Officials implicated in the controversial closure and sale of seven banks are in trouble after the Parliamentary Committee of Commissions, Statutory Authorities and State Enterprises (COSASE) report advised the Inspector General of Government (IGP) and Uganda Revenue Authority (URA) to take action on them.
COSASE investigations into BoU followed the special audit report by the Auditor General that raised a number of queries in the manner the banks were closed. Committee Chairman Abdu Katuntu presented the report on the floor of Parliament last week and will be debated today by MPs for possible adoption.
The seven banks in question include Teffe Bank, International Credit Bank Limited, Greenland Bank, Co-operative Bank, National Bank of Commerce (NBC), Global Trust Bank and Crane Bank Limited.
According to the report obtained by Business Focus, whereas section 95 (3) of the Financial Institutions (FIA) requires the Central Bank to appoint auditors on assumption of management of a distressed bank as soon as possible, in numerous cases, BoU has been appointing auditors after the sale.
“It is the Committee’s further observation that the Bank is not clothed with the authority to appoint an auditor for an institution that it has already sold and whose assets and liabilities have been passed on to a third party,” the report reads in part.
The report adds that whereas the GTB and NBC discount percentages of 20 and 30% respectively appear reasonable, the 93% discount in respect of the loan portfolio of ICB, Greenland Bank and Co-operative Bank acquired by M/s NRAC was incredibly outrageous.
“Whereas it could be difficult to establish with certainty and precision the prospects of sale and recoverable amount, the decision by BoU to undertake a desktop valuation of properties which had been mortgaged to the various banks more than eight years does not represent the realistic values at the time of sale,” the report reads.
It reveals that the consultant, M/s JN Kirkland and Associates employed by BoU to implement the exit strategy, identified the purchaser of the loan portfolio M/s Octavian Advisors which incorporated M/s Nile River Acquisition Company in Mauritius as a special purpose vehicle for purposes of entering into contract with BoU on 5th December 2OO7.
The said JN Kirkland and Associates ended up as the local agent of the M/ s Nile River Acquisition Company with for example, the rights to run an account in Citi Bank in which all recoveries of the sold loan portfolio are deposited.
The report says the Committee obtained evidence from Uganda Registration Services Bureau that M/s Nile River Acquisition Company, was not registered in Uganda as a local or foreign company which is violation of sections 369 and 370 (1) of the Companies Act.
M /S Octavian Advisors Plc was also never registered in Uganda.
It adds that records available to the committee indicate that the then Director Commercial Banking – Bank of Uganda, Mr. Ben Ssekabira, who was the agent of the liquidator/ Receiver of the three defunct banks (lCB, Greenland Bank and (Co-operative Bank) was up to the 12th August 2009 the agent of M/s Nile River Acquisition Company.
It was further noted that between 12th and 16th February 2007, Mr. Ben Ssekabira together with Mr. Kakembo Katende of JN Kirkland and Associates travelled to the United States of America to meet the management of M/S Octavian Advisors plc.
The loan portfolio sold to M/s Acquisition Company is now being managed on their behalf by M/S SIL Investments Ltd. M/s SIL Investment has been charging an interest rate varying between 21 and 25%o on the loan portfolio and recovering monies from different debtors.
“The committee concludes that the transaction between BoU and M/S Octavian Advisors Plc and her agents lacked transparency and the officers involved should be held responsible for commissions and omissions which resulted in not marshaling the greatest amount from the assets of the distressed financial institutions. The committee further recommends that the officers involved should be held responsible for conflict of interest.. The fraudulent business activities being conducted by M/s SIL Investments on behalf of a nonexistent M/s NRAC should immediately cease.”
It adds: “The Inspector General of police is required to immediately, on adoption of this report, seize all the land titles in the possession of Mr. Kakembo Katende of M/s JN Kirkland and Associates and M/s SIL Investments arising from their management of tire loan portfolio sold to M/s NRAC by Bank of Uganda.”
The report adds that M/ s SIL Investments and Mr. Kakembo Katende should render an account to the public trustee of all monies received from the time M/s NRAC ceased to exist.
“ The agency of M/s SIL Investments Ltd cannot legally exist upon dissolution of the Principal (M/s NRAC),” says the report, adding : “The Uganda Revenue Authority should take interest in the tax activities of M/s Nile River Acquisition company and its agents, M/s JN Kirkland.”
The report also calls for punishment of BoU officials, who slept on the job.
“BoU having failed to value the assets and liabilities of GTB, NBC and CBL and considering the lapse of time and impossibility in revaluation of assets should address the probable financial loss occasioned. BoU officials who failed to properly execute their duties in accordance with the law should be held responsible for their commissions and/or omissions,” says the report.