Former shareholders of Crane Bank are challenging Bank of Uganda on the manner in which the Bank was sold off to Dfcu Bank early last year.
This comes after the leaked 22-page sales agreement which shows how Crane Bank Limited was fraudulently sold to Dfcu Bank by Bank of Uganda and now the former Crane Bank shareholders are taking legal action against the Central Bank.
The agreement was signed on January 25, 2017 between the central bank governor, Tumusiime Mutebile and Juma Kisaame, the managing director of Dfcu.
Crane Bank after being placed under receivership by the Central Bank in October 2016 was sold off to Dfcu on January 25th last year, on grounds that it had become “grossly” insolvent.
But the Crane Bank shareholders, who are now threatening a lawsuit, argue that the Central Bank, disregarded a number of factors, breached several laws, and made a number of miscalculations before handing their Bank to DFCU.
The shareholders argue that the agreement which BoU entered with Dfcu, two days before the sale on January 25, disregarded their (shareholders) rights and flouted the provisions of the Financial Institutions Act.
They say that the Central Bank, in claiming under the agreement to care for depositors and creditors of Crane Bank, forgot its mandate of catering to the interests of the shareholders as well, as provided for under the Act.
“The nature, structure and detail of the agreement are directly intended to defraud the shareholders and to benefit DFCU and Bank of Uganda at the expense of the Shareholders,” complained the shareholders in a document that DailyPost has accessed.
“Because the interests of the shareholders were completely ignored and deliberately disregarded, DFCU now finds itself embroiled in a series of expensive and ruinous suits relating to this transaction, valued at several million dollars, from which it may never recover.
“DFCU is going to wish it had never bought these assets in the first place.”
The shareholders have now determined to sue the Central Bank “for the fraud perpetrated in this transaction” against them.
The shareholders of the bank included: Sudhir Ruparelia (28.83%), Ms Jyotsna Ruparelia (13.8%), their children Ms Sheena Ruparelia, Ms Meera Ruparelia and Mr Rajiv Ruparelia (1.99%), White Sapphire (47%), Jitendra Sanghani (4%) and Kampala businessman, Tom Mugenga (0.003%).
Even though the Central Bank is immune under the Financial Institutions Act, these say the immunity doesn’t cover fraud.
“Because there is fraud against the shareholders, Bank of Uganda, Bank of Uganda’s employees and legal advisors involved in the fraud shall also face ruinous civil and criminal legal liability.”
The shareholders also highlight a number of loopholes in the BoU – Dfcu agreement, such as the fact that it doesn’t state the value of liabilities assumed by DFCU or the value of Assets taken over by DFCU.
The Agreement apparently does not state the amounts of money to be paid by DFCU as a net purchase price; or the payment terms for monies DFCU, or the assets (outside branches) that DFCU was taking over. It also does not itemize the list of assets acquired (save for leases).
“This is very strange given that CBL’s total assets were worth 1.3 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”
The shareholders claim that the material terms of the agreement were “agreed fraudulently and secretly outside the agreement by BoU officials and DFCU officials.”
“The net result of these side deals was that Dfcu got a bank worth 1.3trillion in assets for a net price of just 200 billion,” the document reads.
After taking over Crane Bank, Dfcu’s profits reportedly jumped from 31 billion to 150 billion within just three months.
In the document, the shareholders go on to accuse the Central Bank and DFCU of among others; taking over the leases without the knowledge and consent of the lease guarantor; failing to value Crane Bank assets to determine their market value before sale, and collusion to defraud the taxpayer and Crane Bank shareholders.