MTN Uganda Executives On Trial Over $27 Million Tax Scam

By Nicholas Bariyo

KAMPALA, Uganda--More than a dozen executives at Uganda's largest telecoms company, MTN Uganda Ltd. are facing trial over tax evasion amounting to at least 70 billion Ugandan shillings ($27 million) in one of the largest tax scams in the country's history, officials said Tuesday.

Last week, a Ugandan magistrate's court in Kampala issued criminal summons to a number of MTN executives including Sifiso Dabengwa, chief executive of Johannesburg-listed MTN Group Ltd. (MTN.JO), MTN Uganda's parent company. The trial is expected to get underway this week.

The lawsuit, in which MTN officials are accused of false tax declarations and conspiracy to falsify declarations was filed early this month by Naphtali Were, a former logistics officer with MTN Uganda.

However, MTN Uganda Chief Executive Mazen Mroue described the accusations against the company as "vague and baseless" accusing Mr. Were of a witch hunt following Were's dismissal from the company in September over suspected fraud.

"In mid-September, MTN Uganda discovered suspicious supply chain payments made to several service providers...This resulted in the charging of two staff members implicated in the investigation," Mr. Mroue said in an emailed statement to Dow Jones Newswires.

"MTN has been advised that one of the persons implicated in the supply chain fraud has made allegations against the senior management. MTN lawyers are looking into the vague and baseless allegations," Mr. Mroue said.

According to court documents, Mr. Were's lawyers say that the telecom company declared nil taxes for several months through false declarations, costing the East African nation millions of dollars in lost revenue.

With around 7 million subscribers, MTN controls around 50% of Uganda's telecoms market.

It isn't the first time the company is facing accusations from former employees. Earlier this year, MTN Uganda Ltd. was accused of using underhand methods to wrestle a lucrative mobile phone license away from Turkey's Turkcell. Turkcell has filed a $4.2 billion lawsuit against MTN in a U.S. court.

Under Ugandan law, any person can initiate private prosecutions against a company or individual implicated in a crime, however, the director of public prosecutions reserves the right to takeover the prosecution of such a case at any stage.

Write to Nicholas Bariyo at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires