Nine Suspects under Police Custody in Abyssinia Bank Probe

28 September, 2009

Fortune - Investigators at the Federal Police (Feds) have arrested close to nine former board directors and senior managers of the Bank of Abyssinia (BoA) and other businesspeople, in their investigation of alleged wrongs doings involving loans made to a private company.

Aselefech Mulugeta, former president of the Bank, was arrested on Thursday, September 24, 2009, and remains under custody at the Federal Police Forensic Department, a.k.a Meakelawi, Dejazmach Belay Zeleke Road. This is the second time Aselefech was arrested by the Feds during an investigation in connection to her years as chief of the BoA.

Aselefech was appointed as CEO of the Bank of Abyssinia in October 2007, after the Board of Directors, under the reign of Filipos W. Mariam, fired Kebede Temesgen, who had served the Bank for four years.

She is not alone; several other current and former board of directors were also detained the following day, police source disclosed. The series of arrests began on Thursday include Filipos, former chairman of the board of directors, and a former state minister for Infrastructure prior to his retirment from the civil service; Menwuyelet Kassa, who was replaced from his chairmanship of the board last week; Simon Marye, Tekle Almneh, Abebe Addis, and Yeshiwork Wolde. Tilahun Teshome, a practicing lawyer, and a director of the board of BoA, was summoned by investigators on Friday, sources at the Federal Police disclosed to Fortune. He was not detained, though.

The suspects are under investigation following criminal complaints lodged by the bank’s management to the Federal Police over loans it was unable to recover, police sources told Fortune.

Aselefech was brought before the Federal First Instance Court, at Arada Criminal Bench, on Friday morning, September 25, 2009; federal investigators have appealed to be granted the right to custody for 14 days. The presiding judge ruled for the suspect to appear before the court on October 9, 2009.

Aselefech is under investigation in connection with a loan advance when she was in office to Ethio-Investment Group (EIG), according to her lawyer, Nekatibebe Beyene.

EIG, sole importer to Ethiopia of automobile brands such as BMW, Land Rover, SCANIA, and Ford, has been going through rough times. Established in March 1999 by 19 companies and six businessmen, the company suffered losses of over 255.2 million Br when its accounts were closed in June 2007. Its losses eclipsed the 31.9 million Br paid up capital the shareholders raised when they acquired the company from the Commercial Bank of Ethiopia (CBE).

EIG has laid off approximately 173 staff members in July 2009. Nearly 61 of these employees have sued the company, while the remaining 112 employees have submitted a letter for a class action suit to the Federal First Instance Court of the Kera Labour Bench in June 2009.

Banks have been all over EIG’s properties held as collateral. The CBE was unable to attract interested bidders when it attempted, several times, to auction the company’s property on 7,404sqm, located in central Addis Abeba.

The Bank of Abyssinia had applied to be subrogated (substituted) in place of EIG to claim the latter’s credit from its debtors, claiming 59 million Br loans in default.