A letter, said to have been authored by disgraced former Bank of Uganda, Executive Director, lifting key anti money laundering reporting requirements for dfcu Bank in regard to a Shs570 billion bad-loan book, which same loan book was ‘secretly’ transferred to dfcu by BoU, has surfaced; lending more credibility to claims by Crane Bank shareholders, that the seizure and rushed sale of their bank was “a well calculated heist by certain rogue officials at BoU and dfcu Bank, aided by conflicted lawyers” for their own private benefit.
According to the January 25, 2017 letter (signed on the same day as the Crane Bank sale agreement) among many other waivers, Bagyenda instructed dfcu to “ring-fence”, manage and report on the “non-performing loans and advances acquired by dfcu separately from dfcu’s pre-transaction balance sheet for a period of at least twelve (12) months.”
Curiously, the letter was not copied to any one at Bank of Uganda as would be the case for such critical communication and neither did the Purchase & Assumption (P&A) agreement of Crane Bank’s assets and liabilities signed between Bank of Uganda and dfcu, mention anything to do with the non-performing loans.
This has raised suspicion that Bagyenda’s letter, was a cover-up for the key architects of the controversial sale and would legitimize the process of recovery on the bad loans, without placing the recovery process under the usually rigorous BoU scrutiny and the strict anti money laundering reporting process.
This would then allow the the rogue dfcu officials to deploy the conflicted lawyers to start the process of recovery- for which they would earn huge commissions that would later be shared by officials at BoU, dfcu Bank and their mastermind lawyers.
For those unable to pay, the dfcu lawyers would then quickly start the process of selling off the collateral, most of which comprised of prime properties at forced sale value, keeping the balance for themselves and co-conspirators.
Another third way in which dfcu lawyers and BoU officials would eat from the bad loan book, is a repeat of what was done in 2007- create a shell a company, in an offshore location; possibly owned by themselves or a mask and tow which they would sell to the bad loan book at a massive discount.
For example, it shall be remembered that the Auditor General discovered that the assets of International Credit Bank (ICB), Greenland bank, Cooperative Bank, Global Trust Bank and National Bank of Commerce worth a combined Shs164 billion were sold for a mere Shs32 billion- a discount of 80%!!
M/S Nile River Acquisition Company, a company that that bought bad loans worth Shs135b in 2007 at $5.25m (Shs8.9bn), according to the AG led to a loss of Shs126b. The Shs135b loan portfolio included Shs34b of loans that had valid, legal and equitable mortgage supported by proper legal documentation.
The sale price offered of UGX8.9bn according to the AG, represented 26% of the total secured loan portforlio and 7% of the total loan portfolio. Moreover, the Audit report says BoU did not furnish auditors with bid documents that guided the procurement of M/S Nile River Acquisition Company, meaning that it could not be established the process that was followed in the awarding of the debt selling deal to this company.
M/S Nile River Acquisition Company, a company that bought bad loans worth Shs135b in 2007 at $5.25m (Shs8.9bn), according to the AG led to a loss of Shs126b. The Shs135b loan portfolio included Shs34b of loans that had valid, legal and equitable mortgage supported by proper legal documentation.
It is therefore not surprising that the documents of the M/S Nile River Acquisition Company have since gone missing- just as the inquiry into BoU by parliament is starting.
For this delicate syndicate to work, therefore, the mastermidns of the deal had to keep a closely-knit circle of three law firms to whom several mouthwatering deals surrounding the Crane Bank sale have been ring-fenced for, regardless of the fact that these same law firms, have severally represented BoU and or dfcu Bank at different stages of the transaction- either to investigate Crane Bank, sell it off, recover bad loans as well as represent BoU in cases against Crane Bank Shareholders.
The three law firms whose “too close for comfort” involvement with BoU and dfcu are: MMAKS Advocates, AF Mpanga (Bowmans) and Sebalu & Lule Advocates.
To date, these law firms have earned more than Shs10 billion in the Crane Bank sale process and several other billions are in pending invoices.
In one such deal, MMAKS is said to have billed dfcu a total of USD1.4m (Shs5.4bn) as commission on recovered monies, prompting Mutebile to protest the said exorbitant fees in a March 27th 2017, letter to BoU’s legal counsel, a one Margaret Kasule over the matter, saying that as a retainer lawyer, MMAKS’ fees should be based on “negotiated hourly rates, actual costs incurred and reimbursable fees rather than basing their fees as a percentage of the claim.”
Vast wealth of BoU and dfcu officials should be investigated
Therefore, the recent reports that Bank of Uganda Deputy Governor, Dr Louis Kasekende, Mrs Justine Bagyenda and dfcu Bank’s outgoing Managing Director, Juma Kisaame have vast unexplainable riches could hold some water, given the monies at stake.
At a mere 5% of the Shs570 billion, commission estimates, the recovering lawyers would be walking home with not less than Shs28 billion. Since most if not all of the Shs570 billion was collateralized, selling off the properties themselves, would yield even much higher earnings. But the earnings would be much higher if the bad loans were sold at a massive discount allowing for a back room sharing of the proceeds, just like was in the case of the M/S Nile River Acquisition deal.
It is not clear how far the process of debt recovery has gone, but either way, whoever is involved in the recovery is reaping big. Since the recovery process is not subject to normal reporting procedures and therefore out of the public eye, this is one area that MPs should seek to look into.
The ongoing probe into the private wealth of over 100 Bank of Uganda officials, including the Governor, could also give a hint on who is riding on dirty riches.
Recently, it was revealed that Deputy Governor, Louis Kasekende transacted over Shs897 million his mobile money account and that his wife received several millions of shillings on her bank accounts.
Earlier in the year we report that Mrs. Bagyenda had between March 2017 and September 2017, transferred Shs950 million- to Tibeingana & Co Advocates a law firm owned by city lawyer and property dealer, Deox Tibeingana.
All the above are possible indicators of money laundering which need to be exhaustively investigated by Parliament, since the Financial Intelligence Authority (FIA) and the IGG seem to be reluctant to release the findings of their investigations regarding the same.
When we approached Sydney ASubo, the Executive Director of the FIA, he declined to give more details regarding whether all these reported transactions are being investigated.s
“It is not the practice of any Financial Intelligence Unit, anywhere in the world to comment on active cases,before such matters are either taken to court or closed. So this should not be strange at all. The cases you refer to are not the only ones we are not commenting on, so again that should not be strange. It is in our DNA as an FIU to keep in the background and the public face of any case is either the prosecutors or the investigators,” he said.
He however said that the details of the cases investigated are contained in their 2017/18 report that has been sent to the Finance Minister.
“The FIA annual reports are public records, after being laid on the floor of Parliament. The law requires the report for the preceding financial year to be laid on the floor by the Minister of Finance before end of October. On our part, we are required to prepare it and send to the Minister before end of September which we did. Once the Minister does his part, we shall have the Report on our website,” he said.
When we spoke to the Ministey of finance spokesperson, Mr Jim Mugunga, if the reports had been presented to parliament, he said he was “not aware whether it was presented.”
“I will inquire,” he said.