Office of the President and Cabinet (SPC) former secretary Lloyd Muhara and Mulli Brothers Managing Director Leston Mulli have spent a night at Lumbadzi Police Station in Lilongwe following their arrest Tuesday.
Muhara and Mulli are facing charges to do with abuse of office in the manner in which they signed a loan repayment deal on the K4.6 billion loan Mulli obtained from State-owned Malawi Savings Bank (MSB)—now defunct.
The two are likely to be taken to court for bail application today.
Meanwhile, a warrant of arrest for Treasury former secretary —now retired—Cliff Chiunda has been issued.
Malawi Police Service deputy spokesperson Harry Namwaza confirmed reports that fiscal police had arrested the two suspects but could not divulge details.
“I can confirm [that] the two have been arrested,” Namwaza said.
Lawyer for the two, Chancy Gondwe— who specialises in administrative, commercial, company, constitutional and criminal law— confirmed that the arrest was in relation to his clients’ alleged involvement in a loan settlement deal.
It is alleged that, under the deal, Mulli Brothers Limited (MBL) is obliged to pay K5 billion in 50 years.
Gondwe said Muhara and Mulli were reminded at Lumbadzi Police in Lilongwe.
According to a source, Mulli Brothers obtained from MSB a K4.6 billion loan and agreed to be paying back K5 million a month, which has since accumulated to K30 billion.
“The amount has now shot up to K30 billion. You can do your maths since, as per the agreement, he was supposed to be paying K5 million per month,” said the source.
In May this year, Attorney General Thabo Chakaka Nyirenda requested the Inspector General of Police and Director of Public Prosecutions (DPP) to take action against Muhara and others for allegedly abusing office.
The letter, addressed to lawyers representing MSB Debt Collection Company, states that Muhara and others illegally instructed the law firm to withdraw enforcement of bankruptcy proceedings it obtained against MBL.
Human Rights Defenders Coalition Chairperson Gift Trapence has said Malawians will now know the truth of how the bank was sold.
“As you are aware, the government sold MSB to FDH Bank. When the bank was being sold, some politically connected individuals and companies owed the bank over K6 billion and that government did not recover the loans,” Trapence said
He said his organisation has been asking the Tonse Alliance-led administration to appraise Malawians on the recovery process.
Last year, the government re-engaged members of the special purpose recovery vehicle (SPRV) to restart the K6.1 billion MSB loan recovery process.
The initiative targeted 12 individuals and companies that obtained loans from the bank before it was sold in 2015.
At the time the government was selling off its 80 percent stake to FDH Holdings, some 12 individuals and companies had outstanding loans amounting to K6.1 billion, prompting the government to bail out the individuals and companies to facilitate the smooth process of selling the bank.
Meanwhile, MBL has been paying back the loan which they had agreed with the previous government to the tune of K5 million a month and some quarters are said to have been on the renegotiating table with the government on the issue of loan repayment as they feel it could take years to settle the loan.
One of the contentious issues that raised eyebrows during the sale of the bank was the selling price of the bank, as it was sold at K5 billion.
In 2014, records indicate that the bank made a loss of about K1.9 billion.
In 2015, the government sold MSB to FDH and Inde Bank to National Bank amid protests by stakeholders, who described the moves as a bad idea.