Dfcu: A Review Of Crane Bank’s Contested Sale As London Judge Warms Up To Hear Case

Ugandan businessman Dr Sudhir Ruparelia won a big battle in a London Court of Appeal with a
judge throwing out an application by DFCU seeking to block a case exposing how the financial
institution fraudulently bought Crane Bank (CB). 

The ruling paved the way for the full court trial that will potentially assist the world to know and
understand what exactly transpired behind the scenes as top officials of the Bank of Uganda (BOU)
and Dfcu negotiated the sale and purchase of CB. 

In the interim, the Bulletin Media website reviews how CB was assigned to Dfcu by BOU with
the view to offer our readers in advance a glimpse into what is likely to transpire during the full
case’s trial in London. 

Bank of Uganda (BOU) led by its then Governor, now deceased Emmanuel Tumusiime Mutebile
shut down CB in October 2016, claiming the bank had lost fifty percent of its core capital,
posing a systematic danger to the country’s economy itself.

The shutdown of CB happened about three months after BOU had on July 1, 2016, taken over that
financial institution, citing insolvency issues on the part of CB. 

It needs to be pointed out at this very juncture that at the time of the takeover of CB, BOU
categorically confirmed how CB was the third leading bank in Uganda. 
Intriguingly, following Dfcu’s acquisition of the so-called insolvent CB, its profits astonishingly
soared by several folds. I will demonstrate how. 

While Dfcu’s profit had been recorded by the bank itself as having been a paltry UGX25Bn a year before its acquisition of CB on January 1, 2017, the same would, merely six months later,
implausibly jump to UGX114Bn. 

Curiously, not only had BOU sold off CB to Dfcu at just UGX200Bn not cash,  but turned over
to the assignee the depositors’ savings worth UGX1.3 Trillion on top of the entire CB’s recently
acquired ATM technology plus 48 buildings housing then CB’s countrywide branches. 
Meera Investments Limited, a real estate firm under the Ruparelia conglomerate, has since
wrestled back from Dfcu the 48 buildings previously dubiously assigned to Dfcu as part of CB
whereas not.

Compellingly, upon Dfcu’s acquisition of CB, the bank went on, in just six months, to turn into
the biggest bank in Uganda.

Before the closure of CB, its shareholders had the knowledge, consent, and approval of
BOU reportedly managed to mobilize about three million United States dollars (about
UGX84Bn) towards the recapitalization of their bank. 

Notably, the shareholders had mobilized those huge sums in merely three months, implying they
stood a chance to mobilize the balance, keeping their back afloat.
The shareholders after mobilizing the above-mentioned funds, were now in the process of
scouting for a strategic investor to total up what they had managed to mobilize with the view to
revive the health of their bank.

One of the shareholders, Joseph Biribonwa, who was also the chairman of Crane Bank, shares
that before they could conclude the processes of recapitalization of their bank, alas, BOU
suddenly moved in, abruptly closing the financial institution.

Although BOU shut down CB, as per Dr Sudhir Ruparelia, another shareholder of the bank,
BOU never returned the money they had mobilized as the shareholders of CB to recapitalize
their bank.

On top of that, Sudhir complains, at the same time as they were scouting for a strategic investor,
BOU was on the other hand also making up news of the purported bad situation at CB, scaring
off potential investors capable of recapitalizing their bank.

That even the regulator stubbornly  retained and continues, moreover, to hold onto the Bad book,
referring to the UGX500Bn loans that CB had prior to  its closure by the regulator, lent out, with
the shareholders terming the same as being inconsistent with the Financial Institutions Act(FIA).
Upon taking over CB, BOU appointed a statutory manager, Mugwanya Katimbo to run its
affairs, but the Government’s Auditor General, John Muwanga states how his terms of reference
were vague particularly when it came to the issue of the deliverables. 

Even as BOU had appointed Katimbo to manage the affairs of CB, oddly, the regulator would
negotiate and sell off the bank without recourse to its own so-called appointed statutory manager.
Katimbo confirms how BOU never made him aware at all as it negotiated and finally sold
off CB to Dfcu. “I just learned about the sale from the newspapers,” the respectable veteran banker
is on record as affirming.

BOU timed the occasion that Katimbo had gone to and away on his farm, selling off CB in his
absence and without his knowledge as the so-called statutory manager. 
As we are still at it, UGX478Bn was extracted from BOU under the excuse of CB’s
recapitalization, and the same is consented to by BOU. Whereas that was money which
was supposed to be lent to CB or it shareholders by the regulator, the necessary agreement shows
that the lender was also the borrower at the same time all in one. 

The then BOU Deputy Governor, Louis Kasekende underplayed the glaring anomaly, claiming
how BOU acted for and on behalf of the depositors of CB. Yet the same BOU would later demand for the refund of the UGX478Bn from the CB’s shareholders no matter that the regulator had not lent the stated sums of funds to them in the first place.

On top of that, the shareholders of CB had asked for about UGX170Bn to recapitalize their bank.
Not only did the concerned authorities at BOU extract UGX478Bn from the regulator’s coffers,
but did not give the stated funds to the CB shareholders. Neither did they account to them how
that money had been spent for the purpose. 

Dfcu’s then MD, Hajj Juma Kisaame, in a further shocking revelation of the wrong procedures
adopted by BOU during the execution of the execution, relates how disgraced Justine Bagyenda,
BOU’s then Director in charge of commercial banks’, casually introduced the controversial deal
to him via a telephone conversation.

Kisaame shockingly reveals how Bagyenda suspiciously advised Dfcu to name the price at
which they were willing to purchase CB, quoting the UGX200Bn and the trio of Governor
Tumusiime Mutebile, his deputy, Louis Kasekende, and Bagyenda prior to carrying out prior
valuation of what they were setting out to sell, suspiciously accepted the buyer’s outrageously
evidently undervalued price. 

Pleasantly, the president has since fired Bagyenda and Kasekende over the dubious transaction
but spared Mutebile, who signed the agreement personally, leading to the disputed sale itself on
behalf of BOU while Kisaame signed on behalf of Dfcu.

Dfcu has since also relieved Kisaame of his MD duties ostensibly to keep face in light of the
deeply disputed transaction, pending investigation by the London Judge.

We understand the president spared Mutebile since he was ostensibly trapped in the deeply
contested deal by his more profoundly sharper subordinates in Bagyenda and Kasekende.
We rest our case as we fervently wait for the hearing of the case in London to determine the
legality or lack of it of the whole transaction.