Mahtani Sued over Luxury Hospital Project

rajan-mahtani-finance-bank-zambia-reportsRajan Mahtani, the controversial multi-millionaire financier of the ruling Patriotic Front party, is being sued by a South African lending institution over a failed project to build a luxury medical care center near the Kenneth Kaunda International Airport in Lusaka.

According to an investigative article published today in the Mail & Guardian, Mahtani had been approached in 2008 by the British businessman Steven Singleton to be his local partner to bring a “South African-style” elite hospital to Lusaka.

The need for such a facility was evident:  Zambians have spent millions on medical care in South Africa and India in recent years.  A top notch care unit could become a referral hub for many visiting patients from the central Africa region.  And Zambia’s very basic facilities often require multinationals to locate the families of their executives in South Africa.

Singleton’s business plan may have been sound, but evidently he ended up picking the wrong partner in Mahtani.

According to the Mail & Guardian, in order to secure financing for the 160-bed hospital, which would feature an intensive care unit and five operating theatres, Singleton and Mahtani formed the Lusaka Premier Health Clinic (LPHC) Ltd, and began making deals with consultants and construction contractors.

They struck up a key financing deal with South Africa’s Industrial Development Corporation (IDC) in which both parties would contribute $10 million to the development and construction project.  However, as revealed by the Mail & Guardian, Mahtani was able to convince IDC to lend the funds based on his position as chairman of Finance Bank, and only offered “a letter of commitment” instead of proof of collateral.

Mahtani’s shareholding in LPHC was represented by his shell corporation Finsbury Investments.  When the Bank of Zambia intervened to seize Finance Bank in 2009 over the illegal shareholding structure, Mahtani was unable to hold up his contractual obligations to IDC, leading to the collapse of the hospital project, default on the financing, and the current lawsuit against him seeking a repayment, with interest, of the $5 million principal sum.

What is particularly interesting about the IDC lawsuit against Mahtani is that it may reveal how Finance Bank was operating outside the law, contrary to Mahtani’s claim that he had been victimized when the Bank of Zambia (BOZ) seized control of the bank.

After Mahtani bankrolled the Patriotic Front’s presidential campaign for Michael Sata, he was immediately handed back control of the bank as the new president’s first order of business.

According to a forensic report into the true shareholding structure of Finance Bank by the law firm of Edward Nathan Sonnenberg, Mr. Mahtani owns at least 56.5% of the bank, which is a violation of Zambian law requiring that no single shareholder exceed 25% of bank ownership.  But what is interesting about the report are the strong indications that in fact Mahtani may actually own 96.5% of Finance Bank, using an $80 million personal loan from Credit Suisse that was disguised as an equity transaction, allowing him to defraud Zambian banking authorities and operate his bank illegally.

So the key question that is revealed by the IDC lawsuit is that if Mahtani had in fact only controlled 25% or less of Finance Bank, as he has claimed, then why wouldn’t he be able to produce the $10 million in financing for the luxury hospital as required under the financing deal?  Further, it begs the question, why did IDC extend such trust to Mahtani based on a “letter of commitment” rather than real collateral?  For an individual of Mahtani’s net worth, the government’s seizure of Finance Bank should not have had such an impact on Finsbury Investments, if in fact he were operating his bank according to the law.  

According to the Mail & Guardian article, after President Sata rewarded Mahtani with his bank, he approached the IDC to continue the project, but the lending institution declined and instead issued him with a writ of demand, triggering arbitration.

The IDC arbitration will add to Mahtani’s growing list of legal woes.  His ongoing battle with Zambezi Portland Cement and the Italian foreign investors Antonio and Manuela Sebastiani Ventriglia, which recently found its way to a Swiss arbitration tribunal, means that Mahtani may have a more difficult time selling Finance Bank, if that is indeed his plan, while also bankrolling a second presidential campaign should his asset President Sata be too ill to continue in office.


  1. Iyeee...

    Mafia boss.

  2. Blessings Kafwanka

    I think the Idea of bringing the “South African-style” elite Hospital is a good idea. This will enable some of us who cannot afford to Travel and Lodge in South Africa to receive high quality Medical Services within Zambia. All the Politicians and high profile personalities need not travel to “Morning Side Clinic” in SA. I hope Mathani will pull through this case and find another business partner to continue with this project.

  3. Legal Eagle

    This article is clearly biased and one sided. What proof is there that Mahtani is bankrolling Sata? There is no mention in the article about how the former government of President Banda hounded any supporter of the PF, including notable figures such as Membe and Mahtani.

    This law suit is a result of the harassment that Banda inflicted during his corrupt regime.

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