Having received numerous complaints about the closure of commercial banks by the Bank of Uganda (BoU), parliament’s committee on Commissions, State Authorities and State Enterprises (COSASE) in November 2017 ordered the Auditor General John Muwanga to undertake a special audit on the closure of seven commercial banks by BoU.
As such, Mr. Muwanga carried a special audit of BoU on the closure of seven defunct commercial banks that included: Teefe Trust Bank, International Credit Bank, Cooperative Bank, Greenland Bank, Global Trust Bank Uganda, National Bank of Commerce and Crane Bank Limited.
Some of Mr Muwanga’s objectives in the audit of BoU included; to establish whether proper inventory of the assets and liabilities of the banks was undertaken at closure in line with sections 9 (3) of the FIA, 2O04 and section 32 (3) of the FIS, 1993; to establish whether the liquidator (BoU) appropriately managed the sale of assets and accounted for the funds resulting from the sale and whether the Receiver (BoU) appropriately transferred assets under the purchase and assumption agreement as well as to establish; whether the statutory Managers performed the functions in line with the FIS t 993 and FIA, 2004.
BoU ‘s legal department, headed by Margaret Kasule is supposed to be the institution’s authority on legal issues, more so to draft legal documents but also is supposed to shield the institution from situations where it is likely to attract legal suits. However, this department has turned out to be useless.
The department and more so its head Ms Kasule has turned to be a briefcase for people like Deputy Governor Louis Kasekende, a couple of to top executives plus conflicted lawyers whose purpose is to see that the correct side of the law isn’t upheld but rather protect their loot from the processes of these closed banks and this seem to be the case with the current case of Crane Bank in receivership Versus Sudhir.
For instance, when Mr Muwanga, the Auditor General wanted to launch his audit into BoU over the closure of the banks, the institution would first frustrate him that it would amount to sub judice since there was a related case in court. That was the ill-advice of BoU’s legal department, though it would be upheld by the Solicitor General. It would take the courage of Speaker of Parliament Rebecca Kadaga to insist that the Auditor General probes BoU as the exercise had nothing to do with the case in court where BoU/Crane Bank In Receivership had sued Sudhir Ruparelia for allegedly swindling Crane Bank Limited of Sghs397 billion.
Further, the Auditor General in his special audit report observes that some of the documentation relating to Teefe Trust Bank specifically the inventory report, loan schedules, customer deposit schedules, statement of affairs and reports supporting assets and liabilities taken over by BoU was not availed him as some were reported missing. The job a serious legal department is to ensure that such documents are kept tightly in case of a legal suit. Yet Ms Kasule and her juniors in the legal department where all ignorant about the whereabouts of several documents during COSASE probe.
Further, Kasule during COSASE surprised MPs when she told them that former Minister of Finance, the late Jehoash Mayanja Nkangi closed bank (names withheld) by way of issuing a press release. She would be challenged by the then COSASE Chairman Abdu Katuntu who reminded her that a press release is not a government document used in the closure of any institution.
Use of conflicted lawyers in BoU case
The Commercial court in December 2017 disqualified Bank of Uganda (BoU) lawyers from sh397b Sudhir Ruparelia’s case, citing conflict of interest. In his ruling, the head of the division, Justice David Kutosi Wangutusi stated that David Mpanga of A.F. Mpanga Advocates and Timothy Masembe of MMAKS Advocates acted in violation of the Advocates (Professional Conduct) regulations in representing BoU.
Section 4 of the regulation provides that an advocate shall not accept instructions from any person in respect of a contentious or non-contentious matter if the matter involves a former client and the advocate as a result of acting for the former client is aware of any facts which may be prejudicial to the client in that matter. This meant that BoU had to hire services of other lawyers to represent it in the main suit. There is no one else to blame for this situation it’s BoU’s legal department that should have done a due diligence on A.F Mpanga Advocated and MMAKS Advocates. Of concern is that taxpayers continue to lose money in such arrangements dues to carelessness of BoU’s legal department.
However, according to our investigations, there was no way Ms Kasule would do away with the ‘conflicted’ lawyers given that her former boss at BoU Joseph Bossa who recruited works with Mr. Mpanga at his law firm and mind you, it should be remembered that it is this same Bossa who sourced for Mpanga and MMAKS Advocates as private attorney for BoU.
Crane Bank In Receivership suit against Sudhir and Meera Investment
Just on Monday, Commercial Court judge, Justice David Kutosi Wangutusi ruled that Crane Bank In Receivership which sued Sudhir Ruparelia and Meera Investments Limited for Shs397 billion violated the law which does not give companies such circumstances to sue. Justice Wangutusi awarded Sudhir and Meera Investments Limited costs of the suit. It was upon BoU’s legal department to know that Crane Bank in Receivership had no right to sue, as per the existing law.
Kasule’s department also failed to let her bosses at BoU to know that that even if Crane Bank In Receivership had the right to sue, it had ceased to own property and not existence.
“That notwithstanding even if Crane Bank In Receivership could sue, by the 30th June 2017 when they filed the suit they were not in a position to do so. They had ceased to own property and their liabilities and assets had all been exhausted,” said the judge in his ruling.
The sum total is that the Respondent at the time it filed this suit was not in existence its lifetime having been terminated when it was surrendered to DFCU Bank whose consideration was the DFCU assumption of the Respondent’s liabilities which assumption was paid by conveying her assets to DFCU Bank, added the judge.
Interesting it is Kasule who swore an affidavit on behalf of BoU who helped Crane Bank In Receivership to lodge a case against Sudhir and Meera Investments. That decision by Kasule made the judge to award costs of the suit to Sudhir, which BoU has to pay. But we know BoU uses taxpayers’ purse. So we shall lose that money because of BoU’s legal department’s carelessness in handling legal issues.
“I am an adult female Uganda of sound mind and the Legal Counsel of Bank of Uganda which is the statutory receiver of Crane Bank Ltd in Receivership and I swear this affidavit in that capacity,” Kasule swearing an affidavit in Shs397 billion case.
From the foregoing Justice Wangutusi said: “There is no doubt that the suit was filed by Bank of Uganda. Since section 96 of the Financial Institutions Act insulated Crane Bank under Receivership from court proceedings, execution or other legal processes the person that should pay costs should be the person who instituted the suit and that is Bank of Uganda. This is so because Crane Bank in Receivership had no capacity to foot the costs and much so the Bank of Uganda that instituted the suit was aware of this incapacity.”
The Crane Bank case is just one example, shareholders of National Bank of Commerce and a few others have considered a legal battle to have their bank restored or be compensated. BoU’s legal department still will carry the blame for not advising rightly. The weakness of the department is the reason BoU relies more on the expensive external lawyers who dupe taxpayers. The question arises as to why that department exists?