By Andrew Irumba
Bank of Uganda (BoU) sold three of the major banks it closed at 93 per cent discount and to a now defunct offshore company registered in Mauritius, a tax haven.
TheSpy Uganda can now authoritative report that there is no record of the buyer with any of the government agencies that should have it, not even a search at the Uganda registration services Bureau (URSB) can answer that puzzle, as to where the details pertaining the company that bought three banks in Uganda are!
“My friend, you would rather send to fetch water in a basket that wasting my time asking me to make a search on that company [Nile River Acquisition],” one of the staff members at URSB on condition of anonymity (she is not the official spokesperson of the agency) told this reporter on phone.
Details on how BoU officials sourced the now defunct Nile River Acquisition Company (NRAC) to snap up the assets and liabilities in the sale of International Credit Bank Ltd (1998), Greenland Bank (1999) and the Co-operative Bank (1999), will be a subject of interest for lawmakers that began investigating the dealings of the Central Bank last week.
One line of questioning, which got BoU honchos kicked out of Parliament last week for failing to provide required documents, was their failure to disclose particulars of the directors of this offshore company.
Our sources revealed that the NRAC, which bought the residual portfolio (assets and liabilities) of the three closed banks in 2007, was incorporated in Mauritius on September 26, 2007 as a global business; the same year BoU officials sold the assets of the three banks.
It is, however, not clear why BoU officials had to wait for eight years before selling the assets of the banks at a disputed discount.
In the case of the three banks, the total loan portfolio sold to NRAC stood at Shs135b, including secured loans of Shs34.5b which had valid, legal or equitable mortgage on the real property.
The Auditor General, Mr John Muwanga, has in his special audit report to Parliament questioned this transaction and wondered why loans which were supported with legal documentation were sold to NRAC at 93 per cent discount.
Ms Charity Mugumya, the BoU director communications, said the liquidator had not been able to realise the value of those loans because eight years had lapsed between the closure of the three banks and their sale to NRAC.
Had the liquidator received the full value of the loans, Ms Mugumya said “there would not have been need to sell what remained to [NRAC] … It stands to reason that the probability of anybody covering the full value of these loans eight years after the banks had been closed was extremely low.”
She added that [NRAC] was aware that it was buying a loan portfolio, which was difficult to recover. As a result, the director noted, it paid a low price for the loans and a large share of the nominal value of the Shs135b of assets sold to NRAC accounted for accumulated unpaid interest which was not secured by any property.
“[This] means the probability of recovery or realising the value of these unsecured loans was approximately zero…So it is wrong to conclude that 93 per cent is a steep discount,” Ms Mugumya wrote, adding: “One needs to understand what discount factor was applied in the computation of the present value of the assets, what proportion of the assets was backed by collectible or real collateral, and the probability of the borrowers repaying or making the future repayments on time and in the agreed amounts.”
This publication’s investigations in Port Louis have since revealed that this offshore company is now defunct. And because the company was removed from the company registry, any information about the directors, including the particulars of individuals who dealt with BoU officials in the sale of closed banks, is labelled “confidential.”
Mauritius shields firm
Mr H.A.Chaumun, the chief compliance officer for Corporate & Business Registration Department of Mauritius, declined to reveal the identities of the company directors.
“Nile River Acquisition Company was incorporated as category 2 global business company. It has been removed from the register of companies. Any information on this type of company is confidential,” he noted in an email.
In Kampala, Mr Vincent Katutsi, the director Business Registration at Uganda Registration Services Bureau (URSB), told Daily Monitor on September 21 that any foreign company must register locally before it can be allowed to transact business in Uganda.
“The [law] requires that a foreign company that establishes a place of business in Uganda be registered within 30 days of such establishment. As to whether that company [NRAC] is registered, [that] will require a search on the [URSB] register.”
Our search at the entity, however, yielded nothing. There was no record of NRAC in the central government registry and, therefore, no particulars of its owner(s) or director(s).
We, therefore, could not ascertain if the firm registered originally in Mauritius, a tax haven, was founded by Ugandans who ended up buying treasured assets of the closed financial institutions on the cheap.
A separate search at Financial Intelligence Authority (FIA), which among other things monitors cash inflows and outflow into and from Uganda and conducts due diligence on investors, turned up no information about NRAC. We could not also find any record of the offshore company with Uganda Revenue Authority (URA), implying it unlikely paid tax on the purchase of the closed banks.
Supplementary inquiries from a director at URSB and a commissioner at URA again revealed nothing about NRAC, not even the company’s past tax records. In the absence of records, it is not clear whether NRAC file was removed from URSB or the company was allowed to do business with BoU without registration in contravention of the existing company laws.
The discoveries also raise question on the kind of due diligence, if any, BoU conducted before transacting business with the offshore company.
With authorities in Mauritius unwilling to disclose the particulars of the directors, Uganda’s Central Bank will have an explaining to do to lawmakers already investigating the institution.
BoU says a private company they contracted to scout buyers of assets and liabilities of International Credit Bank Ltd (1998), Greenland Bank (1999) and The Co-operative Bank (1999) identified the Mauritius-based offshore company.
Asked to name the people BoU dealt with and provide details on how they sourced the company and how many bids BoU evaluated before they selected NRAC, Ms Angela Kasirye Katete, the bank’s deputy director, Corporate Affairs, Communications Department, wrote: “BoU dealt first with Kirkland and later, NRAC. Following the applicable procurement procedure at the time, BoU procured Kirkland to provide consultancy services and one of their terms of reference was to source a buyer for the residual portfolio.” Kirkland did not respond when contacted for further details on the NRAC deal.
On whether BoU confirmed the local registration of the foreign company, Ms Kasirye noted that: “There was no legal requirement that the buyer of the residual portfolio be registered in Uganda.”
She added that “there was a sale agreement for the residual portfolio at an agreed price.” The Central Bank did not explain whether the offshore company paid any taxes to government.
Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) last week began probing BoU, among others, on Auditor General’s findings showing irregularities in the sale of closed banks.
The commission, chaired by MP Abdu Katuntu (Bugweri, FDC) last Friday tasked the BoU Governor, Mr Emmanuel Mutebile and his deputy Louis Kasekende to name the directors of NRAC and table documents on the transactions with them.
The Central Bank is yet to respond, although a failure to supply the information, as from past experiences, could lead Cosase to formally petition the Inspector General of Government (IGG) and FIA to investigate the NRAC deal for any criminal commissions or omissions.
BoU’s position is that in the sale of the three banks, it dealt with companies, not individuals.
Civil society warns
However, Ms Cissy Kagaba, the head of Anti-Corruption Coalition Uganda (ACCU), asked Cosase to investigate NRAC deal and warned that companies that are little more than addresses on a piece of paper have turned countries like Mauritius into tax haven, using an array of schemes to move millions of dollars in tax revenue away from developing countries.
“We want Bank of Uganda to tell us the people they dealt with because companies are owned by individuals,” Ms Kagaba said. “These offshore companies are suspect. How come the file is not at URSB and the tax authority does not have any record? Is it a coincidence that the company was registered in Mauritius and closed after doing business with BoU? All these questions must be answered in the inquiry into Bank of Uganda. Something is wrong,” she added.
Leaked Panama and Paradise Papers, a global reporting project coordinated by the International Consortium for Investigative Journalists, previously unearthed evidence of Ugandans registering companies in Mauritius to avoid taxes.
There is, however, no evidence in the present case to suggest that such was the scheme with the NRAC transaction or that any Ugandan was involved.
The Katuntu-chaired committee has said it will ask BoU to provide details of the November 5, 2007, Purchase and Transfer Agreement (DPTA) under which it compelled Greenland Bank to sell all its loans to NRAC.
The consequence of the decision was transferring all rights of the closed Greenland Bank in the loans to NRAC, including the right to sue and be sued on any issue of the loans. Similar agreements were signed with International Credit Bank Ltd and the Co-operative Bank.
Auditor General Report Pins BOU
Last week, Cosase threw BoU officials out of the probe and ordered them to return on Friday this week, after they failed to produce key documents on the closure of seven banks. A confidential special audit report of the Auditor General (AG) to Parliament revealed weaknesses in the management of Central Bank and questioned the Governor and his team for the glitches in the closure of seven banks. In his report, the AG, Mr John Muwanga, queried BoU officials on the flaws in the closure of Teefe Bank (1993), International Credit Bank Ltd (1998), Greenland Bank (1999), the Co-operative Bank (1999), National Bank of Commerce (2012), Global Trust Bank (2014) and the sale of Crane Bank Ltd (CBL) to dfcu (2016).