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Tirupati Sues KCB Bank Over Fraud In Shs 24.6 Billion Syndicated Loan, Accuses BoU Of Negligence

Tirupati Development (U) Limited has sued Bank of Uganda (1st defendant), KCB Bank Uganda (2nd defendant), KCB Bank  Kenya ((3rd defendant) and Financial Intelligence Authority (FIA) – 4th defendant-over a number of grievances including negligence, money laundering, fraud and conspiracy to defraud, conversion, detinue, deceit, breach of fiduciary duty, breach of statutory duty, breach of contract and injurious breach of public policy.

According to court documents seen by Business Focus, on July 17, 2012, KCB Bank Uganda and KCB Bank Kenya agreed to advance to Tirupati  a syndicated loan of US$ 7,000,000.

At the time, Tirupati held only one account with the KCB Bank Uganda.

This was after Tirupati met all the necessary requirements for the loan.

By the loan agreement, the parties agreed that an amount of US$ 5,140,000 was to be disbursed to Tirupati between July 2012 and August 2013. A further disbursement of US$ 1,584,000 between September 2013 and August 2014 was to be made. A final disbursement of US$ 276,000 was to be effected in September 2014.

While the Defendants had agreed to disburse a total sum of USD 7,000,000, only USD 6,990,000 was disbursed.

KCB Bank Uganda and KCB Bank Kenya agreed to charge Tirupati’s loan negotiation fees in the sum of 0.5% of the loan amount. This amounted to US $35,000.

During the contracting period, all principal and interest payments with respect to the loan facility were to be made through Tirupati’s dollar account.

Breach of contract

According to Tirupati, KCB Bank Uganda and KCB Bank Kenya breached their agreement when: a) They failed to disburse the total agreed amount of USD 7,000,000 (Shs 24,623,844,000), they debited the plaintiff’s account with loan negotiation fees above the agreed amount, c) They failed and willfully refused to provide the Plaintiff with a breakdown of how the loan negotiation amount charged was arrived at and d) They debited the Plaintiff’s accounts to meet costs of a suit after the parties had agreed that each party would bear their own costs in respect of the Consent Judgement in Civil Suit No. 516 of 2017.

Breach of fiduciary duty

The banks were, by law, acting as trustees of such of their client’s name and reputation, assets, accounts, money and property that were in their possession or control. They each owed the Plaintiff a duty to act lawfully, in good faith and in the best interests of the Plaintiff; a duty to not act for a purpose contrary to the purposes conferred by the financial contract signed with the Plaintiff; a duty to uphold the interests of their clients and not act so as to place themselves in a position where their personal interests did or might conflict with the interests of the Plaintiff; a duty not to make a secret profit or receive any secret payment to the detriment of the Plaintiff and a duty not to do or engage in any activity that might injure the reputation, business prospects or financial standing of the Plaintiff.

However, according to Court documents, in August 2016, the 2nd and 3rd Defendants opened and operated two separate US Dollar denominated loan accounts in the names of the Plaintiff without the Plaintiff’s knowledge or consent.

These were: Account number 1059906732 with the 3rd Defendant and Account number 2150226057 with the 2nd Defendant.

In January 2017, the 2nd Defendant opened and operated another new US dollar current account No. 2290351628 in the names of the Plaintiff, without the Plaintiff’s authorization, consent nor knowledge.

In 2018, the Plaintiff noticed and complained to the banks, about several suspicious transactions on its current and loan accounts.

KCB Bank Uganda and KCB Bank Kenya did not provide a coherent explanation for these suspicious transactions.

The Plaintiffs also made demands for a reconciliation of accounts, clarity on the status of their loan repayments, and requests for the issuance of bank statements.

“None of these requests were honoured,” Tirupati, through their lawyers of Aegis Advocates and Kirunda & Wesige Advocates say, arguing, “This inevitably led to the Plaintiffs’ failure to meet her loan obligations.”

Felt insecure, Tirupati instituted Civil Suit No. 516 of 2017 against the banks, challenging a number of breaches that they had occasioned. The suit resulted in a consent judgement agreed upon before the Plaintiff was fully aware of the extent of the transactions on its accounts.

At the time of its execution, it was agreed and understood in the aforementioned consent that the Plaintiff owed the 2 nd and 3 rd Defendants the consolidated sum of US$ 5,972,237.

This sum would be payable in instalments, the payment of which would result in the 2nd and 3rd Defendants release of securities against sums received.

According to Tirupati’s lawyers, the Plaintiff has in the period since signing the consent judgement in July 2017 to date effected payment to the 2nd and 3rd Defendants in the sum of US $ 3,988,538 against a consented demand of US$ 5,972,237. The 2nd and 3rd Defendants have also since debited the sum of US$ 995,466.78 from the Plaintiff’s accounts, which sums were not applied to loan repayments. The Plaintiff believes that her debt as against the consent sum therein should have substantially reduced if the 2nd and 3rd Defendants had properly accounted for all the funds they have received. (Attached hereto is a summary of the payments acknowledged by the 2nd and 3rd Defendants and a sample of some of the various payments.

However, Tirupati’s lawyers say that despite the payment of the above sums, the 2nd and 3rd Defendants have breached the terms of the consent by refusing to release all the titles that were pledged by the Plaintiff as security, proportional to the debt paid.

“The above notwithstanding, the defendants have continued to demand prohibitively high sums totaling US$ 4,564,859.28 (United States Dollars Four Million, Five Hundred Sixty-Four Thousand, Eight Hundred Fifty-Nine and Twenty-Eight Cents Only). This demand was not backed by evidence and the Plaintiff has reason to believe it is the product of fraud perpetuated by the 2nd and 3rd Defendants,” the lawyers.

Fraud

Tirupati also alleges fraud.

According to the Plaintiff’s lawyers, between 2018 and 2021, Tirupati wrote a series of letters to the 2nd and 3rd Defendants in which she raised a number of observed irregularities on its bank accounts with the Defendants.

Tirupati argues that the 2 nd Defendant’s refusal to give her records of bank statements of her current and loan account statements a failure which was inhibiting the Plaintiff’s ability to understand the true extent of her debt. Secondly, according to Tirupati, the 2nd and 3rd Defendants failed to provide coherent explanations for the inconsistent loan statements and balances observed by the Plaintiff on her accounts. Other arguments are that: The 2nd and 3rd Defendants failed to provide clear explanations for the existence of an unknown US Dollar account 2290351628 operated by the 2nd and 3rd Defendants on behalf of the Plaintiff; The 2nd and 3rd Defendants failed to provide clear explanations for the numerous and unauthorised transactions seen on the Plaintiff’s accounts; The 2nd and 3rd Defendants failed to account for money fraudulently taken from the Plaintiff’s accounts to pay the Defendants employees as well as disappearance of the Plaintiff’s funds meant to clear the Plaintiff’s debt obligations; The 2nd and 3rd Defendants failed to provide clear and coherent explanation for the continued and unlawful charge of inexplicable penalty interest on transactions that were not known or recognized by the Plaintiff and that the 2nd and 3rd Defendant failed to release all titles requiring release following receipt of funds from the Plaintiff.

Fraud and conspiracy to defraud

According to Tirupati’s lawyers; failing or otherwise refusing to release all the funds agreed to in the facility letter, having charged processing and handling fees in respect of the entire agreed loan amount; Mismanaging the Plaintiff’s account, using IT fraud, and failing to render proper accountability therefor;

c) Providing inconsistent and patently false bank statements; Opening and operating fraudulent accounts in the name of the Plaintiff without the Plaintiff’s knowledge or consent; Facilitating suspicious transactions in the nature of money laundering; Deliberately and wantonly holding onto or otherwise converting securities that should have been released once the Plaintiff paid the sums agreed in the Consent Judgment; Deliberately refusing to regularize the Plaintiff’s account even after she paid the initial sum agreed in the consent judgment between the parties, pursuant to which the regularization should have happened; Wantonly representing to the courts of law and the public that the Plaintiff was in default of her loan obligations whereas at the same time representing to the 1 st Defendant and the Credit Reference Bureau that the Plaintiff was not in default [Copies of adverts of the Plaintiff’s property up for auction; Unlawfully taking the Plaintiff’s funds and using them to settle legal fees whereas the parties had agreed to each meet their own costs; Deliberately and wantonly creating transactions on suspiciously created accounts in the Plaintiff’s names ; Failing or otherwise refusing to report suspicious transaction activity to the 1st and 4 th Defendants that the 2nd and 3rd Defendants occasioned on the

Plaintiff’s loan accounts; Continuing to demand from the Plaintiff sums that were not owed; Theft and or appropriation of funds from the Plaintiff’s accounts to the detriment of the Plaintiff and Representing conflicting information to different parties tantamount to fraud and conspiracy to defraud.

While the 2nd and 3rd Defendants represented to the Credit Reference Bureau that the Plaintiff’s loans were not in default, Tirupati’s lawyers say, they continued to make contrary representations to other stakeholders.

“Further, the suspicious loan accounts lead to the inference that the Plaintiff would have repaid their loans, while the 2nd and 3rd Defendants continue to represent that the actual loan account was in a default position,” reads part of the documents in our possession.

According to Tirupati, the 2nd and 3rd Defendants occasioned or otherwise facilitated the appearance of wrongly posted, unexplained transactions in the Plaintiff’s accounts which the Plaintiffs did not authorise is clear intention to defraud. Secondly, the lawyers say that the 2 nd and 3 rd Defendants unlawfully occasioned or otherwise permitted and facilitated payments of the Defendants’ agents and lawyers using the Plaintiff’s funds.

Further, according to Tirupati’s lawyers, the 2nd and 3rd Defendants misappropriated and occasioned the disappearance of the Plaintiffs funds in the sum of US$ 995,466.78 deposited on the Plaintiffs current accounts 2150226057 and 1059906732 to aid her loan repayments.

Tirupati notes that the 2nd and 3rd Defendants occasioned or otherwise facilitated the unauthorised use of the Plaintiff’s accounts to transact in varying amounts between 2014 and 2021 totaling to US Dollars 79,900,000 and 62 similar transactions totaling Shs 315,992,747 which transactions bore no relationship to the Plaintiff or its businesses for the period evaluated but appear in the names of the Plaintiff.

However, Tirupati says that the 2nd and 3rd Defendants denied that these transfers and appropriation of funds had any effect on the operationalization of the Plaintiff’s accounts and that no loss was ever caused or could be suffered by the Plaintiff arising out of the said suspicious transfers, yet a contrary position has been shown.

Tirupati also says that using her accounts to operate a scheme wherein the 2nd and 3rd Defendants claimed to have received and disbursed numerous sums which had no obvious purpose or relationship to the Plaintiff and or its business. In so doing, Tirupati says the 2 nd and 3 rd Defendants repeatedly engaged in illegal behaviour; Operating a scheme whereby transactions were entered and run through the Plaintiff’s loan accounts while there were no matching credits out of its operating and current, which in and of itself is illegal and deceitful conduct and that they purported to match payments out of the Plaintiff’s accounts with credits either paid in cash or transferred into her account on the same day.

Tirupati tells court further that the 2 nd and 3 rd Defendants refused to regularise her loan even after the payment of instalments agreed in the consent judgement and continuing to treat the Plaintiff as a debtor, while representing to the Credit Reference Bureau and the 1 st Defendant that the Plaintiff was in fact not in default of its obligations.

Her lawyers say that the 2 nd and 3 rd Defendants misrepresented to the Plaintiff that their account was

nonperforming while at the same time failing to report it as such to the 1 st Defendant, and representing to the Credit Reference Bureau that the account was regular and not in default.

According to Tirupati’s lawyers, the 2 nd and 3 rd Defendants continued to claim and recover from the Plaintiff sums which the 2 nd and 3 rd Defendants did not report to the 1 st Defendant as written off, as required by law and threatened the Plaintiff with the sale of her securities to recover non-existent debt.

Officials of the 2 nd Defendant in attempting to explain away the discrepancies continuously gave the Plaintiff contradictory explanations, the lawyers say.

“They suggested that the conflicting bank statements covering the same period were a result of the bank maintaining separate ledgers,” Tirupati’s lawyers say adding, “The facts alleged above show that the 2 nd and 3 rd defendants on several occasions dealt dishonestly with the plaintiff by acting without the authority and knowledge of the plaintiff, failing to provide explanations for their actions and concealing information about the plaintiff’s accounts.”

Details show a combination or agreement between the 2 nd and 3 rd Defendants pursuant to which the said Defendants acting in concert and with deliberate intention and common object to defraud, using the Plaintiff’s Bank Accounts to carry out a total of at least 1,541 fraudulent transactions of varying amounts between 2014 and 2021 totaling US$ 79,900,000. This, Tirupati says amounted to conspiracy to defraud which has resulted in her suffering loss and damage and which the 2 nd and 3 rd Defendants are jointly and severally liable to.

For instance, documents show that the Plaintiff’s Bank account 2150226057 held with the 2 nd Defendant, between the period 13 th August 2016 and 1 st March 2019, the Plaintiff’s bank statements reveal that the 2 nd and 3 rd Defendants in concert with each other and through an arranged scheme utilising at least 414 suspicious transactions, transferred, received and disbursed large and small sums of varying denominations for a total US Dollars 7,288,496.81.These transfers had no obvious purpose or relationship to the Plaintiff or her known facility, the lawyers argue.

Secondly, for the period 2 nd December 2019 – 20 th April 2020, on the same Bank Account 2150226057, the Plaintiff’s bank statements reveal that the 2 nd and 3 rd Defendants, in concert with each other, though a similarly arranged fraudulent scheme utilised at least 573 suspicious transactions wherein they transferred, received and disbursed both large and small sums for a total of US Dollars 5,873,460.79.

“These transfers had no obvious purpose or relationship with the Plaintiff,” Tirupati tells court through her lawyers.

On the Plaintiff’s bank account 1059906732 held with the 2 nd Defendant, details show further that between the period 31 st August 2016 and 1 st March 2019, the Plaintiff’s bank statements reveal that the 2 nd and 3 rd Defendants in concert with each other utilised at least 542 suspicious transactions by which they transferred, received and disbursed both large and small sums for a total US Dollars 7,471,663.88 which transfers had no obvious purpose or relation with the Plaintiff or her known loan facility.

Similarly, on the Plaintiff’s bank account 2201449317 held with the 2 nd Defendant, between the period 22 nd April 2014 and 20 th July 2015, the Plaintiff’s bank statements reveal that the 2 nd and 3 rd Defendants in concert with each other utilised at least 12 suspicious transactions by which they transferred, received and disbursed large sums for a total 4,375,764.26 disguised as top up loans and loan redemptions which transfers had no obvious purpose or relationship with the Plaintiff or her known facility.

On the Plaintiff’s bank account 2201449287 held with the 2 nd Defendant, between the period 23 rd January 2015 and 1 st July 2017, an audit of the Plaintiff’s account reveals that the 2 nd Defendant utilising at least 62 transactions to transfer and move a total of Shs 315,992,747 which transactions had no obvious purpose or relationship with the Plaintiff or her known facility.

Money laundering

In addition to conspiracy to defraud, the plaintiff believes that the above alleged actions and transactions also constituted money laundering by the 2 nd and 3 rd defendant.

This is because: The Plaintiff has received conflicting statements of transactions on its accounts covering the period of the entirety of the loan and beyond the consent judgement, which clearly indicate highly suspicious transactions akin to money laundering and theft by the 2 nd and 3 rd Defendants collectively. These transactions, according to Tirupati, confirm that the 2 nd and 3 rd Defendants failed to manage the risk of financial crime and IT fraud when they maintained separate ledgers for the Plaintiff’s accounts.

The Plaintiff avers and contends that the 2 nd and 3 rd Defendants utilised her United States Dollar and Uganda Shillings accounts in the manner depicted above including pretended extensions of credit purposely to make any audit trail difficult.

These actions were also calculated to avoid triggering any statutory requirements by the 1 st and 4 th Defendants, as regulators of financial institutions, to file suspicious activity reports required by law, and avoid scrutiny by regulators and law enforcement in the two jurisdictions of Uganda and Kenya.

The Plaintiff will aver and contend that the said sums represented the proceeds of some form of activity that may have constituted crime necessitating the need for deceit on the part of the 2 nd and 3 rd defendants and that the 2 nd and 3 rd Defendant continue to this day to launder money through her named accounts.

“These actions did and continue to expose the Plaintiff, its shareholders and directors to the legal and financial consequences and sanction arising from the suspicion of engaging in illicit money laundering and probable terrorist financing, likely corruption, or payments procured through drug or child and sex trafficking through the illegal use of her accounts threatening her entire business enterprise,” Tirupati’s lawyers argue.

According to Tirupati, the 2 nd and 3 rd defendants carried out the impugned deposits, withdrawals, transfers between accounts and pretended extensions of credit to the Plaintiff.

However, the plaintiff contends that the 2 nd and 3 rd Defendants a) Acted with the intent to accomplish and create an avenue through which the two banks could secretly promote to some of their clients if not their own officials’ money laundering activities and b) Acted with knowledge that the scheme was illegal and designed in whole to conceal and disguise the nature, location, source, ownership or control of the proceeds of money laundering whilst also avoiding/evading the required need under the law to report suspicious money transaction activity.

The Plaintiff contends that the 2 nd and 3 rd Defendants’ actions pleaded in above exposed the Plaintiff and its directors to the perpetual potential prosecution for money laundering, which is a serious offence both locally and internationally.

Further, the Plaintiff says that the said actions exposed the Plaintiff, its directors and key persons to the perpetual threat of being deemed money launderers by any other parties who may conduct due diligence on the Plaintiff for purposes of committing to further dealings.

According to lawyers, the Plaintiff contends and avers that it is entitled to declaratory orders pleaded at the foot of the plaint and to damages, in order to restore its good name, and to atone for the injustice meted against it by the Defendants.

Conversion

According to documents, the Plaintiff shall aver and contend that in addition to breach of contract, breach of fiduciary duty, money laundering, fraud and conspiracy to defraud, the 2 nd and 3 rd defendants committed conversion of the plaintiff’s property and assets.

Tirupati argues that her bank statements for the period in issue contain additional evidence of unauthorised transactions on its US Dollar current account initiated without right or authority to the 2 nd and 3 rd Defendants’ lawyers and other third parties.

Her lawyers say that the Plaintiff shall present evidence at trial to prove that the consent judgement executed in Civil Suit No. 516 of 2017 expressly ordered each party to bear its own costs. “Consequently, therefore the payments made from the Plaintiff’s Bank Accounts by the 2 nd and 3 rd Defendants and designated as meeting their costs from the Plaintiff’s banked funds amounted to conversion of the plaintiff’s funds. These transactions created additional difficulty in the Plaintiff’s ability to meet her obligations after the consent thereafter,” legal experts say.

In particular, however, the 2 nd and 3 rd Defendants being unauthorised and without the Plaintiffs’ knowledge, appropriated and stole or otherwise converted funds belonging to the Plaintiff from the Plaintiff’s bank account No. 2290351628 when they used the sums deposited therein to effect a) Illegal Payments to KMA Advocates and charged additional expenses for a total of US $ 178,088.19 made between the 4th August 2017 and 27th February 2019.

Lawyers allege misappropriation and theft of the Plaintiff’s deposited funds amounting to US$

995,466.78 meant to meet her repayment obligations.

The Plaintiff contends that had the 2 nd and 3 rd Defendants not illegally converted these

funds and instead applied them to settle the Plaintiff’s liability, her liability would have been decisively settled.

The Plaintiff further contends that these illegal and fraudulent transactions on the Plaintiff’s accounts created punitive cost and credit arrangement charges which had the clear cumulative effect of distorting the Plaintiff’s overall debt creating variances on her loan repayment figures. The plaintiff avers and contends that these inconsistencies have been used by the 2 nd and 3 rd Defendants to continuously overstate the loan amount claimed and limited the Plaintiff’s ability to meet her payment obligations.

Throughout this period, especially after execution of the consent judgement, Tirupati’s lawyers say the 2 nd and 3 rd Defendants have concealed and continue to conceal the depth of the fraud despite admitting to the existence of the varied suspicious transactions on the Plaintiff’s submitted bank statements.

Further, the lawyers claim that the Plaintiff would not as a result be threatened with the outright and unlawful sale of her 20 properties and other securities as she is currently forced to endure.

The 2 nd and 3 rd Defendants have additionally and willfully, albeit unlawfully, appropriated 20 Certificates of title belonging to the Plaintiff and in the custody of the 2 nd Defendant as security for an expired bank guarantee.

The said titles were provided as security for an entirely different loan altogether.

“The 2 nd and 3 rd Defendants have thus wrongfully and illegally appropriated these titles, holding them at ransom despite numerous pleas by the Plaintiff following the expiry of the aforementioned guarantee on the 29th of July 2017,” Tirupati says.

According to Tirupati’s lawyers, the Plaintiff has as a result and, at its cost, been forced to engage its own accountants and external auditors twice, to investigate and carry out a forensic audit of the transactions on its bank accounts with the 2 nd and 3 rd defendants covering the period ending 31 st December 2021, which reports have confirmed that there were severe irregularities in the management of the Plaintiff’s bank accounts including IT fraud.

The Audit report observed amongst other things, that, the 2 nd and 3 rd Defendants frequently charged the operations account of the Plaintiff as loan repayment but reflected less figures as having been paid towards the loan. The Auditors also observed that: several unknown un-authorized top up loans had been given by the 2 nd Defendant and purportedly used to pay off loans to the 2 nd Defendant on the same date and that these as well as other numerous irregularities had the resultant effect of increasing the loan balances due, which coupled with the Defendants’ refusal to provide the Plaintiff timely statements and explanations for suspicious transactions, made loan/debt scheduling an impossibility.

According to Tirupati, two independent audit reports have confirmed that the amounts of money laundered or otherwise moved through suspicions transactions occasioned upon the Plaintiff’s accounts by the 2 nd and 3 rd Defendants is in the sum of at least USD 25 million to about USD 80 million. The Plaintiffs will seek a court ordered reconciliation in order to ascertain the actual total amount in issue.

The Plaintiff avers and contends that the 2 nd and 3 rd Defendants’ Bank officials have, at various meetings with the Plaintiff’s officials, admitted to the Bank’s maintenance of two ledgers covering the Plaintiff’s accounts.

This is because, according to Tirupati, 1 st and 4 th Defendants are Statutory bodies empowered to carry out an oversight function over financial institutions, such as the 2 nd and 3 rd Defendants and to ensure that they are compliant with the provisions of the law.

The Plaintiff avers and contends that the 1 st and 4 th Defendants owed a statutory and fiduciary duty of care to the Plaintiff and failed in that duty when they failed to detect money laundering activities carried out by the 2 nd and 3 rd Defendants.

“This amounted to a breach of statutory duty and negligence on the part of the 1st and 4th Defendants,” Tirupati’s lawyers say.

Misfeasance

Further, Tirupati says that this amounted to misfeasance in public office for which the 1 st and 4 th defendants are liable jointly and severally and as such, the Plaintiff avers and contends that 1 st and 4 th defendants were misfeasant because the 1 st and 4 th Defendants have the statutory duty to detect, investigate and sanction financial institutions for money laundering.

“They failed in this duty, thereby facilitating the occurrence of these events,” the lawyers argue.

According to Tirupati’s lawyers, the Plaintiff informed the 1 st Defendant of the suspicious accounts and activities being carried out by the 2 nd and 3 rd Defendants on her account but the 1 st and 4 th defendants failed to prevail over the 2 nd and 3 rd Defendants in these fraudulent and illegal conduct and operation of the plaintiff’s accounts despite being made aware of the 2 nd and 3 rd Defendants’ conduct on several occasions.

The 1 st and 4 th Defendants, the lawyers say, through their officials were aware of the possibility and risk of loss and damage to the plaintiff’s business that would occur if the allegations of money laundering were not checked by the 1 st and 4 th Defendants and that the 1 st and 4 th Defendants having been made aware of the 2 nd and 3 rd defendants’ conduct and the possibility of loss to the plaintiff, ignored to carry out their statutory duties and did not rein in the 2 nd and 3 rd defendants.

Tirupati tags misfeasance case to the 2 nd and 3 rd Defendant’s regulator, the 1 st Defendant failure to prevail upon the 2 nd and 3 rd Defendants to rectify the Plaintiff’s accounts with a view of ending the mismanagement of the same especially following notification by the Plaintiff.

Secondly, according to Tirupati, the 1 st Defendant failed to restrain the 2 nd and 3 rd Defendant from engaging in money laundering and other suspicious transactions to the extent that the illicit money is allowed to flow un-impeded through this system threatens Uganda’s financial system for which the 1st Defendant is chief custodian;

Having received evidence of mischaracterization of the Plaintiff’s accounts, Tirupati says that the 1 st Defendant had a statutory, fiduciary and public policy obligation to ensure that the 2 nd and 3 rd defendants are not acting in ways that breach financial sector laws and the sanctity of the banker-customer relationship between the Plaintiff and the 2 nd and 3 rd Defendants and which left unchecked threatens the vitality of the financial system and that having noted that the 2 nd and 3 rd Defendants had never reported the Plaintiff’s accounts as nonperforming as is required under the Prudential Lending Regulations that the 1 st Defendant administers, the 1 st Defendant had the duty to verify the accuracy of the Annual and other Financial Accounts submitted by the 2 nd Defendant.

Tirupati says that the 1 st Defendant, being aware of the infractions against the Plaintiff, went ahead to approve financial reports and audited accounts that did not disclose an alleged non-performing facility, which the Plaintiff was forcefully and illegally creating, consequent of which, as a first line of defense, able controls at these financial institutions had failed.

The lawyers say that the plaintiff as a customer of the 2 nd Defendant bank is entitled to seek redress against the 1 st and 4 th Defendants who were the Plaintiff’s 1st port of call for relief against the actions of the 2 nd and 3 rd Defendant, before commencing these proceedings.

As a result of the 1 st and 4 th Defendant’s failure to carry out their duties, Tirupati’s lawyers say that the plaintiff has suffered great loss and expense in meeting its loan obligations and investigating the extent of the money laundering by the plaintiff because the 4 th Defendant is enjoined by law to detect, investigate and prosecute all incidents of money laundering in Uganda and ought to have detected the suspicious activities pleaded herein but did not.

Tirupati’s lawyers say that the Plaintiff shall aver and contend that the 2 nd and 3 rd Defendants were required by law to report each of the at least 1,541 fraudulent transactions of varying amounts between 2014 and 2021 totaling US Dollars 79, 900, 000 and 62 additional transactions totaling Shs 315,992,747 to the 4 th Defendant as suspicious transactions but they did not.

According to lawyers, the Plaintiff shall also aver and contend that the 1 st Defendant approved the audit reports that were prepared by the audit firms of PriceWaterhouseCoopers and Ernst & Young and submitted to them by the 2 nd Defendant in compliance with the reporting requirements under the law. Tirupati’s lawyers say that the 1 st Defendant accepted and approved all the reports and knowingly ignored the irregular, illegal and seemingly fraudulent transactions on the 2 nd defendant’s books.

Furthermore, the Plaintiff avers and contends that firms of PriceWaterhouseCoopers and Ernst & Young as the auditors for the 2 nd Defendant provided accounts for the relevant period which concealed information about the 2 nd and 3 rd Defendants’ dealings on the plaintiff’s account. As reputable audit firms, Tirupati says PriceWaterhouseCoopers and Ernst Young knew or ought to have detected and known of the transactions pleaded above. The auditors of the 2 nd Defendant had a professional duty to reveal such information for the benefit of the plaintiff.

Further, the Plaintiff avers and contends that as money laundering is a financial crime with worldwide consequences, the Defendants ought to be jointly and severally held liable for exposing the Plaintiff’s officers, directors and shareholders to the risk of sanction and prosecution through their actions and inactions. Specifically, Tirupati says the 2 nd and 3 rd Defendants ought to be held liable for their actions as pleaded in this Plaint, while the 1 st and 4 th Defendants ought to be held liable for their inaction in failing to perform their statutory duties to restrain the 2 nd and 3 rd Defendants from engaging in the illegal and offensive actions pleaded herein.

Tirupati’s lawyers note that the Plaintiff will aver that all the infractions pleaded in all the above causes of action against each of the Defendants amount to illegality for which all the Defendants should be held jointly and severally liable and that the Plaintiff shall further aver and contend that all the 2 nd and 3 rd Defendant’s illegal activities pleaded herein are injuriously offensive breaches of the public policy of Uganda in that they lend Uganda to being a jurisdiction that is susceptible to unrestrained money laundering particularly through regional banks such as the 2 nd and 3 rd Defendants and whose regulators are wanton and negligent in their duties.

The Plaintiff avers and contends that as a result of the above fraudulent acts she has suffered inconvenience, financial loss, damage to her reputation, and at the same time has been deprived of the use of her money and properties that the Plaintiff has converted and continues to hold with no just cause, for which the Plaintiff shall plead general, aggravated, punitive and exemplary damages.

Tirupati’s lawyers say the 2 nd and 3 rd defendants are additionally each liable to compensate the Plaintiff in equity for their breaches of fiduciary duty, liable to account to the Plaintiff for the funds misappropriated and paid away by them, as well as account to the Plaintiff for the sums received by them through the Plaintiff’s accounts which were secret profits received in fraud of the Plaintiff.

According to lawyers, the Plaintiff shall also contend and prove that the 3 rd Defendant has been sanctioned at least four times before for money laundering in Kenya.

“These sanctions in Kenya have proved to be ineffective. Its exportation of the said illegal behavior is in fact a brazen disregard for the laws and public policy of Uganda for which it ought to atone most mercilessly,” Tirupati says.

Documents further show that the Plaintiff shall aver and contend that the 2 nd and 3 rd Defendant’s conduct entitle her to an Order for the payment of: i. Statutory fines in accordance with the Anti-Money Laundering Act, as amended in 2017 and ii. The Plaintiff shall aver and contend that since the fines in Kenya have not had the deterrent effect as against the 2nd and 3rd Defendants, the Court has every basis to award punitive damages against the 2nd and 3rd Defendants.

“These punitive damages should be in addition to, and computed as several multiples of the highest statutory fines available to the court,” Tirupati notes.

Prayer

Tirupati wants:

A Declaration that the actions of the 2 nd and 3 rd Defendant amounted to breach of contract against the Plaintiff.

A Declaration that the 2 nd and 3 rd Defendants actions amounted to fraud against the Plaintiff.

A Declaration that the 2 nd and 3 rd Defendants each held fiduciary duties to the Plaintiff and were constructive trustees of the Plaintiff’s assets held with them.

A Declaration that the 2 nd and 3 rd Defendants conspired to defraud the Plaintiff and thereby used the Plaintiff’s accounts to transfer and transact through fraud, transactions without the Plaintiff’s authority.

A Declaration that the 2 nd and 3 rd Defendants failed to properly manage the Plaintiff’s accounts.

A Declaration that the 2 nd and 3 rd Defendants failed to properly manage the risk of financial crime exposure to the Plaintiff when they wantonly occasioned the impugned transactions on the Plaintiff’s accounts and in the Plaintiff’s name.

A Declaration that the 2 nd and 3 rd Defendants breached their fiduciary duty to the Plaintiff.

A Declaration that the 2 nd and 3 rd Defendants acted illegally when they opened and operated accounts in the Plaintiff’s name without the Plaintiff’s knowledge or consent.

An Order declaring that the 2 nd and 3 rd Defendants misappropriated the Plaintiff’s funds to the tune of US$ 995,466.78 and that the sum be returned to the Plaintiff in Special Damages.

An Order that the Plaintiff is entitled to the return of 20 Certificates of title unlawfully held by the 1 st Defendant.

An Order directing the 2 nd and 3 rd Defendant to release titles commensurate to funds received from the Plaintiff.

An account of all sums misappropriated by the 2 nd and 3 rd Defendants and paid away, together with any interest that would have accrued had the funds been treated as an investment, and an order for the payment to the Plaintiff of all sums found due on the taking of the account.

An account of all sums received by the Defendants through the Plaintiff’s accounts up until the date of filing this suit which were secret profits received in fraud and by use of the Plaintiff’s name.

A Declaration that the 2 nd and 3 rd Defendants engaged in money laundering through the Plaintiff’s loan accounts for which they are liable to compensate the Plaintiff.

An Order sanctioning the 2 nd and 3 rd Defendants and compelling them to pay the highest possible independent or cumulative fines provided for in the law.

An Order that the 1 st Defendant failed in its statutory duty to address the Plaintiff’s complaints in a timely manner and to ensure their swift resolution.

An Order that the 1 st Defendant failed in its regulatory duty when it failed to detect the Plaintiff’s misfeasance in not reporting accurately the status of the Plaintiff’s loan account status.

An Order that the 4 th Defendant failed in its statutory duty to detect ongoing money laundering to the tune of 1,541 fraudulent transactions of varying amounts between 2014 and 2021 totaling US Dollars 79,900,000 and 62 similar transactions totaling Shs 315,992,747.

An Order directing the 1 st and 4 th Defendant to investigate the 2 nd and 3 rd Defendants actions pleaded above in order to ascertain and prosecute all the individuals involved in or found to be culpable of the illegal money laundering scheme pleaded above.

An Order that the 4 th Defendant tenders to court a definitive set of measures it will deploy to ensure that there is no further suspicious or laundering activity going on through the Plaintiff’s accounts or at all.

An Order that the 4 th Defendant reports its findings or its progress on the investigations in (19) above, and the measures prayed for in (20) above to the court within six months from the date of judgment and that the court reserves residual jurisdiction to make any such further Orders in this regard as may be necessary.

An Order that the 2 nd and 3 rd Defendants be disgorged of any and all the proceeds of the legally offensive and injurious practises pleaded in this suit.

An Order sanctioning the 2 nd and 3 rd Defendants to pay fines under the attendant anti money laundering laws.

Special damages in the sum of US$ 995,466.78.

General damages.

Aggravated damages against the 2 nd and 3 rd Defendants.

Exemplary and Punitive damages against the 2 nd and 3 rd Defendants.

Costs of this suit.

Interest at court’s rate on 25, 26, 27, 28, 29 and 30 above at the rate of 10% from the date of filing till payment in full.

Any other reliefs that this Court deems fit.

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