Dirty secrets of Sh200 billion Crane Bank sale

At the time major decisions around the deal were being taken, Mutebile was not well and relied solely on the advice of his deputy, Louis Kasekende and Bagyenda.

According to insiders, such takeovers are guided by at least three objectives; kicking the bad apple (banker) out of the market, ensuring depositors’ savings are safe, and ensuring that while doing all this the bank does not make a loss.

But while the central bank achieved the first two objectives, it finds itself facing a huge loss and further erosion of its capital.

Accounting rules require that the central bank write off some US$100 million which it injected in Crane Bank and is demanding from Sudhir in several court battles raging in court.

The situation, some say might have played out differently if BoU officials had not taken Sudhir to court given that they had locked him in a March 20, 2016 agreement in which he would pay US$60 million to close the case.

But convinced that they had Sudhir against the wall, BoU officials jumped out of that agreement and threatened Sudhir with a criminal suit.

However, Sudhir sought the intervention of President Museveni who blocked the criminal suit limiting BoU to only a civil suit.

In apparent retribution when BoU took Sudhir to court on July 03, they hiked money they wanted from him to US$90 million.

But Sudhir fought back. He argued that the two lawyers representing the central bank—Timothy Masembe of MMAKS and David Mpanga of Bowmans—quit the case owing to their conflict of interest. The first sign of the trouble for BoU emerged when in December last year High Court agreed with Sudhir.

To replace them, BoU got Sebalu and Lule Advocates, which had been the advisor for DFCU on the purchase of Crane Bank. Unfortunately, the firm was hired without the nod of the BoU board. Sudhir challenged them on that basis and again court agreed with him.  The losses mounted pressure on the central bank.

As the central bank was still recovering from this crisis, Parliament’s committee on Commissions Statutory Authorities and State enterprises fingered them over fees paid to the private law firms handling the Crane Bank case.

In just a few months, the three firms; MMAKS, Bowmans, and

Sebalu and Lule Advocates had earned an estimated Shs 5.4 billion from BoU.

While BoU has previously taken over banks and sold them, with Crane Bank, it now appeared to have swallowed a live crocodile that is busy eating its (central bank) belly.

The lawyer’s fees are just a tiny fraction of the problem. Insiders say BoU injected Shs 450 billion into Crane Bank before selling it. The injection wiped out the central bank’s capitalisation, which is usually under Shs 500 billion. Apart from this, the transaction has heavily damaged the banker’s reputation, worsened tensions within its walls and invited upon it a multitude of suits.

It is not clear how the standoff between Mutebile and Bagyenda will clear out. What is clear the finally, perhaps, some details regarding how tiny DFCU got to buy the mighty Crane Bank will emerge.