The report does not say Mr Munodawafa benefited materially from the scam, but it accuses him of acting to protect the interests of his niece, Mrs Grace Pfumbidzayi.
Mrs Pfumbidzayi is Airzim company secretary and is at the centre of the alleged scam, having authorised fraudulent payments to Navistar Insurance Brokers, according to the report.
BCA Forensic Audit Services recommends not only that criminal proceedings be instituted against those implicated, but also says the matter must be brought to the attention of President Mugabe due to its magnitude.
This is because for a period of about two months, Airzim craft took to the skies without any insurance. Passengers — who include very senior Government officials — were at risk of receiving no compensation in the event of problems.
Further, the report makes reference to oblique payments made by the Zimbabwe National Road Administration on behalf of the airline.
Airzim is 100 percent owned by the Government, and a new board asked BCA to conduct the forensic audit after becoming suspicious of insurance premiums paid out between April 2009 and April 2013.
The report to the board is signed off by Budhama Chikamhi, the chief forensic investigator at BCA Forensic Audit Services.
It is understood that red flags went up when acting group CEO Mr Innocent Mavhunga tried to get an “outstanding” US$800 000 paid out as a premium.
The auditors describe some of the payouts by Airzim to Navistar as “outrageous”.
“Investigations established that at a time when the economy of Zimbabwe was depressed and when all companies including Air Zimbabwe were struggling to sustain operations due to an acute shortage of foreign currency, the current manager legal and company secretary of Air Zimbabwe, Mrs Grace Pfumbidzayi, appears to have connived with Navistar and executed transactions which according to available evidence were fraudulent.
“The transactions resulted in the airline losing material amounts of foreign currency.
“On the basis of the available evidence, Mrs Grace Pfumbidzayi and Mr Innocent Makore (acting group chief executive officer) who are senior employees of the airline appear to have acted in cahoots with Navistar Insurance Brokers resulting in the airline being prejudiced of a total of €5 895 695,49 and US$1 298 827,88 which amounts were paid out to Navistar by Air Zimbabwe allegedly for services rendered which services are not supported by any documentation from Navistar other than the debit notes (invoices) from Navistar.
“The investigation also established that the airline was exposed to a potential prejudice of US$1 862 370,52 being a total for which paper trail which appear fraudulent and had it not been for this investigation, the amount was going to be paid to Navistar by the airline,” reads part of the report.
Prior to 1980, Air Zimbabwe (then Air Rhodesia) received its brokerage services from Marsh Insurance Brokers. This arrangement subsisted until March 18, 2009.
As of that date, Mrs Pfumbidzayi “unprocedurally, illegally and in violation of the tender procedures appointed Navistar as Air Zimbabwe’s provider of brokerage services”.
At that time, Marsh Insurance brokers was charging Air Zimbabwe an average of 125 000 euros per annum as brokerage fees.
However, Navistar was paid 300 000 euros per quarter, translating to 1,2 million euros annually — nearly 10 times what Marsh was charging.
“While the amount which was being charged to Air Zimbabwe by Navistar Insurance Brokers increased by 86 percent, the premiums charged by the international reinsurers remained more or less constant . . . The charges have been described by many of Air Zimbabwe’s current and former executives as fraudulent, a position which is supported by findings of this investigation,” BCA says.
The auditors say the increase in charges was not matched by any commensurate increase in Airzim’s fleet size or expansion of its route network. In fact, some craft were actually grounded at the time.
“In addition to paying a fraudulent flat broker’s fee of 300 000 euros per quarter for the period 4 April 2009 to 3 April 2013, some of Air Zimbabwe’s executives made several other fraudulent payments to Navistar Insurance Brokers, which resulted in the airline suffering actual financial prejudice 5 895 695,49 euros and US$1 298 827,88 and potential financial prejudice of US$2 227 570,22…”
The report also says, “Investigation procedures established that Navistar was not entitled to a payment of (300 000 euros per quarter) as this payment was due to Marsh Limited and Navistar was to be paid an amount of US$76 250 by Marsh Limited. It therefore follows that if this payment was made then this will be a fraudulent payment.”
The Airzim CEO when Navistar was roped in, Dr Peter Chikumba, told the auditors that he had never approved the deal — which is not supported by any standard legal contract — and BCA concludes that Mrs Pfumbidzayi entered into the arrangement by herself.
Working with other senior managers, the millions of US dollars and euros were paid out to Navistar.
In several cases, money transmitted to Navistar was supposed to be forwarded to international insurers.
However, there is a disparity of millions of euros between what the international insurers actually charged and what Navistar received from Air Zimbabwe.
BCA concludes that the difference was converted to personal use by management at Air Zimbabwe or Navistar or both.
Navistar board chair, Mr Patrick Chingoka, told BCA he was not aware of the payments and recommended that criminal proceedings be instituted against management at the insurance brokerage.
BCA says it identified possible violations under the Criminal Law (Codification and Reform Act) Chapter 9:23 which deals with fraudulent transactions in respect of: Mr Mavhunga, Mrs Pfumbidzayi, Mr Nicholas Mujere (Air Zim acting general manager), Mr Norbert Machingauta (Air Zim strategy and economic manager), Ms Patience Tichagwa (Air Zim finance and administration manager), Mr Oswell Matore (former Air Zim finance and corporate services general manager), Mr Givemore Nderere (Navistar managing director), Mr Vukile Hlupo (Navistar director) and Mr Orton Mawire (Navistar finance director and company secretary).
There were also possible violations in respect of Circular Number 2 of 2009 by the Commissioner of Insurance, Pension and Provident Funds, Section 72 if the Insurance Act, and Chapter 22:14 of the Procurement Act.
Mrs Pfumbidzayi, BCA says, on several occasions claimed they entered into the murky deals because they were trying to “bust sanctions”. However, Air Zimbabwe was not under sanctions and insurance companies interviewed by BCA said they could not comprehend how the economic embargo could have interfered with the insurance sector and the national carrier.
In regards to Transport Secretary Mr Munodawafa, the forensic auditors say he has conflict of interest and his views on the matter at hand should be discounted.
“During the course of the investigation, we held a meeting with Mr Munodawafa in which meeting Mr Munodawafa expressed his view that the payments of 300 000 euros per quarter by Air Zimbabwe to Navistar Insurance Brokers are not fraudulent.
“All other executives of Air Zimbabwe (including the former group chief executive officer Dr Peter Chikumba) with the exception of Mrs Grace Pfumbidzayi accepted that the payments of 300 000 euros per quarter were baseless and fraudulent.”
Mrs Pfumbidzayi told BCA that Mr Munodawafa is her uncle.
Mr Munodawafa wrote to Air Zimbabwe’s acting group CEO Mr Mavhunga asking him to authorise payments to Navistar.
The Transport Secretary stands accused of on three occasions failing to assist BCA in getting Zinara, which also falls under his brief, to explain payments it has made on behalf of Air Zimbabwe.
“On the basis of the totality of the available evidence and in the interests of ensuring that objective decisions are going to be made in respect of issues raised in this report, it is our considered view that Mr M Munodawafa should not be involved in decisions to be made in connection with issues raised in this report as he is conflicted.”