In his 11-page affidavit sworn on Wednesday at the Commercial court in response to a Shs 400bn Bank of Uganda lawsuit against him, former Crane Bank boss Sudhir Ruparelia has asked that the central bank’s lawyers Timothy Masembe Kanyerezi and David Mpanga should be his witnesses.
Sudhir contends the duo previously served as his personal and bank lawyers and “cannot appear as counsel in a matter in which they have potential to be witness and are conflicted, and that they cannot appear against former and current clients, or in matters where they will be in breach of their fiduciary relationship.”
BoU recently hired MMAKS and AF Mpanga Advocates owned by Masembe and Mpanga respectively to take on Sudhir in a historic multi-million dollar fraud case.
Through Kampala Associated Advocates, Sudhir says MMAKS Advocates were Crane Bank’s lawyers until the date of its take-over by Bank of Uganda on October 20, 2016.
According to Sudhir, during the management and conduct of the affairs of Crane Bank, the executive directors regularly consulted and wholly relied upon the advice of MMAKS Advocates and in that consultation, the board and management shared facts which are in issue in the fraud case.
As Crane Bank’s solicitors the law firms were in charge of perfecting, registering and enforcing securities, structuring transactions, general corporate advisory work, litigation, recovery and providing all manner of legal assistance to the board and management of Crane Bank.
Sudhir contends that MMAKS advised the board and management on a daily basis since 2005.
“During the course of this intense advocate-client relationship, the board shared with MMAKS Advocates all matters pertaining to the management, shareholding and business of Crane Bank,” said Sudhir.
The businessman says during this time, “we as board members believed that MMAKS Advocates as our advisors were in fiduciary relationship with us and had an ethical duty of fidelity, loyalty and confidentiality and by accepting and prosecuting instructions of Bank of Uganda, MMAKS Advocates is in breach of its fiduciary obligations to me.”
Sudhir now wants court to direct that the lawyers be listed as his witnesses in the case.
The businessman gave another example of a case filed in the Constitutional Court by the former shareholders of the National Bank of Commerce where Mpanga served as Crane Bank’s lawyer and “became aware of facts which may be prejudicial to me…”
BoU lawyers insist Sudhir was the sole and beneficial owner and in charge of Crane Bank’s day to day operations.
The property mogul also denies claims of being a “dominant executive force” and that nothing could have happened without his knowledge and approval, saying “as the lawyers of Crane Bank, I will require MMAKS Advocates, in particular Mr Timothy Masembe Kanyerezi among others as witnesses to defend me from these false allegations.”
He adds: “As my personal lawyers, they are witnesses to the fact that I only sat on the Board of Directors and did not run the said bank on a day to day basis, nor was I a dominant force.”
Sudhir argues that by virtue of being a shareholder and director of Crane Bank, he was a client of Mpanga and Masembe “within the meaning of the Advocates Act and that all times there was advocate-client relationship and a fiduciary relationship between me” and the lawyers.
He also submits that MMAKs was the “longest serving Advocates of Crane Bank Ltd and personally act and have acted for me or other companies in which I have an interest including Meera Investments Ltd and Goldstar Insurance Company Ltd wherein I am a substantial shareholder.”
He also revealed that on September 29, 2017, Crane Bank instructed MMAKS to conduct training to the directors on the duties of directors under the Financial Institutions Act, 2004.
Sudhir says prior to the training of the board of which he is a member, in a “frank disclosure under the confidence of advocate-client privilege, we shared the entire corporate governance structure, the organizational structure, matters relating to the day-to-day running of the bank and other confidential and proprietary information regarding the shareholders and directors of the bank and thus MMAKs are aware of facts which may be prejudicial to my case.”
The lawyers recently said in their defence that they would rely on a forensic audit report by Price Watercoopers (PWC) to prosecute instructions against Sudhir.
PWC said in its report that it was not a legal practice but that comments on possible legal implications, options and considerations were based on independent legal analysis and advice given by Bowmans Uganda – another name for the law firm of AF Mpanga Advocates.
Sudhir says allegations in the PWC document are backed up by the alleged ‘Independent Legal Advice’ or ‘Legal Analysis’ by Mpanga, whom he says is a “necessary, material, competent and compellable witness” to speak on the veracity of the contested forensic audit report.
Case Against Sudhir
Mpanga argued in his legal assessment that Sudhir owned 96 percent of the shares of Crane Bank and leases between Crane Bank and Meera Investments Limited were drawn up to a single template without the endorsement of the person which drew the registered leases.
He also assessed that the transfer of leases was at undervalue and this amounted to causing financial loss and further that some land files at the land registry show that Crane Bank held some freeholds that it transferred to Meera Investments – a decision that was not motivated by business efficacy reasons.
In his legal analysis, Mpanga also opined that that Sudhir engaged in falsification of accounts and that in all years there were misstatements which the directors signed off and are liable for.
The lawyers further cited the manipulation of Crane Bank’s financials to show growth whereas not.
In the ‘legal analysis of the payments’, BoU lawyers said they noted irregular withdrawals of funds by Technology Associates and that monies were withdrawn whereas no software had been supplied.
Sudhir is further blamed for extracting $9.2m through Technology Associates (TA) and that he was a director and shareholder of the said company.
BoU lawyers tendered evidence in form of email correspondences between Jacqueline Lule, William Kasozi and David Mpanga to prove Sudhir’s alleged involvement in extraction of funds using TA, accusations the businessman dismissed as “false.”
Sudhir says on March 20, 2017, he entered into a confidential settlement and release agreement (CSRA) with the Central Bank and DFCU.
He revealed that on April 4, 2017, Mpanga’s law firm availed to him an Implementation Agreement drafted and signed by David F.K. Mpanga for A F Mpanga Advocates and on behalf of MMAKS Advocates, both acting as agents of BoU.
Sudhir said in his affidavit that the two law firms shall be required as witnesses to tender in the implementation agreement and/or testify on matters relating to its negotiation, execution, implementation and breach, as well as its effect on the CSRA.
“…. in order to reach a just resolution of the dispute regarding the CSRA, on account of the averments in the counter claim and the defence to the counter claim, Mr David F. K. Mpanga of AF Mpanga Advocates-Bowmans Uganda is a necessary, competent and compellable witness.”
It will be recalled that after the implementation agreement was signed, issues arose with regard to the list of properties handed over as part of the obligation Sudhir had under the CSRA.
BoU lawyers cited issues of disputed ownership and poor value of properties handed over by Mr Mahmud Bharwani of Infinity Investments Ltd.
Mpanga on April 7, 2017 met with Mahmud over the matter before recording and transmitting minutes of the meeting in an email to different parties.
It was agreed that parties would not rely on unilateral valuation of one party but would strictly follow the CSRA.
Sudhir says in his defense and counter claim he will rely on Mpanga’s minutes to show that all the issues related to the property list that he handed over in relation to CSRA Implementation agreement were resolved, adding that the lawyer as “the author and sender of the minutes is the best placed person to testify on them as a competent and compellable witness.”
The businessman further said Mpanga and his firm “cannot act as counsel in matters relating to the CSRA, the Implementation Agreement, property list, Bharwani properties and from his engagement with Mr Bharwani on the loans of Infinity Investment Ltd, all of which constituted a significant part of the defence and counterclaim.”
Sudhir further revealed that on the night of June 28, 2017 at 11:00pm, Mpanga sent him an email containing a letter of demand which he says constituted a breach of CSRA and will require the lawyer to testify to this as a witness.
On July 10, Mpanga wrote to Sudhir proposing a settlement and concluded the letter, according to Sudhir, by “threatening that if I did not sign off a consent judgement by July 12, 2017, they would commence criminal proceedings against me.”
Sudhir says he will use this letter at the trial to show that BoU were using the case to “blackmail me, and that the suit had been filed in abuse of court process.”
BoU lawyers said Sudhir caused Crane Bank to loan enormous amounts of money to Infinity Investments Ltd on a highly irregular basis and that there were no recovery efforts against the company it started defaulting.
Interestingly, Sudhir says in 2010, 2011 and 2014, Crane Bank approved a loan facility to the company before instructing MMAKS Advocates to conduct a due diligence and prepare the security documents for the loan facility including a debenture mortgage for Infinity Investments.
“Infinity defaulted on its loan obligations and contrary to the allegations that no recovery efforts were made, Crane Bank instructed MMAKS Advocates to undertake recovery measures against the company,” contends Sudhir.
He says MMAKS wrote demand notices to Infinity Investments on February 6, 2016, 21 September 2016, and 6 October, 2016 demanding for the outstanding amounts.
“Following the failure of Infinity Investment to pay the outstanding amount, MMAKS Advocates, on the instructions of Crane Bank instructed their auctioneers to advertise and sell some of the properties offered as security,” he added.