Kadaga orders Auditor General to probe BoU over fraudulent Crane Bank sale - Daily Post Uganda

Kadaga orders Auditor General to probe BoU over fraudulent Crane Bank sale

Auditor General Muwanga and Kadaga.

The Speaker of Parliament, Rebecca Kadaga has ordered the Auditor General to go ahead and carry out a forensic audit into Bank of Uganda over the October 2016 takeover of Crane Bank and its subsequent sale to Dfcu in January 2017.

In a May 10 letter to the AG, Ms Kadaga quashed the protests by BOU officials led by deputy governor Dr. Louis Kasekende and backed by legal opinions from an official of the office of the Solicitor General, saying that the Office of the Speaker of Parliament retains the mandate to sanction such clarifications.

“Therefore in response to your request for guidance, you should proceed with the audit as directed and submit your report to my office as it is required by the law,” the Speaker wrote.

MPs had earlier insisted that an investigation into the operations of Bank of Uganda by Auditor General must go on despite protests by the Central Bank.

Deputy Governor Bank of Uganda, Mr Louis Kasekende, in an April 19 letter to the Attorney General, said the Auditor General has no authority to audit the Central Bank over its role in the closure of four commercial banks, including Crane Bank Ltd, arguing this contradicts the subjudice rule since the cases related to the collapse of the bank are before the High Court.

Deputy Governor Bank of Uganda, Mr Louis Kasekende

However, Shadow Attorney General Wilfred Niwagaba said it is only the Speaker who can make the decision on the subjudice rule and not BoU since the latter is a witness before the parliamentary investigation.

Mr Abdu Katuntu, the COSASE chairman, had earlier written to the Attorney and BoU, insisting that subjudice does not apply to auditing.

Parliament is yet to select a committee to investigate the operations of the Central Bank since the Deputy Speaker Jacob Oulanyah said this was not necessary since Cosase and courts are handling the same issue.

COSASE’s Abdul Katuntu

MPs want to conduct a broader investigation into the management of BoU after some employees in March petitioned the House, accusing the Central Bank’s senior managers of misconduct.

They also want to comprehensively investigate the motive behind recent staff changes made by BoU Governor Emmanuel Tumusiime-Mutebile last month, which were resisted by some central bank staff.

Inspector General of Government Irene Mulyagonja blocked the changes of eight executive directors, 13 directors, 24 deputy directors and four staff confirmations, key among them the transfer of Ms Justine Bagyenda, the former director of commercial banks supervision.

Ms Justine Bagyenda, the former director of commercial banks supervision.

They will also investigate the circumstances under which Crane Bank was transferred to dfcu Bank without consultation of the key stakeholders. This website revealed that Crane Bank Ltd was sold to dfcu Bank by BoU at a paltry Shs200 billion without consulting the shareholders while auditors valued it at Shs1.3 trillion.

The January 25, 2017 sale agreement was signed by BoU Governor Tumusiime Mutebile and Mr Juma Kisaame, the managing director of DFCU, without considering the interests of major shareholders of Crane Bank Ltd.

Last year, former shareholders of National Bank Commerce dragged BoU to Commercial Court for allegedly wrongfully closing his bank (NBC) in 2012. The assets of the bank were later sold to Crane Bank that also collapsed last year after becoming ‘significantly undercapitalized’. The Bank’s former Chairman Mr Amos Nzeyi avvers that NBC’s financial health had stabilized by the time BoU closed it and now wants court to hold BoU for alleged failure of supervising the banking sector.

NBC’s major shareholders, Amos Nzei and Amama Mbabazi

Recently, Meera Investments dragged Dfcu Bank to the Land Division of the High Court, seeking to reclaim its 46 branches which it says were acquired illegally following the dissolution of Crane Bank.

After the take over of Crane Bank, Dfcu’s profits were reportedly believed to have jumped from Shs 31bn to Shs 150bn within just three months.

It should be recalled that Crane Bank that helped turn around Dfcu Bank profits had been put under receivership by BoU a few months earlier reason being that it was under-capitalised and posed systemic risk to the banking sector.

Sudhir Ruparelia with his lawyers at the Commercial court in Kampala

The Crane Bank shareholders claim that the material terms of the agreement were “agreed fraudulently and secretly outside the agreement by BoU officials and DFCU officials.”

The shareholders are also accusing the Central Bank and DFCU of among others for 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.

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