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BoU and lawfirm, MMAKS on the spot over “exorbitant” fees and conflict of interest in Crane Bank sale

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MMAKS Advocates Managing Partner and Head of Litigation, Timothy Kanyerezi Masembe

Before the dust settles on the explosive Auditor General’s report into the closure and sale of 7 defunct banks, in which Bank of Uganda was implicated for gross negligence and causing financial loss, to taxpayers, fresh details leaking from BoU indicate Governor Emmanuel Mutebile unsuccessfully tried to fight off “exorbitant” payments to law firms involved in the closure.

These leaks which first appeared in the Independent Magazine, paint a clearer picture on the powerful role of disgraced former Executive Director, in the controversial sale of Crane Bank. The leaks also shine a spot-light on the lucrative ‘scramble and partition’ of Crane Bank, especially for the city’s top 3 law firms, each of which has in one way or another earned big in the capture and subsequent rushed sale of Crane Bank, that has turned out, according to the Auditor General, be fraught with several irregularities.

The three law firms whose “too close for comfort” involvement with BoU and dfcu are: MMAKS Advocates, AF Mpanga (Bowmans) and Sebalu & Lule Advocates.

MMAKS Advocates are the retained Bank of Uganda lawyers and the lead transaction advisors in the Crane Bank takeover and subsequent sale to dfcu Bank. AF Mpanga (Bowmans) on the other hand together with PriceWaterhouseCoopers carried out the forensic audit on Crane Bank, which audit report was relied on to establish the supposed troubles of Crane Bank and the consequent decision to sell it.

Bowmans who are dfcu Bank’s official external lawyers had also been awarded a lucrative contract (by Bank of Uganda) to represent Crane Bank (in liquidation) in a case filed against Sudhir Ruparelia, Crane Bank’s former owner, but were thrown out, together with MMAKS for conflict of interest- the duo having Sudhir’s lawyers before and his potential witnesses.

Sebalu Lule & Advocates on the other hand, initially acted for dfcu Bank during the takeover, but following MMAKS and Bowmans dismissal from the lucrative suit, Bank of Uganda went on to appoint them as the official lawyers for Crane Bank (in liquidation) and BoU.

Thick Plot and conflict of interest

While legally there is almost nothing wrong yet, with the above, there is a lot of moral conflict of interest written all over these appointments. In the face of the AG’s scathing report and the BoU leaks on how these lawyers were appointed and consequently remunerated, there seems to be more than meets the eye.

A conflict of interest is a situation in which a person or organization is involved in multiple interests, financial or otherwise, and serving one interest could involve working against another.  Conflict of interest assumes derivation of personal benefit from actions or decisions made in official capacity.

In the face of findings by the AG that BoU never carried out any valuation of Crane Bank before selling it but instead relied on dfcu’s valuation- one wonders, what professional advice and or value did MMAKS give to BoU- advice for which they earned Shs3 billion, especially when the AG found out that over and above failing to value the assets and liabilities of Crane Bank, the Crane Bank was sold at a “contentious” Shs200bn, payable over a period of 30 months without interest, thereby causing taxpayers a loss of UGX39.5 billion.

Did MMAKS actually give BoU proper advice that could have averted these costly mistakes or did they just rubber stamp what BoU (Bagyenda) wanted? Did they actually deliver any value for money, to deserve the Shs3 billion they earned as transaction advisors?

Bowmans Uganda Partner, David F.K Mpanga

With revelations that MMAKS was engaged to collect on the bad Crane Bank loans on behalf of BoU and existing evidence show MMAKS went ahead to “exorbitantly” (emphasis Mutebile’s)  invoice a total of USD1.4m (Shs5.4bn) as commission on recovered monies, major conflict of interest issues arise, especially that MMAKS participated as BoU’s transaction advisers and external lawyers.

It is these costs that riled Governor Mutebile who described the fees as unreasonable, extortionate and or ”exorbitant” forcing him to on March 27th 2017, to write to BoU’s legal counsel, a one Margaret Kasule over the matter.

”M/s MMAKS Advocates are the Bank’s principal external lawyers engaged on a retainer basis, for which the Bank has enjoyed a long term relationship for quite some time. I, therefore, expect that their charges should be reasonable based on negotiated hourly rates, actual costs incurred and reimbursable fees rather than basing their fees as a percentage of the claim,” wrote Mutebile.

What is so special about these 3 law firms that BoU is so glued to them? Do they have godfathers in BoU and if they do, what interest does his godfather have?

The other key issue is built around a finding by the AG that BoU secretly transferred an undisclosed amount of bad loans to dfcu Bank – undisclosed because there was no agreement and or schedule of loans and the corresponding collateral. Naturally Bowmans, who are dfcu’s principal lawyers and debt collectors, stand to benefit from this transaction; so the major question is: did Bowmans, while acting for BoU have a hand in this decision?

The choice, again by BoU, to choose Sebalu & Lule, who are not only dfcu’s lawyers, but also acted for dfcu Bank during its takeover of Crane Bank, to represent Crane Bank (in receivership) in court, raises serious ethical questions.

What is so special about these 3 law firms that BoU is so glued to them? Do they have godfathers in BoU and if they do, what interest does his godfather have?

 MMAKS and Bank of Uganda remain silent

This reporter attempted to contact MMAKS Advocates Managing Partner and Head of Litigation, Mr. Timothy Kanyerezi Masembe on whether, with all the faults that were discovered in the way how BoU mishandled the closure of various banks, if his law-firm gave BoU and by extension Ugandan tax payers value for money, but for 3 weeks, our emails remain un responded too?

This reporter, also reached out to BoU’s spokesperson, a one Charity Mugumya as well as Dr.Tumubweine Twinemanzi, BoU’s new Executive Director, Supervision for a comment on a raft of accusations by the AG’s findings but for three (3) weeks, now there is no response forth-coming.

With the exception of a September 18th press opinion by the Governor in the leading dailies which were specifically limited to a rebuttal on Crane Bank having spent Shs478bn on Crane Bank, the Central Bank has failed to respond to all the other isues raised by the AG.

In the coming days, Parliament’s COSASE committee is expected to start debating the report; in what promises to be an explosive show-down.

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