The secrets behind the Sudhir saga

How BoU is overseeing the biggest asset grab ever

Kampala, Uganda | HAGGAI MATSIKO | On July 3, Crane Bank which is under receivership by Bank of Uganda (BoU) sued its former owner, Sudhir Ruparelia, and a company called Meera Investments Ltd also owned by Sudhir in what might turn out to be a very interesting case – if it proceeds.

The central bank is making three charges against Sudhir; first that he on several occasions over many years fraudulently took money totaling about Shs340 billion from his own bank; two, that in 2013, he fraudulently shifted ownership of the 48 bank branches from his bank to another company he owned called Meera Investments and then proceeded to charge his own bank very high rent, and three that he failed to remit Shs52 billion to NSSF as his workers’ compulsory savings.

According to the summons to Sudhir, the cause of action or reason why he is being sued individually for alleged wrongs possibly committed under the hand of the bank’s managers and officials of Meera is because he owned and controlled the two companies 100% even if he deceived BoU, his customers, and auditors about this. The BoU lawyers allege that Sudhir concealed his 100% ownership of Crane Bank by introducing fake shareholders including his wife and three adult children, one Kasiklal Kantaria of a phantom company called White sapphire, one Jitendra Sanghani, and businessman Godfrey Kirumira.

The case is interesting partly because, if BoU had exercised its supervision role of Crane Bank to the letter under the Financial Institutions Act, the alleged wrongs would possibly not have happened or would have been quickly sorted out.

“By suing Sudhir, the central bank is exposing its own incompetence,” one source close to the case told The Independent.

After all, Crane Bank is not the first bank to be taken over under similar accusations. In 1999, Greenland Bank was taken over and its founder Dr Sulaiman Kiggundu, who had been a governor of the central bank, was jailed. In 2012, the National Bank of Commerce of then-prime minister Amama Mbabazi, businessman Amos Nzeyi, and current Prime Minister Ruhakana Rugunda was taken over.

But the Sudhir case also exposes either the incompetence or collusion of the regulators because it is difficult to understand how Sudhir’s 100% ownership of the bank could have gone unnoticed for 22 years from 1995 when the bank was opened.  By 2015, Sudhir’s bank was the fourth largest bank by assets – up to Shs1.8 trillion. But even before he started Crane Bank, Sudhir’s unorthodox financial tendencies were well known from the days he was netted at Entebbe airport allegedly with bundles of dollars he intended to illegally take out of the country. It is also difficult to understand how NSSF could have failed, for over 10 years, to collect Shs52 billion from a big company like Crane when it harasses smaller companies every day for smaller sums. Based on a statement made by prominent lawyer who was involved in the Greenland Bank case, Erias Lukwago; who is the Lord Mayor of KCCA, the popular view is that “this is a case of a deal gone bad”.

It is perhaps for fear of such dirty details being exposed that neither President Yoweri Museveni and BoU nor Sudhir wanted this case to go to court. They, in fact on March 20 signed a secret deal to ensure Sudhir is not sued.

BoU lapses exposed

Up to this point, claims that Uganda’s financial sector is very well regulated by individuals of high integrity, including from BoU, have been unchallengeable. That claim is now shaky.  It has also emerged that apart from the principal actors in this case; Museveni, Mutebile, and Sudhir and their trusted confidantes and aides, nobody knows for sure what the Sudhir saga is really about or how it will end. According to some observers, because of the secrecy surrounding what is being seen as expropriation; the state’s grabbing of Sudhir’s property, other top businesses are likely to reconsider keeping their investments in Uganda. Such investor fear is likely to have a chilling effect and hurt the economy.

As a result, although BoU’s taking over Crane Bank was initially seen as a positive move, increasingly and as a result of the incidents in which improper practices within the central bank are being exposed, public opinion appears to be shifting. In its most benign form, BoU is being accused of enforcing “orders from above” and mechanically and blindly running the banking sector in a manner that hurts Ugandans. The target appears to be Sudhir’s property.

In a sign that it is aware of the shifting public perception, BoU in an unprecedented move on July 13 issued a statement defending the actions its taking against Sudhir. The BoU statement was responding to accusations on social media that its officials and lawyers were conniving to award themselves billions of shillings in pursuit of the case.