DFCU profits expose BoU ‘sweetheart deals’

 Sweet heart deals

Sudhir’s lawyers have described the deal between DFCU and BoU as a “sweetheart” deal. An investor who in December met President Yoweri Museveni with intentions to acquire the bank told The Independent on condition of anonymity that the bank they were looking to acquire for over Shs400 billion, DFCU acquired for “zero”.

The Independent has learnt that about eight sets of investors flew into Kampala looking to buy Crane Bank or at least some of its assets. One of these groups was a consortium of international investors, which had a major Srilankan retail bank as part of it.

Representatives of this group even met President Museveni to get him to intervene so as to get Bank of Uganda (BoU) to pay attention to their offer. At the time, President Museveni appeared keen to let BoU officials deal with issues of Crane Bank independently.

Apart from this group, there was a company from Boston, another from Portugal and another company called Atlas Mara linked to former Barclays boss Bob Diamond and tycoon Ashish Thakkar.

Sources close to Sudhir say another set of investors were interested in just the Non-Performing Assets of the bank, which amounted to Shs700 billion. For these investors, the attraction was the collateral, insiders say. Although people had defaulted on their loan obligations, the collateral attached to these loans is always more than double the value of the loans. The collateral on some of these loans included the most valuable properties in Kampala like businesswoman Amina Mohmmad’s Oasis Mall, tycoon Patrick Bitature’s Skyz View Hotel, among many others. Amina and Bitature held some of the top six non-performing loans at Crane Bank.

Even Sudhir’s lawyers had investors from the U.S. who were looking to do due diligence on the Crane Bank and buy it. Insiders say, BoU and the lawyers acting for it, frustrated all these investors by denying them access to do due diligence on the bank. Finally, when they accepted, BoU officials offered a short window of a few days, for those interested to bid.

These revelations come as questions emerge and scrutiny intensifies about the nature of the deal BoU entered with DFCU. Questions are being asked as to why BoU officials locked out all these potential investors and did not open up the transaction for fair competition; especially now that it has emerged that BoU has already registered losses over the same.

Apart from affecting the operations of the central bank, the saga has also dented its reputation. The Crane Bank takeover has been described by some observers as the “biggest asset grab by government”.

Amongst the grabbed assets, Sudhir’s lawyers list Crane Bank branches, which legally belonged to Sudhir’s Meera Investments Limited and had been leased to Crane Bank and were valued at Shs100 billion.

However, BoU whittled down the value to a paltry Shs10 billion. Yet when DFCU acquired them, it automatically valued them at Shs47 billion – making a clean profit of Shs 37 billion by the stroke of a pen.

Sudhir’s lawyers base on these revelations to conclude that the terms of the agreement were agreed fraudulently and secretly in documents outside the main sale agreement.

“The net result of these fraudulent side deals was that DFCU got a bank with 1.3 trillion of Assets for a net payment of just 200 billion (payable under side deals over a period of about 3 years),” reads a memo prepared by Sudhir’s lawyers, “all of this was to the detriment of the shareholders and other legitimate creditors and for the benefit of DFCU and the BOU officials and their transaction advisors.”

The lawyers add that those who structured the sale transaction appear to have been compromised and working for both parties secretly.

“They (lawyers) represented BOU and connived with some BOU officials to give DFCU a sweetheart deal and then they immediately crossed over and went to work for DFCU to collect money and fees on the same assets they had just transferred to DFCU.”

Immediately after concluding the sale of Crane Bank to DFCU as Bank of Uganda lawyers, Sudhir’s lawyers claim, both MMAKS Advocates and AF MPANGA (BOWMANS) switched sides to work for DFCU to collect loans and earn fees from the same Crane Bank loans they claimed were written off and uncollectable. To this day, the two law firms, Sudhir’s lawyers say, continue to work for DFCU to collect Crane Bank money.

While Mpanga’sBowmans conducted a review on the non-performing portfolio for DFCU, court documents indicate that MMAKS is handling some 49 cases on former Crane Bank assets on behalf of DFCU.

Sudhir’s lawyers claim that Bagyenda gave DFCU permission to secretly account for these bad loans on a secret basis outside the official books of DFCU Bank.

Sudhir’s lawyers claim the money DFCU is collecting from these loans belong to him and other former shareholders of Crane Bank.

It is on the basis of these revelations that the BoU, DFCU deal continues to star controversy.