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12 February 2007
One of Mosvold Plc’s shareholders, Fekadu Worku and the General Manager of the household and office furniture factory under the company, Tariku Seifu, were placed under arrest by the Federal Police last week for allegedly failing to pay Value Added Tax (VAT).
The two suspects were detained at the Federal Police Investigation Co-ordination Department (Maikelawi) on Tuesday, January 30, 2007, and were released a day later on bail.
After Tariku and Seifu’s arrest, the police requested the Federal First Instance Court, Arada Bench, to keep both suspects in custody for 14 days so further investigation could be carried out. The court declined the Police’s request, ruling for both suspects to be released on 5,000 Br bail each. The money was paid the same day and both men were set free. Police searched Mosvold’s offices and took receipts and documents for investigation purposes before it had arrested the suspects.
During a monthly company performance assessment meeting that was held on October 11, 2006, by Mosvold’s management and representatives of the Labor Association, it was disclosed that the company could not pay income taxes, VAT, pension and providend funds as it was 5.2 million Br indebt.
Fekadu Worku refrained from giving further comments until auditors clarified the case.
Two weeks ago, Dashen Bank sold off Mosvold House and Office Furniture-Factory, which sits on a 10,140sqm plot located in Lideta Sub City, Kebele 17 to Ayat Plc for 13.7 million Br to pay off a 10.5 million Br debt to the Bank on January 5, 2007.
Although Dashen wrote a letter to Mosvold on January 17, 2007, informing it to handover the property by January 18th, the transfer has still not occurred.
Mosvold Ethiopia is one of the oldest woodwork, furniture and retail factories, first established by Norwegian investors; it was nationalized by the military regime in 1974, which renamed it Warka House and Office Furniture Factory. Ethiopia has given compensation to the original owners through the mediation of the Multilateral Investment Guarantee Agency (MIGA). Mosvold was one of the 49 claims put through MIGA to the government of Ethiopia, which were later resolved to the satisfaction of both parties according to MIGA’s annual report for 2005.
The factory was privatized in the mid-1990s to Fekadu Worku and Fekadu Ambaye. During the same year, both parties established Mosvold Plc with a capital of eight million Br with equal shares. Fekadu Amabaye went into exile right before the Ethio-Eritrean conflict, on the grounds that he was an Eritrean national with security concerns, which prompted the restructuring of the company in January 1999, when all of his 4,000 shares were given to the remaining shareholder and his son, Samuel. Fekadu Worku took 3,900 shares that had a par value of a 1,000Br.
Fekadu Worku and Fekadu Ambaye bought 75pc of Warka House & Office Furniture Factory for six million Birr from the previous Ethiopian Privatization Agency, on January 3, 1996. Later accepting an offer from the Agency of paying two million Birr for the complete overtake of the factory. In addition to this, Mosvold bought Fetan Store including its warehouse, in the Arada District near Cinema Ethiopia in the Piazza area, the same year for three million Birr, also from the Agency.
However, in 1999, Fetan Store was re-established as Fetan Plc by Fedadu Worku and his two sons Samuel and Dereje.
Fekadu Ambaye, who was out of the country at the time, had given Melaku Feleke power of attorney to fulfill his duties in his absence. Nevertheless, upon his return in 2004, he charged Fekadu Worku, his sons Dereje Fekadu, and Samuel Fekadu and Melaku Feleke, at the Federal High Court claiming that they had unfairly taken ownership of his shares.
These parties argued that the Commercial Bank of Ethiopia (CBE), which at the time lent them over seven million Birr, forced the reason for the dissipation of his shares. The Court stated that whether an Eritrean or not, none of the shareholders were entitled to take Fekadu’s shares without compensation or his consent. As a result the Federal High Court passed a verdict to re-establish Mosvold with the ownership of the original two shareholders. Based on the verdict, the District Trade and Industry Development Office gave the company a new license on January 11, 2007. Interestingly, Fekadu Ambaye is an Ethiopian citizen with a national passport.
However, this took place after Dashen had already sold the Household and Office Furniture Factory. A day before the sell, Fekadu Ambaye, who is currently in the country, charged Dashen Bank along with the above mentioned four and Fekadu Worku’s former wife, Emebet Mengesha.
Fekadu Ambaye requested the court to cancel the loan agreements that Mosvold made with the Bank in his absence. He then appealed that the auction floated by Dashen be ceased. The Court has dropped Fekadu’s appeal of stopping the auction, stating that the auction issue will be resolved once the decision on the charge is made.
Mosvold Factory is still open for operation and even has a 300,000 Br production order. And yet, no progress on the activities has been made as Fekadu Worku, who signs company cheques, refused to sign any, after his release on bail, which would enable them to buy raw materials, Mengistu Reta, Labor Union president, disclosed to Fortune.
Fortune attempts at soliciting information from the buyer, Ayat Plc and seller, Dashen Bank were unsuccessful.
By ISSAYAS MEKURIA - FORTUNE STAFF WRITER