As far back as 2010, word was rife on the grapevine about the unscrupulous nature of the operations at the then high flying Crane bank. Stories abound of the existence of a duplicate set of accounts, the use of unsuspecting individuals’ accounts to launder money, intimidation of key employees that opted to leave the bank etc.
So, while Mr. Sudhir Ruparelia was being glorified by the media for his feat as a billionnaire, I remained part of those who kept insisting that the end doesn’t justify the means. Money on its own isn’t worth its salt if it has a trail of tears in its wake.
The year must have been 2001 when a friend of mine set out to open up one of the first ever internet cafes in Kampala (and by extension, Uganda). He opted to take a bank loan and as security, submitted his father’s land title in the form of a prime residential property on Luzira hill overlooking the lake. To this day, I do not understand why he ended up at Crane Bank but those I have shared the story with tell me the bank was very easy when it came to lending money. Approvals for loans weren’t as laborious as other banks and not much due diligence was needed since it’s believed their interest was eventually in attaching whatever security that had been deposited.
This friend of mine, I’ll call him Akat, got a loan of UGX 15 Million Shillings and went ahead to set up the business. As fate would have it, internet use was not yet massive and only a few elites patronised it. The loan he got unfortunately attracted interest weekly on a compound rate basis. This is how it works out, imagine a Loan principal amount of UGX 15 Million attracting a 3% compounded interest rate weekly. It implies that by the end of the first week, the loan will have grown to;
UGX 15 Million (Principal Loan Amount) + UGX 450,000/= (Weekly interest of 3%)
= UGX 15,450,000/=
Come Week 2 and the total loan sum with interest for the first week becomes the new Principal sum i.e
UGX 15,450,000 (New Principal Loan Amount) + UGX 463,500/= (Weekly interest of 3%)
= UGX 15,913,500/=
You notice that within two weeks, your loan will have grown by nearly a million shillings. By the time two months are past, the original loan amount is likely to have doubled.
Akat struggled for a couple of months trying to keep up with the repayments until he realised that the business was not in position to service this loan. He tried selling off the business but the money offered wasn’t enough to pay off the now humongous loan sum. This led him to seek for work abroad and by a stroke of luck, an opportunity opened up in Europe.
In his own words, Akat told me, “The Crane Bank loans are designed to fail you. Imagine, I toiled in Europe, earning Euros 350 per day and it took me 6 months to pay up the loan. I just thank God that I retrieved my Father’s land title.”
News of Crane Bank going under therefore never came as a surprise to many. We expected it. Our only concern was when. I recall talk doing rounds at one time of how the bank’s systems run amok and account holders found millions on their bank accounts that they were never aware about. Massive withdrawals were made by the crafty ones and no prosecution ever occurred. If indeed this was true, how did it go unnoticed to the Central Bank?
Section 4 (2)(j) of The Banking Act of 2000 states, “… the bank shall – supervise, regulate, control and discipline all financial institutions and pension funds institutions;”
It therefore leaves many of us wondering how a bank that was regularly getting Banker of the Year Awards could be so rotten at the core of its operations without the awareness of the Central Bank. The kind of fraud that has been unearthed so far could NOT have been carried out solely by Sudhir Ruparelia and a few cronies. No Way!!! We all know how information tends to leak from within institutions to the outside especially within industry circles. I doubt Crane Bank employees privy to some of the fishy dealings all kept mum. They definitely shared this information and that is how some of us were able to have red flags raised on this bank as far back as ten years ago. Like a puffed up balloon soaring up into the sky, we knew that all it would take was a spiky object to deflate it and bring an end to its flight.
I am no financial expert but there are some basics that can never skip my interrogative mindset. These are some of those;
How could a credit facility of over 3.5 Million dollars to Infinity Investments Ltd (Sudhir’s company) be written off without attracting any attention to the case? Is it that common for companies to default on loans in millions of dollars in Uganda only to be written off? In most cases the banks usually go after these businesses. That is a flag right there.
How could the transfer of titles for the plots where the bank branches were located to Meera Investments (Sudhir’s company) go unnoticed in an annual review of the Bank’s operations? Another Flag.
How can a phony purchase for banking software of US$ 10 Million not be given a nod of approval by Bank of Uganda?
How could Sudhir’s amateur attempt at concealing his 100% ownership of Crane bank go unnoticed all these years? Matters are worsened when Bank of Uganda labels these efforts as sophisticated. In an interview published on 2nd April 2012, when asked whether he had business partners, to which Sudhir responded, “I don’t like to engage in partnerships. I only have one business in which I am a partner with Godfrey Kirumira ….” Couldn’t such an utterance have raised a red flag?
I’m sure there is a lot more to this web of intricate theft than what has surfaced already into the public domain. It’s a shame that BoU kept a blind eye to all the rumors that have been surrounding Crane Bank all these years. This is another strong reason for us naysayers to advance as proof of collusion.
The times I have had bank transactions of substantial sums of money, I’ve always received calls from the bank with requests to furnish proof of why the transaction is being carried out. When I did ask why this was always the case, a bank official told me that transaction amounts over a certain limit need to be reported to the Central Bank and sometimes State House. There is therefore NO way Sudhir would have engaged in such financial fraud without some key people at BoU being in the know.
It is upon this premise that I believe heads have to roll at the Central Bank. The first action I would advise the Governor of BoU to do is resign from his position. This is not because he is guilty of having carried out the act, but a sign of remorse to show the public that stuff went wrong under his watch and he is taking responsibility since the buck starts and stops with him. We call this vicarious liability.
His action should be followed by the line managers stepping aside to pave way for an internal investigation to take place. It’s a matter of ethics here. No form of whitewashing can redeem their professional integrity at this stage, just like no amount of lipstick can turn a pig into a beauty queen.
All said and done, the people my heart goes out to are those that have been fooled for long into believing that crooked business personalities are the epitome of success. The thousands of youths and upcoming entrepreneurs that have attended Pakasa Forums whose panels are lined with star studded so-called business success stories that are as shallow as temporary graves will now be forced to rethink whatever knowledge they attained.
The biggest learning point from this saga and many more to come is that achievements without integrity are as useless as rains without good soils.
It’s time to rethink our basic morals, values and aspirations. Why would you build a multi-million dollar residence yet fail to remit Social Security contributions for the thousands of employees under your payroll? At this rate, Joseph Kony might appear a saint.
By the way, let us not always wait for people to fall out of political favour before doing the right thing. There are many more ‘Crane Banks’ in Uganda today that we need to get rid of.
For God and My Country !!!!
James Wire is a Small Business and Technology Consultant based in Kampala, Uganda
Follow @wirejames on Twitter.
Email lunghabo [at] gmail [dot] com