Uganda central bank sues Crane Bank director for over $100m

The Bank of Uganda has filed a law suit on behalf of troubled lender, Crane Bank, against Sudhir Ruparelia for the retrieval of more than $100 million.

In a statement released on July 13, the central bank said it was seeking to retrieve funds from the owner of Meera Investments, which it claims were “fraudulently extracted” from Crane Bank from 2013 to 2016.

“The suit seeks to recover a total of $93.8 million and 60.3 billion shillings ($20 million), together with the freehold titles to Crane Bank’s branches, general damages, interest and costs,” the central bank said.

The lawsuit forms part of a much larger dispute that began last year when the central bank was forced to take over Crane Bank after it was found to be “significantly undercapitalised” and therefore posed a “systemic risk” to the stability of the nation’s financial system.

The central bank said Crane Bank had been on its “watch list” since September 2015 when it started performing regular onsite tests and audit reports that revealed the bank’s capital had fallen below a mandatory level of 50%.

In January 2017, Crane Bank was sold to DFCU Bank. Following the transfer, the central bank said its investigation into the commercial lender had found Ruparelia, who had acted as director and vice-chairman of Crane Bank’s board of directors since its founding in 1995, had owned 100% of the bank’s shares via the use of fronts – in contravention of Ugandan law, which prohibited majority ownership.  

Money was also found to have been funnelled from Crane Bank through a series of “fictitious transactions” linked to false construction activities at the bank’s branches and for software developments that were never carried out.  

Central Banking reached out to Ruparelia through Meera Investments but failed to get a response. 

The new documents also revealed a number of accounts had been created within the commercial bank, but were deliberately not mapped onto the profit and loss statement or balance sheet of the financial institution, the person familiar with the matter says.  

Local media has since reported that EY has been suspended from auditing any commercial banks in the country after a forensic audit showed firm staff had helped Crane Bank hide critical information from other auditors and regulators. EY was not immediately available for comment at the time of publication.

Lapse in concentration

A third party – Derrick Nsereko – has also filed an intention to sue notice against the Bank of Uganda, demanding to know how the central bank allowed Crane Bank’s problem to slip through its net.

Taking into account the powers given to the central bank, Nsereko claims the central bank has “failed in exercising its statutory mandate in supervising the management and affairs of Crane Bank Ltd (CBL) or Bank of Uganda’s officers colluded with the management of CBL in doctoring reports of sound financial health of the CBL”.

The letter, which was filed to the office of the central bank’s governor – Emmanuel Tumusiime Mutebile – on July 12 says Nsereko would file a lawsuit against the institution within three days on the grounds of “collusion, corruption and fraud”.

“Clearly the failure in carrying out this statutory duty implies the entire banking and financial sector in Uganda is as risky in the hands of the BOU as presently constituted, manned and managed,” Nsereko says.

He is also seeking assistance from the police to launch a criminal investigation into officers at the central bank.