Finance (250)

Isharaza Leaves dfcu In Latest Employee Exodus

DFCU Bank feels like a haunted house lately if the continued employee exodus is anything to describe the troubled commercial bank. After a recent management shakeup that saw long serving managing director Juma Kisaame leave, more senior managers are leaving.

The latest departure is Ms Agnes Tibayeyita Isharaza who has been working as the chief legal officer and company secretary. The respected Isharaza has moved to National Social Security Fund (NSSF) where she has been appointed by the finance minister Matia Kasaija as Corporation Secretary and head of legal.

At NSSF, Isharaza replaces Mr Richard Wejuli Wabwire, who in February was appointed High Court Judge. Kasaija said Isharaza will serve NSSF on a five-year contract. Her appointment was recommended by the NSSF board headed by Patrick Byabakama Kaberenge.

Isharaza holds a Bachelor of Laws from Makerere University, a post graduate diploma, legal practice from Law Development Centre and an Executive MBA from Eastern and Southern African Management Institute (Esami).

She leaves DFCU when they are being faced with a reputational crisis emanating from the fraudulent takeover of Crane Bank from Bank of Uganda. This damage on their image has reportedly affected investors’ confidence with many considering quitting the commercial bank.

Gadenya To Hear Sudhir Case Against dfcu Lawyers

Justice Paul Gadenya will now handle the case in which property mogul Sudhir Ruparelia sued city law firm Sebalu & Lule Advocates, seeking to stop them from representing dfcu Bank for alleged conflict of interest.

This comes after after Justice David Wangutusi, the head of the court, and his deputy, Justice Elizabeth Jane Alividza, declined to hear it, Solomon Muyita, the Judiciary senior communications officer, told Daily Monitor.

“The file was allocated to Justice Gadenya. However, he has not allocated it a hearing date because he is away in the field,” Muyita stated, explaining that initially, the case was allocated to Justice Alividza but she felt that it would be better if it was handled by Justice Wangutusi, since he was handling similar matters.

He added that when the file was sent to Justice Wangutusi, he also declined to hear it on grounds that it was a different matter that should be handled by another judge and the file was thus sent to Justice Gadenya.

In the case, Mr Ruparelia claims that Sebalu and Lule Advocates is “guilty” of conflict of interest and should not represent dfcu Bank which he sued. Mr Ruparelia, through his Crane Management Services, sued dfcu Bank over rental arrears owed by the sister company Crane Bank, which was closed by the central bank in 2016 and later sold to dfcu Bank. 
Mr Ruparelia claims there exists an ‘advocate-client’ relationship between him and Sebalu & Lule Advocates because the same law firm had previously represented his companies. 
He further avers that because of that relationship, confidential information was discussed between the two and will use such information to his disadvantage if the law firm represents dfcu Bank.

SOURCE: Daily Monitor

Bad Investment Choices Forcing dfcu Shareholders To Exit

Poor investment choices made by dfcu Bank in Uganda are pushing shareholders away, leaving the commercial bank in an enviable state, media reports say.

Without naming the uncomfortable shareholder, Eagle Online Wednesday reported that Dfcu bank’s major shareholder is said to be unhappy with the bank’s business and is interested in detaching from the bank.

Once such bad investment choice is the Shs1.8 billion Dfcu Financial Centre built at Kampala Industrial Business Park in Namanve, Wakiso District. The building continues to eat into the bank’s finances in terms of security, power and other costs even though the bank is not gaining from it.

The bank reportedly only Shs60 billion in profit despite making an investment of about Shs3trn over the recent years.

Dfcu Bank continues to face scrutiny ever since they took over Crane Bank in 2017 in a manner the public says was dubious. Some shareholder were not happy with the transaction that has put the bank in bad image.

In July 2018, UK’s CDC Group indicated its desire to exit the investment. Other shareholders in Dfcu Bank include Arisse BV, National Social Security Fund Uganda, The Rock Creek Group LP and Old Mutual Investment Group (Pty) Ltd.

Russell Investment Management LLC, Bank of Uganda Staff Retirement Benefit Scheme, Vanderbilt University Foundation, Conrad N. Hilton Foundation and Jubilee Investment Co. Ltd. are the other shareholders.

Bagyenda Replaced On Financial Intelligence Authority Board

The composition of Financial Intelligence Authority (FIA) Board of Governors is now complete after estranged Justine Bagyenda, formerly executive director in charge of supervision at Bank of Uganda (BoU), has been finally replaced on the board.

She was controversially named on the board by finance minister Matia Kasaija at a time the Authority was investigating her for money laundering. Many stakeholders in the finance sector petitioned parliament to force the minister drop her from the board.

Bagyenda, who in a report by parliamentary Committee on Commissions, Statutory Authorities and State Enterprises (cosase) was highly blamed for the dubious sale of seven commercial banks, was replaced by Titus Wasswa Mulindwa, a lawyer at Bank of Uganda.

Speaker Rebecca Kadaga who chaired the Parliament’s Appointments Committee approved Wasswa Mulindwa. The other FIA board members who have already been approved by Parliament are; Mr Leo Kibirango as chairman, Patrick Ocaillap, deputy secretary to the treasury and Grace Akullo, CID Director.

The FIA was established under the Anti-Money Laundering Act, 2013 to combat money laundering activities.

BoU Has Upto April To Agree With Sudhir In Crane Bank Case

Bank of Uganda has up to 3rd April to reach an out of court agreement with former Crane Bank owner Dr. Sudhir Ruparelia. The two parties are currently engaged in out of court negotiations but should they fail, the courts of law will apply.

In 2017, Bank of Uganda sued the property mogul and his Meera Investments Company accusing him siphoning over Shs400 billion from his defunct Crane Bank. Dr. Ruparelia in defence said the accusation was false and tantamounts to witch-hunt by the central bank.

While appearing before Commercial Court in Kampala in January, both parties asked Justice David Wangutusi for more time to enable them conclude their negotiations. Justice Wangutusi accepted their request and adjourned the case to April 3 for the Central Bank and Sudhir to return with the progress on their talks.

Bank of Uganda in 2016 took over management of Crane Bank saying it was undercapitalized and posed a threat to the banking sector. The central Bank would later sell Crane Bank of DFCU Bank in a manner that has been described as dubious by experts in the sector.

But a report by the auditor general in 2018 revealed irregularities in the way Bank of Uganda was taking over selling commercial banks. The auditor report asked parliament to investigate the central bank.

And when Parliamentary Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) probed the sale of commercial banks by the central bank since 1993, it found out the central bank was breaking and sidestepping the laws of the land.

In the case of Crane Bank, cosase said Bank of Uganda flaunted the Financial Institutions Act categorically pinning deputy governor Louis Kasekende, former director in charge of supervision Justine Bagyenda and the board for neglecting their duties and failing their duties at the central bank.

Wangutusi Refers Sudhir, Sebalu And Lule Case Back To Justice Alividza

Commercial Court head judge Justice David Wangutusi has ‘sent back’ the case between business mogul Sudhir Ruparelia and law firm, Sebalu and Lule Advocates to Justice Jane Alividza so ‘she can finish what she started’.

In the conflict of interest case, businessman Ruparelia demands that a permanent injunction be put on Sebalu and Lule Law Firm, banning them from appearing before the court as the shielding units for dfcu bank, and the other court cases that Crane Management Services and dfcu are engaged in.

In the suit, Sudhir says Sebalu and Lule Advocates were unfit to represent Bank of Uganda (BoU) and dfcu bank because they once represented Crane Management Services which owned Crane Bank in several court cases.

The case has been in court since November 2018 and its first hearing was before Justice Alividza.

However, according to information from the commercial court, since Wangutusi was handling other cases involving Ruparelia Justice Alividza decided to hand him this particular case.

However, both parties involved in this case were not aware of these changes, even after it had been adjourned from February 20 to March 1.

At the Commercial Court on Friday, both parties were surprised when Wangutusi said the case would be handled by justice Alividza. “We have sent the case to lady Justice Alividza to finish what she started,” said Wangutusi.

Unfortunately, the court registrar did not communicate the next date of hearing under lady justice Alividza.

Rajiv Ruparelia, the managing director of crane management services said, “All this is time wasting and money. Unfortunately, we came expecting another thing but now the case has been taken back to the initial judge. Nothing to do we trust them. And I am sure they know what they are doing. Most of all we trust in Uganda’s judicial system so we are waiting for the next date of hearing and we shall come.”

Man Threatens To Sue Bowmans, MMAKS Lawyers For Fraud

Two legal firms under the names of Bowmans Advocates and MMAKS Advocates are on the verge of being sued by a one Steven Masanso, a concerned citizen, for colluding with individual Bank of Uganda officials to sell of key commercial banks including Crane Bank Limited which belonged to businessman Dr. Sudhir Ruparelia.

In two separate notice to sue addressed to Bowmans Advocates and MMAKS Advocates dated 26 January, 2019, Masanso says by the two law firms to meet his demands in will leave him with no choice but to login in ‘criminal and civil proceedings’.

In the notice copied to President Yoweri Museveni, Director Legal Department, Bank of Uganda, Inspector General of Police, Director Criminal Investigations Department and Finance Minister, Masanso demands the following.

“As you are, it’s on record that as part of resolution of various banks facts of which are well with in your knowledge you continually received various monies in collusion with individual Bank of Uganda officials which sums were charged on received banks.”

“You also routinely billed way beyond permissible scale and in instances for no work done at all. A case In point is with respect on the monies taken out as legal fees for purported drawing of the Crane bank sales agreement even when it clearly shows having been drawn by the Legal Department of Bank of Uganda.”

"You also perjured yourselves during the COSASE Parliamentary proceedings while under oath" “You accordingly offered no consideration and per took in an illegal and criminal enterprise”

"Furthermore, you performed a regulatory coup variously significantly advising the banking regulator while at the same time sitting on different boards of the regulated commercial banks and/or acting for them"

"In the case of Crane Bank Limited's resolution, you acted without the proper authority of Bank of Uganda and/or its legal department."

"Your activities were constructed in bad failed, self-interest and usurped the constitutional mandate/purpose of the regulator."

"Take notice that unless: 'Publish a public apology in the nation’s media' 'Refund all you illegally levied on the public purse and/or the received banks by close of business week, I shall proceed to lodge criminal and civil proceedings against you and you accomplices.

David Mpanga is a leading partner at Bowmans Advocates while Timothy Masembe Kanyerezi is also a senior partner at MMAKS Advocates (Masembe, Makubuya,Adriko, Karugaba & Ssekatawa). The two lawyers have been at the center of controversy attached to sale of Crane Bank Limited.

COSASE Report Calls For Reforms At Bank of Uganda

A committee of Parliament has called for governance reforms at the Central Bank after finding flaws in the way it handled the liquidation and sale of insolvent banks.

A report by the committee on Commissions, Statutory Authorities and State Enterprises (Cosase) tabled in Parliament yesterday evening said Central Bank officials had made “questionable decisions” and flouted the law in closing and selling seven commercial banks.

The 64-page report, issued after months of public hearings, also invites the police to investigate whether there was loss of taxpayer money in the bailouts of stricken commercial banks or during their disposal.

Presenting the report to Parliament committee chairperson Abdu Katuntu (Bugweri, FDC) questioned “serious security laxity” at BoU and said bank officials who flouted relevant laws and regulations ought to be held personally responsible.

The committee’s findings followed public hearings and a special audit by the Office of the Auditor General into the closure of seven commercial banks between 1993 and 2016.

The banks include Teefe Trust Bank, International Credit Bank, Cooperative Bank, Greenland Bank, Global Trust Bank Uganda, National Bank of Commerce and Crane Bank Limited.

The committee report noted several instances in which the central bank did not follow the Financial Institutions Act (FIA) and its own regulations on appointing auditors, taking inventories, managing confidential information, and reaching out to potential buyers of the failing banks.

The committee also found serious problems with the disposal of liquidated banks. For instance, it noted that Nile River Acquisition, a company tapped up to recover Shs145b in loans owed to ICB, Greenland and Co-operative banks was not registered and benefitted from “an incredibly outrageous” discount of 93 per cent.

The report also questions dealings with Octavian Advisors Plc, a firm that bought the loan book at $5.2m – less than an earlier offer of $10m – and which received a grant of exclusivity in the dealings.

“The committee concludes that the transaction between BoU and M/s Octavian Advisors Plc. and her agents lacked transparency and the officers involved should beheld responsible for commissions and omissions which resulted in marshalling the greatest amount from the assets of the distressed financial institutions,” the report recommends.

It also called for the Inspector General of Police to immediately seize land titles and other securities from Mr Kakembo Katende of JN Kirkland and Associates and SIL Investments arising from the management of the loan portfolio Nile River apparently farmed down to them.

The MPs also asked the tax authorities to investigate the named firms’ tax compliance statuses.

In its report, the committee directed the Bank of Uganda board of directors in consultation with the Minister of Finance to issue new regulations for managing stricken financial institutions within six months.

Other recommendations by the committee include amendments to the FIA to spell out timelines for resolution of stricken institutions, taking the role of resolving financial institutions in distress away from the commercial bank supervision function and a strengthening of the Central Bank’s capacity to supervise financial institutions.

The committee also recommends widespread improvements in the management of the Central Bank’s records, security and documentation of processes and meetings.

On the disputed sale of Crane Bank Limited to dfcu bank at Shs200b, the committee highlighted violation of the FIA, the absence of records and queried the valuation of the bank’s assets and liabilities.

SOURCE: Daily Monitor


Crane Bank Closure Was Illegal, Cosase Report Reveals

A report by the parliamentary committee on Commissions, Statutory Authorities and State Enterprises (Cosase) reveals that closure of Crane bank by Bank of Uganda was illegal and that the owners of the commercial bank should be compensated.

The report also says that by January 24, Crane Bank had recovered from liquidity distress the reason for which was taken over by the central bank. This was also before it was sold to dfcu Bank.

"In fact, Bank of Uganda had stopped injecting money on January 9, 2017. Therefore the bank's liquidity position had stabilized,” the report reads in part.

Crane bank was closed by Bank of Uganda on October 20, 2016, after it failed to comply with a capital call on July 1, 2016. BoU governor Emmanuel Tumusiime-Mutebile said then that the bank's takeover was guided by the systemic nature of its under-capitalisation to avoid financial sector instability.

But Katuntu told parliament that his committee observed that BoU management did not provide a plan or assessment detailing efforts to return the bank into compliance with prudential standard despite funding with Shs 478.8 billion.



Bank Of Uganda Caused Mega Financial Loss To Crane Bank

The Report of the Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) on Special Audit Report of the Auditor General on Defunct Banks that was presented to parliament has blamed Bank of Uganda (BoU) officials for causing a financial loss to Crane Bank Limited as well as the central bank itself.

Castigated BoU for its decision to ‘lent’ Dfcu bank Shs200 billion of CBL’s total loan book of Sha500 billion, which they said caused CBL a loss.

The long-awaited report says that all BoU officials who failed to properly execute their duties in accordance with the law should be held responsible for their commissions/ or omissions.

Among the officials mentioned as not doing their work and they should have done, are the current Ben Sekabira, Director Financial Markets Development Coordination and Edward Katimbo Mugwanya, who was the Statutory manager of CBL. Others heavily mentioned for failure to adhere to the FIA procedures are Governor Emmanuel Mutebile and his deputy Dr. Louis Kasekende.

The report recommends that BoU which failed to value the assets and liabilities of CBL, Global Trust Bank and National Bank of Commerce and that considering the lapse of time and impossibility in revaluation of assets should address the probable financial loss occasioned.

The report presented by MP Abdu Katuntu, the out-going COSASE Chairperson also recommends that BoU makes good of the loss as they financially disadvantaged CBL by breaching the statutory duties provided in the Financial Institutions Statute, 2004.

More so the report pins BoU on Shs478 billion which BoU wanted CBL shareholders to pay back on claim that it was used as liquidity support to CBL in receivership. The report wondered why BoU officials wanted CBL shareholders who were not party to Shs200 billion purchase of assets and assumption of liabilities agreement that saw Dfcu bank buy CBL moreover money paid in installments.

The MPs in their report have recommended that BoU bears the cost of their negligence as far as the transaction is concerned.

The report also notes that at the time CBL was sold on January 25, 2017, it had gotten out of the financial distress even as BoU said it was still under receivership.

The MPs have also proposed a number of changes to the Financial Institutions Act that partly trims the powers of the central bank especially in the supervision of commercial banks but also have recommended that both the Governor and Deputy Governor be removed from being Chair and deputy chair of the BoU Board respectively.

“The board did not adequately supervise management in the process of liquidating the financial institutions,” reads part of the report, adding: “Good corporate governance principles would require that the position of chairperson and vice chairperson of the board is separated from the position of Chief Executive (Governor) and his Deputy.”

“It is therefore the recommendation of this committee that article 161 (4) (of the Constitution) be reviewed to separate the offices of the leadership of the board and top management of BoU,” the report, signed by 27 of the 35 MPs on the committee recommended.

The MPs said that whereas in their 15th December 2016 meeting the board had resolved under minute no. 3754 paragraph 10, that the would-be buyer of CBL would take all the assets and liabilities after a forensic audit was out, the Management of BoU went ahead and conclude a sale agreement with Dfcu that excluded some assets and liabilities.

They also blamed the BoU board for ratifying the sale that included charging interest on the Shs 200 billion differed consideration at the CB rate on reducing balance basis, an act that in effect constituted a discount of Shs39 billion to the buyer but would be recoverable from the shareholders of Crane Bank.

Crane Bank was sold illegally and after it had recovered from insolvency

In specific reference to the sale of Crane Bank, the MPs also found “The principles of legality therefore were highly compromised. This is exacerbated by the absence of minutes or any record detailing the process of arriving at the figures,” observed the MPs, further adding that failure to value the assets and liabilities of Crane Bank before selling it to Dfcu was “imprudent”.

“The inevitable conclusion therefore is the BoU did not know the exact assets and liabilities it was disposing off. The reliance by the Central Bank on the due diligence undertaken by an interested party and eventual purchaser to purport to determine the value of assets and liabilities was imprudent and an abdication of statutory responsibility.”

The MPs also found that BoU sold CBL without the authority of the board, although the board later turned around to approve the decision, a decision MPs said was an abdication of its fiduciary responsibility.

SOURCE: Eagle Online

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