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Opinions of Tuesday, 9 June 2020

Columnist: Goldstreet Business

The punishment for financial malfeasance in institutions of state

It has been revealed that three of the six former top officials of the state owned Venture Capital Trust Fund have come to an agreement with state prosecutors under which they will plead guilty to the 86 or so charges leveled against them and refund the monies they are accused of illegally diverting from the Fund’s coffers between 2015 and 2015 when they worked there. The terms of the agreement dictate that consequently, the three involved – which include the then CEO himself – will evade further punishment.

This is in line with section 35 of the Courts Act of 1993 (Act 459) which makes provision for such compensation/restitution by public officers found to have illegally taken state funds for themselves.

State prosecutors claim that the financial malfeasance of the six accused has resulted in losses to the state amounting to nearly GHc43 million, principal and accrued interest inclusive – most of the monies stolen were through illegal loans they granted to themselves and their cronies from an equally illegal loan scheme operated by VCTF at the time – although how much of this is attributable to the three who are involved in the new agreement and how much of the amount owed is covered by the agreement are not yet public knowledge.

Nevertheless, it is certain that the amount to be refunded to the state will be considerable and government needs the money now more than ever due to the unusual fiscal circumstances created by the COVID 19 pandemic. Therefore many people would see the agreement as a victory.

This newspaper does not share that view.

What the agreement – and indeed the law on which it is based – amounts to is official sanction of criminal conduct, which was clearly rife going by the factsheet of the case. In effect the agreement and the law behind it suggest it is okay to illegally divert state funds into one’s own pockets as long as one is willing to refund it when caught.

We fail to see how this can discourage corruption by officials of state. Indeed we believe it rather encourages it because potential culprits are now aware that as long as they can generate more money than what they are charged to be responsible for, they can divert state money, make a tidy profit from it, and ultimately go scot free with that profit.

Besides, the law does not seem to take into account the possible wider repercussions of the financial malfeasance underpinning its implementation. In this particular case, the loss of financial resources incurred by the VCTF greatly inhibited its effectiveness as a crucial institution established to provide, in partnership with private sector financiers, pivotal equity finance for promising start up and early stage productive enterprises. Indeed the VCTF is still trying to fully recover from its financial losses.

Added to this are the travails of beneficiary enterprises who were starved of direly needed equity finance injections because the VCTF could not respond to cash calls at the time, as agreed between it and both its financing partners and beneficiary enterprises. It is unclear how deeply this has adversely affected the growth and viability of those beneficiaries but surely there must have been some adverse effects.

With the legal/financial agreement that has been reached who bears responsibility for their travails?

Criminal conduct by officials of state is supposed to attract appropriate sanctions just as they are applied to private, poor people. An agreement that circumvents that simply circumvents both legal and social justice.

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