The 25th of January 2017 will go down in history as the day the most fraudulent transaction, the sale of Crane Bank Limited (CBL), in Uganda.
happened. This is the day parties involved in the Purchase of Assets and Assumption of Liabilities Agreement between the DFCU Bank and Bank Of Uganda that saw DFCU take over Crane Bank Limited(CBL) effected this gross fraud. As DFCU went about their business of integrating the assets and liabilities of Crane Bank Limited into its business, making swift physical moves applauded by the general public, they seemingly forgot about the interests of the shareholders. Finally, in a heroic act, a whistleblower has brought to light in a leaked agreement how one of the best local investments was led to its downfall.
A simple glance at the agreement indicates an arrangement that caters only to the interests of depositors and creditors of Crane Bank Limited and not the shareholders . Without a doubt, this is a move that indicates fraud. For a process that began in October 2016, this seems like a gross and intended oversight by both the Central Bank and DFCU contrary to the Financial Institutions Act.
This act was orchestrated by individuals who sat and agreed to sell and buy Crane Bank. Since all of them knew what they were doing was illegal, they signed an agreement where they all swore to keep secret the transaction as long as they lived. The four were, Mr Emmanuel Tumusiime Mutebile, the governor of the shaky Bank of Uganda; Margaret Kasule, BoU’s executive secretary; Juma Kisaame, the managing director of Dfcu Bank and William Sekabembe the executive director.
For DFCU, the deal was an opportunity to expand on the financial mistakes by another strong financial institution, for the Central Bank, an opportunity to protect the financial system and regain the trust of the citizens, for Crane Bank Limited, apparently an opportunity for local businessman Sudhir Ruparelia to concentrate on other business ventures and for shareholders, the beginning of a never ending nightmare.
It was all smooth sailing when DFCU’s Board of Directors approved the transaction of Crane Bank, the fourth largest bank in the country with assets valued at Shs1, 794.34 billion (as of 2015). The ship hit the iceberg when shareholders realised that Crane Bank’s Assets had only been valued at Shs10 Billion instead of the clear Shs1.3 trillion by the time of the takeover. The shareholders emphasise that BoU also undervalued the listed leases of the Crane Bank, set at a paltry Shs10 billion by PriceWaterHouseCoopers.
‘The Agreement does not list assets (outside branches) that DFCU was taking over. The Agreement does not itemize the list of assets acquired (save for the leases). This is very strange given that CBL’s total assets were worth Shs1.3 trillion at the time of BoU’s takeover of the Bank, but the listed leases in the agreement were given an undervalued book value of only 10 billion by BoU’s accountants, PWC. How can this agreement covering assets only itemise Shs10 billion only worth of assets?’ the whistleblower wonders.
Further investigations unbeknownst to the public have indicated that this swift sale agreement will go down in the books as one of the most silent and strangest sale agreements. Nowhere in the sale agreement is the value of the liabilities of CBL assumed by DFCU or value of assets taken over by the same institution stated.
There is little or no indication at how the value was arrived at. As if to throw another spanner into the works, the agreement is silent on the net purchase price. This begs the question, ‘Was there some intentional underhand dealing similar to barter trade?’ To the naked eye, it would appear that together with some legal advisors, there were some secret dealings that resulted in DFCU acquiring assets of Shs1.3 trillion at a shocking price of just Shs200 billion.
“The receiver (Bank of Uganda) shall indemnify the buyer, hold harmless and defend the buyer from all losses, claims, and legal cases and the buyer shall be entitled to take out third party notice against the receiver where liability, losses, demands, claims and/or obligations arise against the buyer after the asset purchase in any matter in which the transfer of any of the assets or liabilities is challenged.”
Contrary to what the general public knew, Bank Of Uganda didn’t protect the employees of Crane Bank as they had promised.They instead added to the unemployment statistics of the nation by letting DFCU bank went ahead to lay most Crane Bank Limited employees after the take over was complete, knowing very well that the central bank would not interfere in the process, as stated in the sale agreement.
“The buyer will determine in its sole discretion whether it will continue to offer employment to the employees and in the event that the buyer opts to terminate or render redundant any employee within a period of 2 (two) months from the completion date, the receiver shall meet the terminal benefits payment of such employee including indemnifying and holding the buyer harmless against any claim by any employee in relation to the said termination or redundancy.”
As if to mock Crane Bank Limited and the proprietor more, DFCU Bank was assured that it would enjoy silent possession of property owned by the well known Meera Investments. BoU and DFCU bank are accused of unilaterally taking over the properties/leases of Meera Investment Limited (MIL) with consent.
‘Both BoU and DFCU Bank were aware when they were entering into this Agreement that they could not transfer the leases from CBL to DFCU without the knowledge or written consent of the Owner (Meera Investments Limited). Nevertheless, they went ahead to purport to transfer them on the understanding that BoU would try to procure the Freehold ownership and sell the same to DFCU within two years’, the shareholders clearly emphasise.
Recently, Crane Management Services, a real estate company that lets out properties on behalf of Meera Investments Limited, demanded over Shs4 billion from the DFCU Bank as rent arrears accruing from 13 properties, some with multiple units, which were being rented by Crane Bank, now in receivership.
In the plaint filed by Messrs. Magna Advocates dated February 15, the Bank of Uganda was also dragged into the picture for transferring the assets and liabilities managed by Crane Management Services including the 13 properties to DFCU Bank on January 25, 2017, in error.
‘On the 25th day of January 2017, the Bank of Uganda as a Receiver represented that it had transferred the assets and liabilities of Crane Bank Limited to the Defendant (DFCU Bank)’, Magna Advocates averred, adding that the latter also acknowledged acquiring the properties now under contestation.
The various rent obligations claimed by the plaintiff, all in one-year pre-paid contract in the period between March 2016 and July 2021 and now being demanded are US$385, 728.54 (approx. Shs1.15 billion) and Shs 2, 998, 558, 624, and for Plot 9 Market Street (Crane Bank branch and ATM); Plot 1-13 Jinja Road (Crane Bank branch); Plot 47 Republic Road Mbale (branch); Speke Hotel (ATM); Plot 9 Cooper Road (Crane Plaza/branch) and Plot 20 Kampala Road (branch).
Other rental arrears being demanded include those for apartments on Bombo Road, Kira Road, William Street, Market Street and Nkrumah Road; Plot 28 Luwum Street, and eight staff apartments on Snay Bin Amir Street and several flats on Plot 22/24/26 on Kampala Road.
According to the plaint, the DFCU Bank, as acknowledgment that it had taken over tenancy from Crane Bank, made a series of payments among them that of US $81, 408 and Shs219, 210, 728 to Crane Management Services.
Other payments made include that of Shs410, 303, 436 for utilities; US $531.000; US $362, 524 and US $168, 476.
‘Subsequently, by a letter dated 4th May 2017, Bank of Uganda as the receiver of Crane Bank Limited (in receivership) informed the plaintiff as the duly letting agent of Meera Investments Ltd that BOU in its capacity as the receiver had transferred the right to and benefit of the pre-paid rent in respect of some of the suit properties formerly occupied by Crane Bank Ltd (in receivership) and managed by the Plaintiff to the Defendant as at the 25th of January 2017’, the plaint by Magna Advocates stated in part.
DFCU, the corporate friendly bank is about to face a storm few financial institutions can weather. The bank whose major shareholders are the Netherland-headquartered Arise B.V, CDC Group, the National Social Security Fund and Kimberlite Frontier Africa Naster Fund will for a long time be involved in wearisome and costly suits to prove how and why within 90 days, they were able to register a five fold increase of Shs31 billion to over Shs150 billion in this unsteady economy.
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