PM Amama Mbabazi cleared of fraud

By Hillary Nsambu & Betty Amamukirori

KAMPALA - The Commercial Court has cleared Prime Minister Amama Mbabazi and his business partners Dr Ruhakana Rugunda and city tycoon Amos Nzeyi on allegations that they had committed fraud in their dealings relating to the National Bank of Commerce.

Justice David Kutosi Wangutusi, the head of the Commercial Court, on Wednesday dismissed a case brought up by retired judge George Wilson Kanyeihamba and 320 other National Bank of Commerce shareholders against Mbabazi, Rugunda and Nzeyi. The bank is currently in liquidation.

 

The court also ordered Kanyeihamba to single-handedly pay the costs to the three defendants. Kanyeihamba may be asked to pay Mbabazi, Nzeyi and Dr. Rugunda about sh5b in costs, according to one of the defendants’ lawyers.

 

Kanyeihamba’s lawyers said they were under instructions to appeal against the ruling. Kanyeihamba did not attended the proceedings.

 

Although Kanyeihamba had argued that he sued jointly with 320 other shareholders, the court established that very few shareholders were notified of the suit and even those who were notified, rejected the idea of being plaintiffs.

 

Mbabazi and his co-defendants were represented by two law firms: Byamugisha and Company Advocates and Muwema and Mugerwa Advocates.
 

 

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On his part, Kanyeihamba was represented by Emmanuel Orono, from the retired judge’s firm.

 

In the case, Kanyeihamba dragged Mbabazi, Rugunda and Nzeyi to court accusing them of fraudulently transferring the business and assets of Kigezi Bank of Commerce (KBC) to the National Bank of Commerce (NBC).

 

Kanyeihamba claimed that the change of the bank’s name from Kigezi Bank of Commerce to National Bank of Commerce was “fraudulent, dishonest and illegal” and that it was calculated to benefit Nzeyi, Mbabazi and Rugunda.

 

He argued that after the change of name, the three sold off some of the bank’s shares to foreigners yet the bank was intended only for the people from Kigezi, hence the name KBC.

 

Kanyeihamba also dragged the Attorney General and the National Bank of Commerce, now in liquidation, to court alleging that they also conspired with the three individuals to fraudulently constitute NBC into which they transferred the business and assets of KBC, which he had earlier started.

 

Kanyeihamba wanted the court to direct the registrar of companies to revert NBC to the position of KBC in its “original functional state.”

 

He also wanted the court to order Nzeyi, Mbabazi and Rugunda to give accountability of the profits of KBC and its assets since April 12, 1997.

 

In addition, they wanted Mbabazi and his colleagues to pay them damages for loss incurred as a result of their alleged unlawful acts.

 

“In the sum total, the plaintiff having failed to prove liability of the defendants, this matter is accordingly dismissed with costs,” Justice Wangutusi said in his ruling.
 

 

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Dr. Ruhakana Rugunda

 

 

Wangutusi, agreed with Dr Joseph Byamugisha and Fred Muwema, who asked the court to clear their clients of any fraudulent acts, submitting that the registrar of companies registered the change of name and company of the bank from private company limited by shares into a public company limited by shares after the shareholders and the board had agreed upon it in their general meeting.

 
In the ruling read by deputy registrar Thadeus Opesen, the judge ruled that the plaintiffs had failed to prove fraud against any of the defendants.

 

The judge ruled that the change from KBC to NBC was only in the name and that the bank had never disposed of any property and that whatever profit was made by NBC remained the bank’s property albeit under a different name.

 

“Since the change of name did not change the company, there could be no loss by one company to the other and; therefore, none of the defendants is found liable to make good any loss,” Wangutusi ruled.

 

In their pleadings, Mbabazi’s lawyers argued that the change of name from KBC to NBC was intended to give the bank a national outlook and to woo other investors to acquire shares in the bank.

 

They contended that it was important to sell the shares in order to raise the bank’s capitalisation from sh500m to sh2b.

 

 

According to the court records, KBC was initially formed by Dr Rugunda and Nzeyi and both were directors alongside Mbabazi.

 

The bank was incorporated on December 23, 1991. Kanyeihamba was also a shareholder in the bank. In the course of running the bank, conflict arose between Kanyeihamba on one hand and Mbabazi, Rugunda and Nzeyi on the other hand.
 

 

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Retired judge George Wilson Kanyeihamba

 

 

Kanyeihamba accused the trio of doing unauthorised acts, including turning KBC into NBC for their personal gain and to the detriment of other shareholders.

 

In September 2012, the Bank of Uganda closed NBC and all its depositors transferred to Crane Bank. At the time, NBC had been suffering financial distress for more than two years and had incurred continuous losses with half of its loans not performing. Its share capital had fallen dramatically from sh10b to sh9.2b.

 

At the time, all commercial banks in Uganda were required to have a minimum capitalisation of sh10b.

 

The closure of the bank was also precipitated by disputes between the bank’s major shareholders, who proved to be a serious obstacle to effective governance and management and public confidence in the bank.

 

The dispute pitted the bank’s majority shareholders including Mbabazi, Rugunda and Nzeyi against a group of minority shareholders led by Kanyeihamba.