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Friday, August 19, 2022

How Stanbic Bank top bosses connived to fleece private company of Shs4bn in fraudulent sale of mortgaged property

The Commercial Division of High Court has fined Stanbic Bank (U) Ltd Shs400m after it was established that it sold mortgage property to a company owned by its employees.

Section 30 of the Mortgage Act, 2009, prohibits banks from selling mortgage properties to its employees.

The Act prescribes a punishment of a 24-month jail term and or a fine for violation of this provision.

Yet several employees of Stanbic Bank formed a conduit company under the name Myriad Investment Club Limited under which they bought mortgaged properties.

One of these properties belonged to Macdowel Limited, which had mortgaged part of its properties to Stanbic Bank as collateral security for a loan in 2017.

The properties in question were locate on Plot 1, 3, 4, 5 and 6 closes in Luzira.

With the company finding trouble to pay the loan, it opted for a consent judgement to clear the same by June 30, 2020.

Yet Macdowel Limited’s directors say they were shocked to learn that the bank had refused to hand over its titles even when they had repaid the loan.

The company ran to the High Court protesting the fraudulent actions.

It would later emerged that the top bank employees had sold the properties to themselves.

Macdowel Food and Beverages Limited argues that on top of the sale being illegal, the bank undervalued the properties.

That they expected Shs4bn from the properties but Stanbic Bank valued the same at Shs1bn.

Two Stanbic Bank employees are singled out for their prominent roles in Myriad Investment Limited’s buyout of the properties in question.

These are: Kenneth Kitungulu, the head of global markets, and Daisy Nitwe, the treasury sales dealer at the same financial institution.

Kitungulu and Nitwe appended their signatures to the sales agreement in their capacities as directors at Myriad.

Stanbic Bank’s legal division had drafted the sale agreement.

In other words, Kitungulu and Nitwe’s colleagues at the bank — from a different department — had drawn the agreement.

 Justice Richard Wejuli Wabwire has now ruled that Stanbic Bank’s employees ‘circumvented the law’ to fleece their clients.

“I could not turn a blind eye when employees of Stanbic Bank circumvented the law to the disadvantage of their esteemed customers,” Justice Wejuli ruled.

“It is very clear from the evidence on record contained in the affidavits in support of this application and rejoinder that the shareholders of the second respondent [Myriad Investment] are employees of the first respondent [Stanbic Bank], on February 3, 2020, opportunistically incorporated a sham or conduit company in the name of second respondent [Myriad], with a hidden motive of purchasing the securities, of the applicant [Macdowel].”

The judge also cited the timing of the company’s incorporation.

“It is my finding that the second respondent [Myriad] which was incorporated after an advert for auction of the applicant’s securities is a creature of the employees of the first respondent [Stanbic Bank] as a devise by a sham, a mask which the employees of the 1st respondent who are also directors and shareholders of the second respondent, chose to shamelessly place upon their faces in an attempt to circumvent the provisions of Section 30 of the Mortgage Act 2009. It would create an absurdity if this court allowed the respondents to walk away scot free.”

He has fined Stanbic Bank Shs400m.

Pearl Times Reporter
Pearl Times Reporterhttps://pearltimes.co.ug
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