StanChart, KenGroup loan dispute persists
May 09, 2010
TWO years since the Uganda Manufacturers Association asked the central bank to intervene in a loan dispute between KenGroup, a stationery manufacturing firm, and Standard Chartered Bank, the matter remains unresolved. <br>
By David Mugabe
TWO years since the Uganda Manufacturers Association asked the central bank to intervene in a loan dispute between KenGroup, a stationery manufacturing firm, and Standard Chartered Bank, the matter remains unresolved.
Even with the intervention of an arbitrator, KenGroup is still contesting the audit report presented by Deloitte & Touche.
After court ordered that an arbitrator mediates the issue, Deloitte was appointed to verify the loan figures.
Its report indicates that KenGroup owes StanChart sh264m.
But Edward Kigongo, the group’s chief executive officer, contests the report, saying his own independent auditor discovered that the figure was overstated by sh116.6m.
Because of this dispute, StanChart is still holding KenGroup’s land titles as securities for the loan.
The group had also earlier been put under receivership over the same debt; an act Kigongo said cost the company over $500,000.
“Our reputation is badly affected.
“Unfortunately, we are not helped at all in spite of our appeal to the Bank of Uganda, the regulator.
“The small-and- medium size businesses have continued to be suffocated and sometimes killed by the giant multinationals,†said Kigongo.
“As far as we are concerned, we have paid the bank. We borrowed $370,000 but we have paid $383, 000, plus interest,†explained Kigongo.
He said the Deloitte audit report was deposited in court as a binding agreement yet it was not signed by his firm.
However, a senior partner with Sebalu & Lule Company Advocates, the StanChart lawyers, said Kigongo consented to the draft audit report.
“We realised it was a reconciliation matter so we short listed three audit firms,†the partner, who didn’t want to be named, said.
The firms were PriceWaterHouseCoopers, Ernst & Young and Deloitte.
“Ernst & Young wrote back, saying they cannot handle it because it was a small matter, while PriceWaterHouseCoopers never got back to us,†said the lawyer.
Because of the disparity in figures, KenGroup went back to the arbitrator, requesting that Deloitte clarifies its figures in court.
But Sebalu & Lule Company Advocates protested, arguing that was not mentioned in the earlier judgment.
“It was during this time that we discovered that Deloitte & Touche is Sebalu & Lule’s client,†said Kigongo.
A.F. Mpanga Advocates, Ken Group’s lawyers, insisted that Deloitte & Touche is one of the established clients of Sebalu & Lule.
“The special relationship (advocate-client) was never disclosed at the time of the appointment and /or shortly before embarking on the assignment.
“The said audit firm was a client of your firm at the time they were appointed to undertake the execution of the exercise,†said A.F. Mpanga in the letter to Sebalu and Lule Advocates.
Mpanga said had his client known about the relationship, they would never have accepted Deloitte as an audit firm.
“To the extent that Deloitte & Touche was associated to yourselves and failed to disclose as required by applicable code of ethics and practice, the said firm was and cannot be seen to be independent,†said Mpanga.
Sebalu & Lule denied any special relationship.
“We do for them powers of attorney when they are bidding for a job.
“There is very little nexus between an audit firm and a law firm,†said the lawyer.
Sebalu & Lule explained that the last meeting they had in February had asked Kigongo to present the grounds of fault.
“There was no mention of the auditors appearing before any court to explain their report.
“To request that the auditors now appear before the court to explain their report would amount to a variation of a consent judgment,†said Sebalu in a letter to A.F. Mpanga.
TWO years since the Uganda Manufacturers Association asked the central bank to intervene in a loan dispute between KenGroup, a stationery manufacturing firm, and Standard Chartered Bank, the matter remains unresolved.
Even with the intervention of an arbitrator, KenGroup is still contesting the audit report presented by Deloitte & Touche.
After court ordered that an arbitrator mediates the issue, Deloitte was appointed to verify the loan figures.
Its report indicates that KenGroup owes StanChart sh264m.
But Edward Kigongo, the group’s chief executive officer, contests the report, saying his own independent auditor discovered that the figure was overstated by sh116.6m.
Because of this dispute, StanChart is still holding KenGroup’s land titles as securities for the loan.
The group had also earlier been put under receivership over the same debt; an act Kigongo said cost the company over $500,000.
“Our reputation is badly affected.
“Unfortunately, we are not helped at all in spite of our appeal to the Bank of Uganda, the regulator.
“The small-and- medium size businesses have continued to be suffocated and sometimes killed by the giant multinationals,†said Kigongo.
“As far as we are concerned, we have paid the bank. We borrowed $370,000 but we have paid $383, 000, plus interest,†explained Kigongo.
He said the Deloitte audit report was deposited in court as a binding agreement yet it was not signed by his firm.
However, a senior partner with Sebalu & Lule Company Advocates, the StanChart lawyers, said Kigongo consented to the draft audit report.
“We realised it was a reconciliation matter so we short listed three audit firms,†the partner, who didn’t want to be named, said.
The firms were PriceWaterHouseCoopers, Ernst & Young and Deloitte.
“Ernst & Young wrote back, saying they cannot handle it because it was a small matter, while PriceWaterHouseCoopers never got back to us,†said the lawyer.
Because of the disparity in figures, KenGroup went back to the arbitrator, requesting that Deloitte clarifies its figures in court.
But Sebalu & Lule Company Advocates protested, arguing that was not mentioned in the earlier judgment.
“It was during this time that we discovered that Deloitte & Touche is Sebalu & Lule’s client,†said Kigongo.
A.F. Mpanga Advocates, Ken Group’s lawyers, insisted that Deloitte & Touche is one of the established clients of Sebalu & Lule.
“The special relationship (advocate-client) was never disclosed at the time of the appointment and /or shortly before embarking on the assignment.
“The said audit firm was a client of your firm at the time they were appointed to undertake the execution of the exercise,†said A.F. Mpanga in the letter to Sebalu and Lule Advocates.
Mpanga said had his client known about the relationship, they would never have accepted Deloitte as an audit firm.
“To the extent that Deloitte & Touche was associated to yourselves and failed to disclose as required by applicable code of ethics and practice, the said firm was and cannot be seen to be independent,†said Mpanga.
Sebalu & Lule denied any special relationship.
“We do for them powers of attorney when they are bidding for a job.
“There is very little nexus between an audit firm and a law firm,†said the lawyer.
Sebalu & Lule explained that the last meeting they had in February had asked Kigongo to present the grounds of fault.
“There was no mention of the auditors appearing before any court to explain their report.
“To request that the auditors now appear before the court to explain their report would amount to a variation of a consent judgment,†said Sebalu in a letter to A.F. Mpanga.