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Sudhir embezzled over sh400b, says Bank of Uganda

By Admin

Added 10th July 2017 05:11 PM

According to Bank of Uganda, Sudhir perpetrated sophisticated false accounting “to cover up the hole in the Crane Bank accounts.”

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Sudhir and his business associate Godfrey Kirumira

A Bank of Uganda investigation into the mismanagement of Crane Bank says its proprietor, Sudhir Ruparelia, embezzled over sh400b through what they called highly sophisticated fraudulent transactions.

Bank of Uganda (BoU), through the Crane Bank now under receivership, has sued the embattled tycoon and his Meera Investments Company, to force him to pay back the money with interest, according to court documents seen by Sunday Vision.

BOU also names a number of businessmen that it says colluded with, aided or facilitated Sudhir to carry out the alleged fraud. Others named in the court documents are companies linked to the property mogul.

The Central Bank says that Sudhir operated phony bank accounts within Crane Bank, purposely to conceal what it called fraudulent transaction and deceive the Central Bank about the financial status of Crane Bank.

According to Bank of Uganda, Sudhir perpetrated sophisticated false accounting “to cover up the hole in the plaintiff’s (Crane Bank) accounts.” Sudhir’s business associates named in the alleged fraud include Jitendra Sanghani, Rasiklal Chhotalal Kantaria, Godfrey Kirumira and Mohammed Ali.

Rasik Kantaria is a Kenyan tycoon and founder of Prime Bank, which has branches in Kenya and other African countries. BoU says Sudhir and his firm (Meera) siphoned over $92m and more than sh8.2b from the bank, on different dates. The Central Bank wants court to compel Sudhir to refund the over $92m at an interest rate of 12% per annum and 26% for more than sh8.2b, as well as accounting for its use.

BoU took over the management of Crane Bank last October, on the grounds that the financial institution was under-capitalised and posed a systemic risk to the banking industry. BoU said the bank had been on its watch list since 2015, after regular onsite visits and external audit reports showed that the financial institution’s capital had fallen below the mandatory 50%.

The Central Bank announced that it was investigating to establish if the non-performing loans and bad debts had played a role in eroding the bank’s capital. However, in January this year, BoU transferred the assets and liabilities of the troubled financial institution to dfcu Bank. According to the documents filed and received in the Commercial

Division of the High Court in Kampala on June 30, varying sums of money valued in dollars and shillings were fraudulently withdrawn from Crane Bank, under Sudhir’s instructions between 2013 and 2016. Sudhir is the defendant number one, while Meera is number two.

Fraud BoU argues that $80m was siphoned from Crane Bank on October 26, 2013 and over $9.2m “extracted” from the institution on different dates in the same year, purportedly for the supply of core banking systems and software licences.

According to the documents, over $3.5m and more than sh8.2b was taken out of the bank on December 27, 2014 disguised as credit facilities to Infinity Investments Limited and eventually written off as bad debts under Sudhir’s instructions. Infinity Investments Limited is reportedly owned by Sudhir.

FraudulENt laNd traNSFErS, rENt A total of $990,000, according to BoU, was withdrawn from Crane Bank and paid to Meera Investments as rent fees, illegally, between 2013 and 2016, the document argues. The Central Bank says Sudhir did not remit over sh52b in workers’ savings to the National Social Security Fund between 2007 and 2016.

BoU alleges that Sudhir fraudulently transferred freehold titles of 48 plots of land (where the bank has its branches) purchased and developed using the Crane Bank’s finances into the name of Meera Investments, from Crane Bank. The plots of land, according to the court documents, were then leased back to the owner (Crane Bank) at high fees.

Each plot was reportedly leased to the bank at sh100m as premium for 49 years and a $6,000 in ground rent per year, payable to Meera Investments.

CoNCEalEd SharES BoU states that Sudhir, who was the Crane Bank director and vice-chairman of its board of directors since its founding in 1995, owned 100% of the shareholding in the financial institution, but fraudulently concealed his shareholding through his fronts who he reportedly used to take money from the bank.

The Central Bank further states that the embattled entrepreneur is the registered owner of 28.83% of the bank’s shares. He is also reportedly the owner of 47.33% of the bank’s shares registered in the name of White Sappire Ltd, a company incorporated in Mauritius and allegedly owned by Rasiklal Chhotalal Kantaria.

BOU said Sudhir owns 4% shares registered in the name of Jitendra Sanghani and a further 19.83% recorded in the names of members of his immediate family – wife and their three children. White Sappire, it’s supposed owner, Kantaria, Sanghani and Sudhir’s family members, according to suit, have always acted as his nominees and at his direction.

“They are all the 1st defendant’s (Sudhir) associates within the meaning of section 3 of FIA (Financial Institutions Act) and persons connected with the 1st defendant within the meaning of section 210 of the Companies Act 2012,” BoU states. By October 2016, when it took over management of Crane Bank, the BOU said Sudhir owned 100% shares in the financial institution and exercised full control over it and is the owner of Meera Investments, operated under Ruparelia Group.

“The 1st defendant’s combined legal and beneficial ownership of 100% of the plaintiff’s (Crane Bank) contravenes Section 18 of the FIA and his control of the plaintiff, until October 2016, contravened Section 24 of the FIA,” the suit reads. The FIA prevents any person other than a reputable financial institution from exercising control over a financial institution.

Through illegal arrangements with Kantaria, White Sappire and Sanghani, the BoU argues, Sudhir dishonestly concealed his ownership and control of Crane Bank from the Central Bank, the its depositors and others including the financial institution’s auditors.

Anglo Universal Holdings Limited, a company reportedly associated with Sudhir, at sh2.5b in 2006 and another batch of shares from Jagdish Nagrecha, Sudhir’s brother-in-law and Jyotsna Ruparelia, at sh9b in 2010.

“In fact, the $2.3m used for the purported purchase of shares by Kantaria from Nagrecha and Mrs. Ruparelia in 2010 was depositors’ money unlawfully channelled on August 12, 2010, through the account of Premier Commodities Limited, a company associated with the 1st defendant, by virtue of his known social and business associate, Mr. Godfrey Kirumira, and his employee, Mr. Mohammed Ali, disguised as a loan,” BoU alleges.

Premier Commodities, according to the suit, wired the monies to one of Crane Bank’s internal accounts, where it was split into three sums, before being transferred to Kantaria’s account in Citibank NA, India on August 12, 2010.

According to the court documents, Kantaria deducted $50,000 reportedly as his commission and sent back the monies to his shillings account held in Crane Bank on August 24, 2010 “From there, on August 25, 2010, Kantaria made two transfers, one to Nagrecha’s dollar account, held with the plaintiff and another to Mrs. Ruparelia’s shillings account, also held with the plaintiff. These were supposed

payments for the shares,” the court document reads. Nagrecha and Mrs. Ruparelia reportedly transferred on August 27, 2010 the money paid into their accounts by Kantaria to Crane Bank Forex Bureau, a company owned and controlled by Sudhir.

On the same day, the court documents indicate, Crane Bank Forex Bureau re-deposited the monies onto the account of Premier Commodities and the company then ‘purported to repay’ the funds it borrowed from the bank.

BoU says Sudhir’s dishonest dealings were aimed at enabling him run the bank without reputable shareholding, create an impression that Kantaria, a prominent and experienced Kenyan banker, was involved in the management of the financial institution and escape scrutiny.

The court documents indicated that monies were taken out of the bank to pay companies, including one that belongs to Sudhir, for software supplies and construction activities at the bank’s branches that did not take place. As a result, the bank ran into financial troubles and several bogus transactions were carried out, including false accounting to give an impression that the financial institution was in good shape.

Sudhir gets dividends
The Central Bank said out of the over sh36b due to Kantaria in dividends earned between 2006 and 2014, more than 35b was received by Sudhir. “By way of example, the 2012 dividends were initially transferred to Kantaria’s account at Capital Bank Limited, Botswana.

The entire dividend amount was then transferred to the 2nd defendant’s (Meera Investments) account, held in the plaintiff in two tranches being $2.5m paid on December 29, 2013 and $600,000 paid on November 7, 2013,” the document reads.

The court documents indicate that although White Sappire was reported to be wholly owned by Kantaria, correspondence with its Mauritian administrators showed that its crucial businesses, including, but not limited to, approval of its annual accounts, answering regulatory queries and status, as well as payment of its auditors was exclusively handled by Sudhir.

“Kantaria’s involvement in the leadership and management of the bank was absent and was in no way commensurate to the levels of his purported shareholding or his experience as a banker in Kenya, Malawi and Botswana,” BoU states. Kantaria, the purported single largest shareholder, according to

the Central Bank, did not make any efforts to save the bank from collapse, and instead resigned from the board in September 2016, a month before the financial institution was taken over by BoU. It is alleged that Sanghani bought the 4% shares from Sudhir in December 2010, a few months prior to the expiry of the statutory deadline for the bank to comply with the new shareholding restrictions under the FIA.

The over sh1.6b worth of dividends payable to Sanghani were received by Mohammed Ali, an employee of Sudhir.  Additionally, Sanghani’s dividends for 2013 were, according to documents before court, transferred to an internal interest receivable account named corporate current to plug a hole occasioned by fraudulent extraction of monies from the bank.

“Like Kantaria, Sanghani did not attend any general or extraordinary general meetings of the plaintiff and further, in a similar fashion, the correspondence with the Mauritian administrators of White Sappire, revealed that a company by the name The Spectrum Finance and Investment had been set up in Mauritius, to acquire shares held by Sanghani. This process had not been complete when BoU took over the plaintiff,” the Central Bank states.

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