Who looted MKM?

Who looted MKM?

MASERU – THERE was a frenzy of excitement as Simon Thebe-ea-Khale entered the Palace Of Justice on July 8, 2008. The crowd outside was a medley of sympathisers and investors in his companies. To most of them Thebe-ea-Khale was a ‘genius’ being persecuted by the government and the Central Bank of Lesotho (CBL). His crime, so the narrative ran, was that he was going against established commercial banks and insurance companies.

Here was a man, they opined, who wanted to pull Basotho out of the clutches of poverty but was being pulled down. Thebe-ea-Khale was a victim of jealous competitors, vindictive politicians and a heavy-handed Central Bank, they said. In radio interviews Thebe-ea-Khale had boldly declared that MKM companies had enough money to pay the depositors but the Central Bank was interfering with their operations. And so even without sight of the MKM’s bank accounts the depositors had turned on the Central Bank and the government.

“Very much so,” he said when asked in court if there was enough money to pay the investors. But that façade did not last for long. Soon it began to crumble as he came under a barrage of pointed questions about his operations. He admitted that there was no money in the accounts. He was right because the total amount in the bank accounts of MKM companies was a measly M450 000. Just over M41 000 had been seized when the investigators raided MKM branches across the country. “There is no cash available and the cash that I know of is what was taken. There is no other money that I know of,” he said under cross examination.

What had happened to the millions that had been poured into the company between 2001 and 2007? That question would come from a Pricewaterhousercopper investigation commissioned by the Central Bank. Liquidators would subsequently provide the same answer in their various reports. MKM and its associate companies were an elaborate Ponzi scheme that had enriched some and impoverished others. There were 28 642 investors who had made a M415 million profit from the MKM schemes. In other words the MKM Ponzi scheme had generated nearly half a billion for 1.5 percent of the country’s population.

That however does not mean it created millionaires as some have claimed. As happens in any Ponzi scheme these winners were earning because others were losing. There were 61 depositors who each received more than M200 000 in profits from the scheme. Just three of those received more than M1 million in profit from the scheme. The creditors’ list shows that the highest profit paid from the scheme was M2 620 000, followed by M1 740 000 and M1 654 000. The 61 top winners made a total M25 million from the scheme. There were 9 032 investors who lost M128 million in the scheme.

The biggest investment was in the MKM Bursary Scheme which received M52 million from depositors from which they were supposed to make about M120 million in profits. Because the profits were so spectacular most depositors opted to roll over their investments and wait for a bigger pay day. A total of M300 million was reinvested and the Bursary Scheme was supposed to pay about half a billion Maloti in interest.

The interest on the new investments and reinvestments was going to be a staggering M1 billion, nearly 10 percent of the national budget at that time. Investigators estimated that the scheme had received M555 million in deposits but warned that the figure could be higher because it seemed MKM had pilfered some crucial documents before they were seized.

In total all the MKM schemes received M400 million in investments, according to the investigators’ report.

Staff Reporter

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