Robbed by the ‘bank’

By Patrick Kagenda & John Njoroge

Weak company law fails to protect the poor and gullible from fake saving schemes

To Gauda Tushabomwe, it seemed like a brilliant way to invest her money. Tushabomwe, at the time an accountant with Kabale Diocese, was introduced to a microfinance organisation called COWE Limited in 2005. Little did she know that she would be among over 3,000 Ugandans to be conned.

Those who fronted COWE Limited said it was a ‘purely philanthropic scheme designed to assist orphans, widows and the elderly.’

COWE recruited its victims at meetings at which it would promise loans if the ‘customers’ deposited money with them. It also promised to give 30% interest on deposits every month.

Hence the organisation attracted hundreds of people in districts of Kabale, Mbarara and Kabarole who wanted to ‘double’ their earnings.

Tushabomwe paid her registration fee of Shs 65, 000 which doubled as first deposit.

Upon payment, she was given a bank book with her account number, an identity card and a receipt. She was also given a coupon showing she would earn interest of Shs 19,500 at the end of the month.

“The following month I had Shs 84,500 on my account,’ she told The Independent. ‘I didn’t believe it so I asked if I could withdraw it. They accepted. I took home the whole amount.”

After withdrawing that money, Tushabomwe like many others was hooked. She made several deposits which totalled to Shs 25 million and started earning interest on her money. With such a huge deposit, Tushabomwe thought she could pursue her dreams including having a university education that she even went ahead to apply for mature admissions at Makerere University. She was confident that she would be able to pay her tuition fees and more since she was earning Shs 7million in interest on her Shs 25million monthly. She got admission and paid for her first year tuition fees. Soon, hell broke loose.

“I heard rumours while in Kampala that COWE was an illegal organisation. In December 2006, I visited my branch in Kabale to make inquiries. They assured me that all was a lie and my money was safe,’ Tushabomwe said. ‘They even told me I could withdraw it if I wanted to. ‘I believed them and didn’t remove my money,’ Tushabomwe recounts.

Tushabomwe came back to Makerere to study rest assured her money was safe but in January 2007, Bank of Uganda froze COWE’S accounts countrywide for operating an illegal microfinance organisation.

‘My world crumbled.’ Tushabomwe said.

Two years on, Tushabomwe has been unable to recover her initial deposit of Shs 25million. As a result she couldn’t cater for her basic needs let alone university tuition fees. Tushabomwe is living in distress and just like many in her position, government has not intervened.

Police reports show about 11 suicides were registered in Kabale in which people involved had lost their money to the COWE scheme.

After their expulsion from western Uganda, COWE relocated to eastern Uganda in February 2008, this time under the name TEAM (Together Everyone Achieves More). But it took months to discover the link between the two organizations. In October 2008, TEAM was reported to have swindled billions from once again unsuspecting depositors. The cover was blown last September after TEAM stopped honouring withdrawal demands from members claiming State Minister for Finance (Micro Finance), Gen. Caleb Akandwanaho (Salim Saleh) had ordered them to transform TEAM into a SACCO (Savings Credit Co-operative Societies).

The over 4,000 members were also duped that the group was to open up new branches to reduce on the congestion at plot 128A in Jinja central division.

The group went ahead to advertise over 100 jobs for the new branches and each applicant was asked to pay Shs 100,000 for feeding and accommodation during the training period. The training never took place and the money was never refunded.

One of the members Edinan Kawoya reported the matter to police and some staff were arrested but later released on police bond after the managers promised to resume paying people.

It took months to get the intervention of the RDC, Christopher Bagonza and the national anti-fraud squad to shut down TEAM.

Kawoya and others in Busoga region added to the long list of Ugandans that have been driven into desperation by fraudsters that are somehow allowed to operate without queries from the government.

Minister Akandwanaho told The Independent that he is aware of the groups but denied he has anything to do with them.

“We are wondering why people are going for these get rich quick projects,”he said, “We have given the people the correct channels to save and access credit through the sub-county SACCOs, but they are opting for the wrong ones.”

He said the Criminal Investigative Department (CID) has identified the groups and they are being investigated.

Some directors of both COWE and TEAM, including Nickson Balikowa, Sewava Mpologoma Nkadde, were arrested and charged on accounts of operating a financial business without a valid license and obtaining money from people by false pretence. Sewava was remanded by the Jinja Magistrates Court in December.

But the complainants have not seen justice, at least according to their account to The Independent. Paul Kiiza Tusiibula the chairman of the complainants committee said some of TEAM’s former directors are free pointing out one Colin Tusubira.

“He moves with two un-uniformed armed bodyguards,” he said.

Part of the problem is that the country has no proper laws to deal with these fraudsters.

Minister of State for Justice Fred Ruhindi on May 22, 2007 told parliament that the law to penalise fraudsters like COWE, TEAM is too weak to grant the victims justice.

“If the prosecution under the Companies Act is successful, the penalty is only the default fine and the fine is either Shs 100 or 1000. This type of remedy is not useful to the alleged defrauded parties,” he said.

According to Ruhindi, prosecution under the Companies Act is restrictive because the registrar can only prosecute in accordance with the provisions of the Act and nothing more. He even warned that attempts to deregister the fraudulent companies would lead to the alleged defrauded persons losing their money and the directors going free.

Ruhindi said the founder members and directors of COWE are: Andrew Kaggwa Kkulumba, Franklin Gessa, Nixon Balikoowa, Ms Efrance Saano, Mpologomankadde Ssewava Kagimu, Pius Kyagaba, Alex Shekanabo, James Kibalama, and Lumala Nabate.

Ruhindi noted that while COWE was registered as an NGO, there was another company by the same name of ‘COWE’ registered as a business name, possibly for fraud.

In the Financial Year 2008/09, the Minister of Finance, Dr. Ezra Suruma listed the Company Bill among efforts to be implemented this year to improve the business environment. Nothing has been done so far.

Jinja Municipality MP Nathan Igeme Nabeta says they are using the courts to see whether they can recover the people’s money and the parliamentary sector committee in charge of Savings Credit Co-operative Societies (SACCO’s) to strengthen the government’s monitoring of such organisations.

“Most of these organisations are using people’s ignorance to cheat them by fronting big names like State House and others so that people think the scheme is genuine,” he said.

At Bank of Uganda, Anthony Opio, Director Non-banking services told The Independent, that such groups are not covered by the MDI Act (Micro deposit taking institutions Act of 2003.)

“We don’t license these groups because they don’t fall into our category. We only hear of them on radio and from newspapers.”

SACCOs and other cooperative and savings bodies fall under the Ministry of Tourism, Trade and Industry but Fred Mwesigye, the commissioner for co-operatives says they are under the supervision of ministry of internal affairs.

This lack of coordination between different government sectors also dims any efforts to reduce these cases.

Despite the outcry of victims of these fraud companies, The Independent investigations found there’s still a COWE office open in Old Kampala.

With people like Tushabomwe who still live in hopelessness as COWE operates, there is belief that these fraud companies have strong backing of top government officials.