Kampala. In the case filed in the High Court, Bank of Uganda has submitted a detailed scheme of how Kampala businessman and property mogul Sudhir Ruparelia fraudulently sold himself Crane Bank and was the sole proprietor but disguised its ownership in the names of false shareholders.
In the case documents now before the Commercial Court, a division of the High Court that handles business-related cases, BoU presents a detailed catalogue of what it calls dubious or fraudulent activities that took place in Crane Bank under instructions or knowledge of Mr Ruparelia.
In the documents supporting the case against Mr Ruparelia and others, BoU states that the property mogul fraudulently took out $92.8m (about Shs334b) and another Shs8.2 billion of depositors’ money from Crane Bank for personal gain.
Fraud syndicate inside Crane Bank
The BoU documents in court show that Mr Ruparelia and his associates Vivek Sharma and Rakesh Gupta created false invoices to bill Crane Bank for activities that did not happen.
In 2014 and 2015, a company called Interdico was paid $80m (about Shs288b) on false invoices in order to move the money out of Crane Bank for purported construction work.
Bank of Uganda further reveals that Mr Ruparelia created companies which were paid by Crane Bank for construction of the bank’s branches and installation of a core banking system.
“By means of fraud described…, the plaintiff (Crane Bank in receivership) has lost $80m (Shs288b) and it is averred that the money was paid to persons, companies or other entities for the ultimate benefit of the 1st defendant (Sudhir) or his associates,” BoU states in its evidence against Mr Ruparelia filed in court on June 30, 2017.
The central bank further avers that for no financial reason, the entire land where Crane Bank had branches, was transferred to Meera Investments Limited, another company owned by Sudhir.
Then Crane Bank started leasing the land at Shs100m for 49 years and paying $6,000 in annual ground rent to Meera Investments.
“The first defendant (Mr Ruparelia) failed to safeguard the plaintiff’s assets; and on the contrary, stole them or otherwise caused or permitted them to be extracted from and lost to the plaintiff,” the court documents state.
Crane Bank ownership
The central bank submitted evidence showing that Mr Ruparelia had been violating the laws which had been put in place to regulate and prevent commercial banks from failing or collapsing.
For example, the Financial Institutions Act (FIA) created in 2004, stated that “no individual or body corporate controlled by one individual shall own or acquire more than forty-nine percent of the shares of a financial institution.”
Bank of Uganda has told court that Mr Ruparelia, at the time of passing the law, owned about 66.7 per cent of Crane Bank.
However, by end of 2015, he controlled 48.7 per cent of Crane Bank. Another company White Sapphire, registered in Mauritius, owned 47.33 per cent of Crane Bank.
The central bank says the company is owned by a Kenyan banker and real estate mogul Mr Rasik Kantaria.
However, the documents in court show that White Sapphire’s purported 47.3 per cent shares were actually “indirectly” owned by Crane Bank.
“By means of illegal arrangements made with Kantaria and subsequently, White Sapphire as well as with Sanghani, the 1st defendant (Ruparelia) dishonestly concealed his ownership and control of the plaintiff (Crane Bank) from BoU…. The facts show that the 1st defendant fraudulently concealed his beneficial ownership of 47.33 per cent of the plaintiff behind Kantaria/White Sapphire,” the documents read in part.
The central bank further states that Kampala businessman, Mr Godfrey Kirumira, through his company Premier Commodities, was used by Mr Ruparelia to carry out a transaction that indicated Kantaria had acquired shares in Crane Bank in 2010, whereas not.
According to the documents Premier Commodities received $2.3m (Shs8.2b) as a purported loan from Crane Bank, but the money was repackaged and sent to Kantaria in India.
After deducting a $50,000 (Shs180m) commission, Mr Kantaria remitted the balance back to Uganda as purported payment for shares he had bought in the bank.
Under the Financial Institutions Act 2004, there are specific disclosures required when shares of 5 per cent and above are being transferred to another party. Additionally, the law gives BoU authority to determine “whether the promoters, controllers and substantial shareholders are fit and proper persons.”
In November 2016, Daily Monitor tasked BoU to explain whether they knew the beneficial owners of White Sapphire considering it is an offshore company with no known directors. The BoU response was that proper vetting is often carried out.
“Shareholders approved by the central bank to conduct banking business in Uganda are duly vetted as fit and proper based on criteria provided for in the law- and these also apply to shareholders domiciled elsewhere. From then on, the central bank conducts regular supervision of financial institutions and may take any relevant action based on the core objective of protecting depositors’ interests and financial system stability,” Ms Christine Alupo, the BoU director of communications, told Daily Monitor in November 2016.
Yesterday, BoU declined to comment on the Crane Bank case, saying the matter was already before court and they were reluctant to discuss it in the public.
Defaulting on NSSF
According to the court documents, BoU accuses Mr Ruparelia of failing or refusing to remit more than Shs52 billion in workers’ contributions to the National Social Security Fund (NSSF).
The central bank also accuses Mr Ruparelia of under-declarations on the payroll for Crane Bank’s expatriates for January 2007 to December 2016.
“Crane Bank was a contributing employer for the purposes of NSSF Fund Act and as a controlling shareholder and director of the bank, Mr Ruparelia was under a duty to ensure compliance with provisions of the said Act by making full and truthful declarations of the number of local and expatriate employees and of its payroll and by remitting all requisite monthly standard and special contributions to the NSSF,” Bank of Uganda states.
When asked why, for all this time, NSSF did not take action on Crane Bank’s default on workers contributions, Mr Richard Byarugaba, the NSSF managing director, said the pension Fund had discovered arrears of Shs52b and sent a demand notice to BoU.
“This demand we have sent to BoU of Shs52b, the receiver of Crane Bank, arises from a whistleblower that approached us after the bank had been taken over by BoU. The whistleblower belongs to a small group of Indian experts who were brought in to work for Crane Bank but did not appear on the regular payroll of the bank and whose details were not available to us in our routine inspections. These are the employees who were colluding with the employer, Crane Bank, not to remit their NSSF contributions. They only came out to whistle-blow after they realised the bank had been taken over,” Mr Byarugaba explained yesterday.
The Shs52b is broken down into Shs12.7b as arrears and interest due to members, and Shs39.3b being the statutory penalty for defaulting.
Bank of Uganda took over Crane Bank on October 20, 2016 after the commercial bank’s capital was eroded to below the stipulated minimum level and depositors’ interests had been seriously jeopardised. Bank of Uganda said this was due to the bank’s Non-Performing Loans (NPLs).
The central bank conducted a forensic audit to ascertain the cause of NPLs. By end of 2016, Crane Bank’s losses had hit a staggering Shs435 billion. On January 27, 2017, dfcu Bank acquired some of the assets and liabilities of Crane Bank.
Mr Ruparelia and his co-accused have been given 15 days to defend themselves but by the time of filing this story, they had not submitted their defence to court.
Fraud. BoU states that the property mogul fraudulently took out $92.8m (about Shs334b) and another Shs8.2 billion of depositors’ money from Crane Bank for personal gain.
Breaking the laws. The central bank submitted evidence showing that Mr Ruparelia had been violating the laws which had been put in place to regulate and prevent commercial banks from failing or collapsing.
Failure to make payments. According to the court documents, BoU accuses Mr Ruparelia of failing or refusing to remit morethan Shs52 billion in workers’ contributions to the National Social Security Fund.
Court rules. Mr Ruparelia and his co-accused have been given 15 days to defend themselves but by the time of filing this story, they had not submitted their defence to court.