can you take the schedule of payments please,
17 the shorter schedule --
18 MR JUSTICE ANDREW SMITH: Is this a short, succinct point?
19 MR SULLIVAN: If I can just finish on this point then it
20 will be about 30 seconds. But please do not time me.
21 MR JUSTICE ANDREW SMITH: That counts as short and succinct.
22 MR SULLIVAN: The shorter schedule.
23 A. I do not have the shorter schedule.
24 Q. It is this one. It is a helpful distillation of the
25 various payments. You will see that a number of
94
1 payments were made to Trade Factors and Mr Mwale.
2 Trade Factors, as we know, is Mr Mwale's company.
3 A. Yes.
4 Q. These are payments by Donegal of $263,000. Given that
5 Moreno had engaged Fisho Mwale, why was payment being
6 made direct to Mr Mwale by Donegal?
7 A. It was because, as Michael Sheehan explained, he was
8 very brilliant in foreseeing something that I did not
9 foresee. When we had the Russian default in 1998 it had
10 disastrous consequences for our emerging market
11 business. I had been burning hundreds of thousands of
12 dollars of my money and Mr Sheehan's money in the
13 development of lottery projects everywhere. I went all
14 over the world.
15 I ran out of money and so Mr Sheehan still probably
16 respected the contribution that we could make in this
17 process. So he advanced money at my request to Mr Mwale
18 so he could take care of his family and pay his child's
19 school fees with the clear understanding
20 contractually -- I think you will see it in the document
21 that I am getting for you tomorrow, I will get it
22 today -- that any of these advances that he received
23 would be deducted from his share of my success fee for
24 Moreno on this matter. Also, you will note this is over
25 six years. It is not much money over six years really.
95
1 MR JUSTICE ANDREW SMITH: Right. Thank you, Mr O'Rourke. I
2 am afraid -- I hope it has been explained to you -- we
3 are not able to sit this afternoon.
4 A. Yes, sir.
5 MR JUSTICE ANDREW SMITH: For my reasons. So could you be
6 back to start again at 10 o'clock tomorrow, please.
7 A. Yes, my Lord.
8 MR JUSTICE ANDREW SMITH: As I alluded to earlier, normally
9 the rule is that we ask witnesses not to discuss the
10 case in the course of their evidence, but I dare say you
11 are expecting to speak to Hextalls about it, am I right?
12 A. Yes, my Lord.
13 MR JUSTICE ANDREW SMITH: Is there any reason that the
14 witness should not speak to Hextalls?
15 MR BLAIR: None at all, my Lord.
16 MR JUSTICE ANDREW SMITH: I must ask you not to speak to
17 anyone other than Hextalls please, but please do feel
18 free to deal with them. I suppose I should say that if
19 Hextalls suggest that the easy way is for you to speak
20 direct to the Swiss lawyers or something of that sort,
21 we had better say that you are free to do that.
22 A. Yes, sir. Yes, my Lord.
23 MR BLAIR: Would your Lordship kindly excuse me tomorrow
24 morning, as I mentioned I have a sentencing commitment.
25 MR JUSTICE ANDREW SMITH: Yes. Thank you. I hope it is not
96
1 causing inconvenience of course. Right.
2 Mr Trace, are you able to help me: Mr Mwale refers
3 at paragraph 8 of his witness statement, page 10, to the
4 exhibit FM1. But I do not have a reference to where it
5 is in the bundles.
6 MR TRACE: FM1?
7 MR JUSTICE ANDREW SMITH: Yes.
8 MR TRACE: My Lord, that is 17.1, page 66.001.
9 MR JUSTICE ANDREW SMITH: I do not know whether others are
10 in the same position. I do not have the claimant's
11 witness statements marked up with references. Do
12 others --
13 MR TRACE: My Lord, they do exist.
14 MR JUSTICE ANDREW SMITH: It does not matter. If it has not
15 been done --
16 MR TRACE: It has been done, my Lord, so we can provide you
17 with copies of that.
18 MR JUSTICE ANDREW SMITH: Just provide me with fresh copies.
19 I have written notes on what I have been using so please
20 do not take those away.
21 MR TRACE: We will just hand you up perhaps tomorrow
22 morning, would that be convenient, at 10 o'clock?
23 MR JUSTICE ANDREW SMITH: Yes.
24 MR SULLIVAN: My Lord, might I raise one short matter, it is
25 a question of timing. Your Lordship has said 16 hours.
97
1 I am obviously aiming to finish tomorrow. But the
2 16 hours might crop up during the course of Friday.
3 What I am saying is, I am seeking permission to
4 cross-examine for tomorrow. Obviously there are issues
5 that I have got to put to this witness which were
6 unknown to us at the time that your Lordship imposed the
7 16 hour guillotine. They are serious matters, and if
8 they are not put properly then there is a risk of
9 an injustice on either side.
10 So I am asking to be able to cross-examine for
11 tomorrow, because I have to get through this witness and
12 Mr Mwale.
13 MR JUSTICE ANDREW SMITH: As things stand I think you would
14 have very much the greater part of tomorrow, would you
15 not?
16 MR SULLIVAN: I was hopeful for that. I am grateful.
17 MR JUSTICE ANDREW SMITH: Let us see whether you need any
18 flexibility at all. I am not sure that you will.
19 (1.05 pm)
20 (The court adjourned until 10.00 am
21 on Friday, 19th May 2006)
22
23
24
25
98
1 INDEX
2 PAGE
3 MR VINCENT MALAMBO (continued) ................... 1
4 Cross-examination by MR SULLIVAN ............. 1
(continued)
5
Re-examination by MR TRACE ................... 48
6
MR PHILIP O'ROURKE (sworn) ....................... 58
7
Examination in chief by MR TRACE ............. 58
8
Cross-examination by MR SULLIVAN ............. 59
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
99
