A look into ‘Project Nyonyi’ the PwC Forensic Review of the Crane Bank!

This are just one of them days, when the glaciers really get to much heat and becomes water. Than underneath all those years of ice and snow, you will find some relics of the past, which was hidden by the massive amounts of snow. That nothing these things hidden inside the glacier, that had the need to resurface, because no one would have the capacity to dig that deep. In the same sense, the PriceWaterhouseCoopers report of the Crane Bank reveal damaging reports on the state of the Bank. The Bank that Bank of Uganda took into receivership before trading to another third party. The bank that were praised and suddenly disgraced itself. Therefore, lets look at the important quotes from the report!

“This report has been prepared solely for BoU for use in considering immediate steps to safeguard Crane Bank’s interests and the additional investigative and evidence collation work that is required on key areas of concern to enable the preparation of a report that can be adduced as evidence in a court of law” (PwC, P:3, 2016).

“The above direct and circumstantial evidence suggests that Dr Ruparelia and persons associated with him, effectively owned and controlled 96% of CBL (With control of White Sapphire, the only shareholding not held by Dr Ruparelia and his immediate family, is the 4% shareholding held by Mr Jitendra Sanghani, (“Mr Sanghani”)). This contravenes the prohibition on an individual or body corporate controlled by one individual owning more than forty nine per cent of the Bank’s shares, and the restriction on the right to control financial institutions by those who are not reputable financial institutions or public companies as set out in S.18, and 24 of the Financial Institutions Act 2004 as amended (“FIA”)” (PwC, P: 14, 2016).

“The false accounting was partly achieved by crediting income with entries from off-book accrued interest receivables accounts and by keeping some liabilities (fixed deposits and borrowings from other financial institutions) off the books” (PwC, P: 15, 2016).

“The off book liabilities were brought back into the books in 2013 and a fictitious asset recognised by overstating the balances in the Nostro Account. It is not clear why CBL brought back this liability at this point. Due to this entry in the Nostro Account, as at 31 December 2013, there was a difference of USD 80m or UGX 200B between the system and actual balance in one of the Nostro Accounts; the Deutsche Bank USD account” (PwC, P: 15, 2016).

“As at 20 October 2016, loans amounting to UGX 63.6B had been advanced to related companies out of which lending totalling to UGX 63.1B (99%) had not been disclosed as insider lending. In addition to the companies considered as insiders in deriving the amount above, there are allegations that Logic Real Estates and Developers Limited (“Logic”) which had an outstanding balance of UGX 26.9 B as at 20 October 2016, is also related to Dr Ruparelia. Logic obtained this loan on 23 December 2014 and the amount appears to have been deposited back into a CBL “interest receivable” account labelled “Personal FD”” (PwC, P: 18, 2016).

It is not strange that a Crane Bank fell, when all the irregularities and mismanagement in their practices comes to the forefront. The Bank of Uganda could have seen this, but did not act upon it. They just let it be and let it go. That must have been because of the ties between Dr. Ruparelia and President Museveni. Certainly, the political affiliation has helped the financer and foreign investor in his prospects in Uganda. Since the off-books practices plus over-extended ownership did not apply to current legislation concerning healthy bank practices. Still, they let it all happen. This secret PwC report even entails provisions and statutes the owner of the bank has breached in his practices.

“Dr Sudhir Ruparelia: As a Director, major shareholder, vice chairman and generally as a person that exerted the greatest control over the Bank, Dr Ruparelia, concealed his true shareholding in the Bank; he oversaw the irregular transfer of the Bank’s branches to MIL, he benefitted from irregularly declared dividends, ‘due’ to White Sapphire; he conspired with others to embezzle/cause financial loss to CBL by use of cash extractions from Interdico, AI and TA; he was instrumental in the approval of credit facilities for related companies and associates, when there was no intention the loans would be repaid; and he failed to disclose his interests.

In addition to the above charges:

 Receiving stolen property in respect of bank branch transfers, and White Sapphire dividends.

 Embezzlement.

 Influence peddling.

 Nepotism.

 Receiving and possessing property for himself or related parties, otherwise than in payment for the full value, in respect of the branch transfers, (FIA S126 (6).

 Breach of the Prohibition on insider transactions” (PwC, P: 23, 2016).

When you read that a review and outsider opinion sees this and that the Bank of Uganda are just taken the bank into custody before trading it off to DFCU. Proves that they knew of the liabilities and the off-books practices, but put a blind an eye to the matter. Don’t see and don’t tell policy are clearly the BoU acts of the day, no matter what principle or legislation that has been breached by the former foreign investor in the good graces of the President.

Certainly, this is again, with all the other reports of the sudden fall of grace for the ones astonishing bank, the Crane Bank are now history and eaten by DFCU. While the subjects running this one to the ground are walking around like free men. The ownership and board are left off the hook, even as this secret report entail embezzlement and fraud of the bank. This is accepted and repeated without any consideration of all the clients and customers  who at one point trusted the Crane Bank. They we’re used as pawns, to secure wealth for Dr. Ruparelia and his comrades. Peace.

Reference:

PriceWaterhouseCoopers (PWC) – ‘Project Nyonyi – Report on the Preliminary Forensic Review at Crane Bank’ (21.12.2016)