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Crane Bank sale: MPs say BoU must be audited amid protests from Kasekende

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At Parliament on Tuesday, Budadiri West MP Nandala Mafabi, who is leading the chorus for an audit into BoU, told Parliament that Kasekende was attempting to shield a “mafia” at the central bank and insisted the Auditor General must be given freedom to audit the bank.

The controversial sale of Crane Bank Limited continues to haunt Bank of Uganda, with the latest attempt by the central bank to block impending audit into the activities that led to the sale of commercial banks in the country being trashed aside by legislators.

Members of Parliament Tuesday said attempts by the Deputy Governor Bank of Uganda, Dr Louis Kasekende, to block a forensic audit by the Auditor General into the operations of the central bank and its role in the closure of four commercial banks amounts to “shielding mafia.”

Daily Monitor newspaper reported on Wednesday that Kasekende had written to the Attorney General on April 19, protesting an investigative audit by the Auditor General on the resolution process of Crane Bank Ltd (in receivership) on grounds that such an inquiry offends the sub-judice rule.

The newspaper also said the Solicitor General, Francis Atoke, had subsequently written back to the BoU Governor on May 2, ordering the bank not to cooperate with either the Auditor General or Parliament regarding an investigation into the sale of Crane Bank on grounds that any such inquiry would offend the subjudice rule.

Subjudice rule is part of the law relating to a matter before court. It dictates that any public actions or statements regarding a party or parties before court amounts to contempt of court.

BoU took over Crane Bank October 2016, over alleged insolvency and subsequently sold it to Dfcu Bank in January 2017, at Shs200 billion; payable over three years. Crane Bank shareholders, led by city tycoon, Dr Sudhir Ruparelia, have since sued dfcu and Bank of Uganda over a raft of what they say are improprieties that among others include underpricing of Crane Bank’s assets as well as illegally assigning of Meera Investment’s properties to Dfcu Bank.

The tycoon also blames BoU for flouting key terms of a Confidential Settlement and Release Agreement he signed with the central bank.

At Parliament on Tuesday, Budadiri West MP Nandala Mafabi, who is leading the chorus for an audit into BoU, told Parliament that Kasekende was attempting to shield a “mafia” at the central bank and insisted the Auditor General must be given freedom to audit the bank.

“Those are the mafias hiding what they have been stealing. In Tanzania, Bank of Tanzania was audited by the Auditor General and grand theft was discovered. I am certain that there is more plunder at BoU. It should account for all the closed banks,” Mafabi said.

The legislator said the forensic audit should focus on the conduct of Justine Bagyenda, the former director of commercial banks supervision at BoU, and other officials who were charged with the responsibility of carrying out routine supervision of Crane Bank.

Bagyenda was prematurely retired from central bank in what many analysts interpreted as paying for failures to supervise as well as causing the messy situation in which Crane Bank was sold, among other reasons.

Central bank officials have, however, always downplayed the matter, insisting that the insolvency of Crane Bank had nothing to do with failures at BoU.

While speaking at a dinner to mark the 20-year anniversary of Uganda Securities Exchange (USE), Kasekende said the insolvency of Crane Bank was “not caused by any problems in the wider economy; it was caused by its own mismanagement, not least by its extensive insider lending.”

“The successful resolution of Crane Bank in January of 2017 was the main reason for the improvement in financial soundness indicators of the banking system,” Kasekende concluded adding that an 18% growth in customer deposits between 2016 and 2017 was an indicator that “public confidence in the soundness of the banking system remains very solid and has not been impaired by the failure of Crane Bank.”

‘Speaker reserves right on call’

Supporting Mafabi’s calls, Shadow Attorney General, Wilfred Niwagaba said the Rules of Procedure give the discretion of interpreting whether an inquiry amounts to subjudice only to the Speaker and not a potential witness before a parliamentary inquiry.

The Ndorwa East MP said BoU cannot stop such an inquiry if the Speaker rules that it does not offend the law on subjudice.

“It is the Speaker to decide that this matter is subjudice or not. The essence of the subjudice rule is not to prejudice a matter that is pending in court. Parliament is talking about an investigation to do with a forensic audit. How does a forensic audit affect the current proceedings between BoU and Crane Bank?” Niwagaba asked.

According to Daily Monitor, Abdu Katuntu, the chairperson of the committee on Commissions, Statutory Authorities and State Enterprises (COSASE), has already protested to the Auditor General and BoU, insisting that the latter must provide documentation relating to the closure of Crane Bank.

“Entities being audited do not have the liberty to choose what should be audited. The arguments being raised by the bank of subjudice do not apply to auditing. Your report may not be discussed in Parliament if in the opinion of the Speaker, it is subjudice,” Katuntu is quoted as having written to the Auditor General and BoU.

Meanwhile, a motion to kick-start the setting up of a select committee to investigate the operations of the central bank remains on the Order Paper listed as business to follow after the Deputy Speaker Jacob Oulanyah ruled last year that COSASE and courts are handling similar matters.

Mafabi said Oulanyah “needs to get to his senses “and also accused Katuntu and vice-chairperson Anita Among of conducting parliamentary business using “underworld” methods, according to the newspaper report.

The dispute between Mafabi and COSASE leadership is over a letter Among wrote to Oulanyah insisting the committee was auditing the operations of Bank of Uganda, even before such an inquiry had commenced.

A draft forensic audit report conducted by the Auditor General that is supposed to guide the Parliamentary inquiry was deemed inadequate as it does not include the plight of Crane Bank and National Bank of Commerce.

 

 

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