Sudhir Ruparelia, chairman of Ruparelia group of companies and former majority shareholder in Crane Bank will appear next week to defend the fraudulent takeover.

The Bank of Uganda Governor Emmanuel Tumusiime-Mutebile during last year’s Uganda Bankers’ Association Annual Conference at the Kampala Serena Hotel, said they closed Crane Bank Limited (CBL) on account of being ‘massively insolvent’.

He explained: “After the BoU had intervened in Crane Bank and taken it over in October 2016, an inventory of its assets and liabilities was commissioned and carried out by a reputable accounting firm. This inventory found that Crane Bank was massively insolvent, with core capital of negative Shs240 billion, as a result of mismanagement and fraud. The notion that this bank could have been rehabilitated by its owners – the same people who were responsible for its failure – if only the BoU had provided more liquidity support and allowed the owners to remain in control, is not tenable. In reality the BoU had no other options, if it wished to minimise the losses incurred by the bank and protect the interests of its depositors, other than to take over Crane Bank and resolve it.”

The Governor further in his speech emphasized that while it is not possible for regulators to guarantee that no bank will ever fail, because that would require the elimination of risk-taking by banks – which would in turn hinder the very purpose of financial intermediation, Regulators can ensure that bank failures are the exception rather than the norm.

Mutebile’s speech as regards CBL closure seemed to point out that Sudhir Ruparelia, the majority owner and other shareholders intentionally collapsed CBL through own fraud. Ruparelia denies this accusation, the reason he is ready to face BoU in court more so to redeem his buildings handed over to Dfcu Bank and has never paid rent on them despite earning huge profits out of the Acquision of CBL.

Through his Ruparelia Group, Sudhir runs many companies in education, tourism and hospitality, real estate and horticulture. So why would a man with all these profitable enterprises work to bring down his own bank? At the time CBL was taken over by BoU owners say they had not closed the process of looking for creditors to invest in the bank even as BoU at the time said no investors were willing to put their money in CBL.

BoU would then rush to sell CBL to its competitor Dfcu Bank at a giveaway price of Shs200 billion paid in installments yet the central bank claimed to have invested Shs478.8 billion of taxpayers’ money during the statutory management of CBL. That expenditure is questionable given that CBL needed only Shs157 billion to stabilise. Further BoU has failed to account for Shs478 billion as it is not reflected anywhere on CBL accounts. Documentary evidence showing how this money was used is nowhere to be seen, something that has bothered Parliamentary Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) which is about to conclude the probe of BoU over the controversial sale of seven commercial banks between 1993 and 2017 .

Now it appears it is not the mismanagement of CBL by owners but the carelessness of BoU staff that led to a rushed sale of CBL to Dfcu Bank. According to the Auditor General John Muwanga, BoU sold CBL basing on an inventory report done by a private firm PwC and due diligence done by Dfcu Bank. Why BoU failed to do the valuation of CBL assets is a big concern as it goes against the Financial Institutions Act. “In a meeting with the former executive director for bank supervision Justine Bagyenda told Mr. Muwanga on June 13, 2018 that BoU relied on the Inventory report and due diligence undertaken by Dfcu to arrive at the Perchance &Assumption of assets agreement with Dfcu Bank. In other words, BoU sold CBL based on a price set by the buyer Dfcu Bank.

Evidence has come out that the financial challenges of CBL presented BoU staff with an opportune to reap profits by selling it to Dfcu Bank. This is because BoU Staff Retirement Benefits Scheme owns 0.59 percent shares in Dfcu Bank. That is why BoU saw no wrong in selling CBL. Dfcu Bank is majorly owned by Arise BV (58.71 percent). The National Social Security Fund (NSSF) also owns 7.69 percent while CDC of the UK owns 9.97 percent.

Other investors of Dfcu Bank are; Kimberlite Frontier Africa Naster Fund, SSB-Conrad N. Hilton Foundation, Vanderbilt University, Vanderbilt University, Blakeney Management among others, including retail investors.

In other words BoU sold CBL to Dfcu well knowing its workers would benefit from the deal. Having acquired CBL, Dfcu Bank would see its net profits jump to Shs127.6 billion in the year ended 31 December 2017 from Shs46.2 billion registered in 2016. Much of the profits were realised from CBL acquisition.

Additionally BoU used MMAKS Advocates in the transaction of CBL business well knowing they were directors in other commercial banks that it is supposed to regulate. The two scenarios created conflict of interest as established by MPs on Cosase and conceded by Tumusiime-Mutebile.

“We take note of the committee’s concern of conflict of interest with respect to service providers and directors of supervised financial institutions. As previously mentioned, Bank of Uganda will review its policy on conflict of interest and its implementation,” he said in late December, 2018 as the committee wound up business before Christmas holiday break.

“Allow me mention that the staff changes, which were made in February, 2018 were intended to address some of the challenges that we knew but which have now become all too evident in the last few weeks. The interaction process with COSASE so far, has helped to expose some of the challenges to the natural medicine of air and light so that we can address them better. For that, Mr Chairman, we are grateful. Further changes and remedial action will be done in due course in order to restore the Bank’s image,” he added.

The above statement by the governor confirmed that all was not good at BoU. Mutebile sacked Ms Bagyenda in February following the CBL scandal and replaced her immediately. Bagyenda is said to have been at the forefront of transferring CBL to Dfcu Bank without following proper guidelines especially to bring CBL into compliance.

Section 89(5) of the FIA states that the central bank shall exercise statutory management over a financial institution for the minimum time necessary to bring the financial institution into compliance with prudential standards.

In achieving the above function, Mr. Muwanga, the Auditor General quotes Section 90(4) (c) of the FIA 2004 requires the statutory manager to evaluate the capital structure and management of the institution and recommend to the Central Bank any restructuring or re-organization which he or she considers necessary and which, subject to the provisions of any other written law may be implemented by him or her on behalf of the institution.

That BoU spent Shs478 billion as liquidity support as claimed but failed to adhere to the above guideline is an indication that it was not the intention of CBL owners to collapse their own bank especially that they needed Shs157 billion to stabilise but was denied the money and instead BoU senior staff splashed Shs478 billion in the guise of statutory management, yet they can’t account for it.