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Sudhir Ruparelia

Crane Bank Fraud: Twists and Turns as BOU Tightens Noose to Recover Swindled Sums

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.
posted onMay 11, 2019

By Hope Abonit

With the on-going saga of Sudhir Ruparelia and Bank of Uganda over a massive shillings 400 billion Fraud, an aggrieved citizen, Derrick Nsereko, has threatened to institute a law suit against Bank of Uganda (BoU) for failure to effectively supervise Crane Bank Limited (CBL), collusion, corruption and fraud in the issuance of clean financial health bills in respect of CBL over the years.

In the letter addressed to the central bank through the bank’s secretary dated 12th July 2017, written by the law firm Kashillingi, Rugaba and Associates says that the central bank on 20th January 2017, placed CBL under receivership and subsequently transferred the assets and liabilities to DFCU Bank Ltd.

“Our client notes that on 20th October 2016, Bank of Uganda (BOU) took over management of Crane Bank Limited (now in Receivership) pursuant to sections 87(3) and 88(1) (a) and (b) of the Financial institutions Act 2004 on the grounds that Crane Bank Limited (“CBL”) was undercapitalized and posed systemic risk to the Banking sector in Uganda. These grounds were publically broadcast by the Governor of BOU,” the letter read.

In the letter also, Kashillingi, Rugaba and Associates tells BOU, “Our client also notes that CBL was incorporated and licensed in 1995. From thence, CBL has been supervised and regulated by the central bank pursuant to the BOU’s statutory mandate as set out in Part V111 of the financial institutions Act 2004 (FIA) and other enabling legislation.”

“Exercising the said statutory mandate, BOU has since 1995 regularly given CBL a “clean financial bill of health” and reassured the general public of CBL’s sound financial standing. It will be recalled that sometime in 2016, the Governor of BOU publically observed that CBL had a clean financial bill of health. It now transpires that these authoritative assurances were not entirely true,” read the letter

Is BOU Equally Culpable?

The letter goes on to explain that such events clearly demonstrate that BOU either failed in exercising its statutory mandate in supervising the management and affairs of CBL or BOU’s officers colluded with the management of CBL in doctoring reports of sound financial health of CBL. It also adds that as a result therefore, BOU’s failings, neglect of duty or intransigence, CBL was largely owned by individual contrary to the provisions of the FIA, had several fraudulent remittances undetected by BOU (while supervising and issuing clean financial health bills), did not remit colossal amounts of money to the National social Security Fund thereby depriving workers of their retirement benefits.

Bank of Uganda headquarters Kampala
Bank of Uganda headquarters in Kampala: The Central Bank is seeking to recover close to shs 400 billion it says Sudhir Ruparelia illegally siphoned from his own bank. Courtesy Photo  

Last year in October 20, 2016, Bank of Uganda took over the management of Crane Bank Limited due to a report that showed that CBL lacked sufficient capital and posed a systemic risk to the financial system. Sudhir Ruparelia a business man was the sole proprietor of Crane Bank Limited before Emmanuel Tumusiime Mutebile, Governor of BOU in exercise of the central bank’s powers as receiver, under section 95(1) (b) of Financial and other Institutions Act, transferred the liabilities including deposits of Crane bank to DFCU bank.

Sudhir Steals From Own Bank

However the Central Bank’s investigation into the mismanagement of Crane Bank says its proprietor, Sudhir Ruparelia, embezzled over sh400b through hi-tech fraudulent transactions consequently making BOU, through the Crane Bank now under receivership, to sue the embattled tycoon and his Meera Investments Company, to force him to pay back the money with interest, according to court documents

Bank of Uganda has submitted a detailed scheme in a report filed in court 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.
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.”

Sudhir’s Offshore Connections

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. But, by end of 2015, he controlled 48.7 per cent of Crane Bank while another company White Sapphire, owned by a Kenyan banker and a real estate mogul Mr Rasik Kantaria registered in Mauritius, owned 47.33 per cent of Crane Bank. 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.

Extent of the Fraud

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.

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.

Crane Bank
Former Crane Bank headquarters Kampala, now under DFCU Bank management, through the Central Bank. Courtesy Photo

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.

Therefore Bank of Uganda, through Crane Bank, has sued Sudhir and his Meera Investments on behalf of Crane Bank, which is under receivership of the regulator, to compel the property mogul pay back over sh400b he allegedly “extracted” from Crane Bank before it was taken over.

Is Sudhir About to Capitulate?

Conversely under the mediation scheme that the Judiciary is currently promoting as an alternative for court action, Sudhir has a chance to avoid court battle only if he agrees to pay back the money. On this note, it reported that Sudhir has agreed to surrender some of his prime properties to the Bank of Uganda in order to settle the sh400b bank fraud case out of court.

This is due to the fact that Bank of Uganda, according to sources, has indicated that it will withdraw the case if Sudhir agrees to pay back the money. BOU has spelt out the terms for an out-of court settlement which include; Sudhir paying back $70m and sh60b and this implies that he has to pay sh311b, if he agrees to an out-of-court settlement and that he pays back the money within this financial year.

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