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Sudhir Ruparelia siphoned money from financial institution
Crane Bank made fictitious payments worth Shs 167bn to a ghost company known as Interdico as part of a wider scheme by businessman Sudhir Ruparelia’s associates to siphon money from the financial institution, a fresh forensic investigation has discovered.
The report revealed that Crane Bank registered a Shs 200bn spike in the value of Crane Bank’s buildings in 2014 where the value of land and buildings rose from Shs 81bn to Shs 281bn within the year.
This, auditors said, was part of the clandestine ploy by Crane Bank to misrepresent its performance to project the image of a profitable institution.
In the end, this would help Crane Bank to issue share bonus shares worth billions of shillings among the institution’s owners.
How it started
Earlier in 2012, Crane Bank’s directors had communicated their intention to issue bonus shares to the shareholders through capitalization of retained earnings and in effect increased the bank’s total paid up capital from Shs 100bn to Shs 210bn.
However, BoU declined to approve the request on account of lack of enough retained earnings to support the intended bonus share issues.
The media has seen BoU’s rejection of Crane Bank’s request, showing Sudhir’s schemes, which eventually led to the bank’s downfall, did not start recently.
In another instance, Crane Bank tried to get BoU’s approval to issue Shs 110bn worth of bonus shares.
BoU turned down the request on grounds that the bank’s retained earnings as per the audited 2011 financial statements was Shs 73bn and therefore not enough to cover the intended bonus shares.
These documents prove BoU had on several occasions nipped Sudhir’s alleged fraudulent plans in the bud.
BoU’s refusal meant that Crane Bank had to put on hold the planned bonus share issue.
However, Crane Bank needed to achieve its set target of Shs 110bn worth of retained earnings to be able to actualize the planned issue of bonus shares.
Auditors said in a report restricted as ‘confidential information for the sole benefit and use of Bank of Uganda’, that the falsification of the financial reports in 2012 was “part of a two-pronged approach that also involved under provisioning of non-performing assets with the intention of accumulating enough retained earnings for the suggested bonus issue.”
Fake company Interdico
Since Crane Bank claimed a spike of Shs 200bn in the value of buildings which created the impression that the bank was very profitable; auditors hoped to find genuine construction payments, contracts with contractors, architectural and engineering designs, bills of quantities, construction permits from municipal councils and certificates of work done as confirmation of the actual costs incurred in the construction.
Interestingly, all auditors could be provided with were “payment vouchers” in support of the alleged construction expenses.
“A further review of the spike in the value of buildings showed that it resulted from suspect payments to two companies; Interdico Limited Uganda and AI Construction Limited with the bulk of $64.2m (Shs 167bn) paid to Interdico,” the updated audit report reads in part.
Interdico was incorporated on February 25, 2013 with registration number 163335 and its shareholders were listed by Crane Bank as Arab Ibrahimbin Mamadbin and Marhiyani Ashwin Manji.
PwC auditors said “other than the incorporation documentation, Interdico does not have any other field documents at the registry. It is also not registered with URA.”
A deeper investigation shows Interdico’s indicated location in the registration documents – Suite Number 63, Plot 4 Pilkington Road, Kampala, belongs to the law offices of Frank Tumusiime & Co Advocates, who denied having knowledge of the company.
Additionally, the telephone number indicated on the invoices was not registered on the Airtel network.
It was discovered that Interdico had an account with Crane Bank but the account opening forms and system mandates were not available.
This account was also not migrated from Branch Power to T24 during the bank’s system change over in February 2015 as it had been closed in March 2014.
It was impossible to establish who the account beneficiaries, agents or signatories were.
Auditors believe the account documents and file were destroyed and the system mandates deleted yet the Financial Institutions Act (FIA), 2004, provides that a financial institution keeps such records for not less than 10 years.
They further hinted on the possibility that actually the account opening documents and file were never created as required by law.
Nevertheless, auditors observed that the “supporting documentation provided in respect of the Interdico payments was suspicious especially in simplicity of the invoices. Through computer forensics we traced the draft invoices to a deleted folder within the computers allocated to two Crane Bank employees within the finance department. These employees were Vivek Sharma (Head of Finance) and P. K. Gupta (Deputy MD).)”
The recovered documents show that the invoices were created on Gupta’s computer on January 28, 2014 at 9:56am and deleted on 24 September, 2016.
“Between them, Sharma and Gupta appear to have prepared a total 33 invoices in the months of January and February 2014 amounting to $65.14m (Shs 170bn),” reads the audit report compiled at the instructions of Bank of Uganda.
Within the same folder in Sharma’s computer, investigators found a ‘draft special resolution to Interdico to open an account’ with Crane Bank.
When Sharma and Gupta were interviewed, they both denied knowledge of the draft invoices in their computers.
The duo claimed they received “signed invoices” from then Managing Director A.R. Kalan.
However, when confronted with the evidence, while not admitting to preparing the invoices, they admitted that the January and February 2014 Interdico Payments were “fictitious payments aimed at concealing a ‘hole’ in the Nostro account (bank account held in foreign currency in another bank – in this case it was the Deutsche Bank – Ed.)”
The investigators added: “We found that personnel in the IT department would be used to pass the Interdico entries in the back end of Branch Power. Some of the entries passed in the account would have the contra entry as the same account so as to hide the destination of the money. These entries would be passed after 8:00pm in the evening when the bank was closed.”
The IT staff who talked to auditors said Sharma would “go with a breakdown and analysis of transactions that he would instruct them to pass in the back end of the system. Sharma would then takeaway the documents with him after the transactions had been effected.”
As such auditors said Crane Bank’s directors did not give complete, true and fair view of the financial position of the bank, its financial performance and cash flows in accordance with International Accounting Standards and the FIA.
This was due to “clear manipulation of the bank’s accounts be senior management in order to show year to year growth…there was also blatant forgery of documents purported to be invoices from Interdico and uttering of the same to bank for payment. Forgery and uttering of false documents is an offence under the penal code.”
Conviction on these offences attracts sentences of over 10 years in jail.