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They accuse NBC management of gross misconduct and reserve the stingiest criticism for the top three major shareholders, Mbabazi, Nzei and Rugunda.

When investors from the United Arab Emirates wired just over $5 million from their account in Abu Dhabi Islamic Bank to prominent businessman Amos Nzei's accounts in the same bank and in Uganda, between May 2008 and March 2011, they thought their venture to acquire National Bank of Commerce (NBC) in Kampala was on track.

More than eight months after the last installment hit Nzei's account, the investors, M/S International Investments House, are crying foul; Nzei, one of NBCís majority shareholders, is yet to meet his part of the bargain.

The investors have now gone to the High Court, suing Nzei, together with Prime Minister Amama Mbabazi and ICT Minister Ruhakana, who are the other two majority shareholders in the bank. One of the documents The Observer has seen points to International Investment House depositing $435,000 on Mbabazi's account in Tropical bank on May 15, 2008 as part-payment for his shares in NBC. Around the same time, Nzei also received his share, which was also deposited in Tropical bank.

Now International Investment House want to recover their money. On February 27, 2012, they instructed their lawyers, Shonubi, Musoke and Company Advocates to "institute as may be instructed by us civil proceedings against Amos Nzei, Ruhakana Rugunda, the National Bank of Commerce and or all the sellers in respect of our claims arising out of the transaction pursuant to which we acquired 76% of the shares in the issued and paid-up capital of National Bank of Commerce U Ltd."

Last Thursday, March 15, International Investment House, through their subsidiary Emirates Africa Link for Strategic Alliance, made good on their threat as they filed a case in the High Court. They say they first bought 48% of the shares in NBC for $6 million. They then put in more capital of $3m and further payments made to third parties on behalf of the bank amounting to $920,000 (as per the agreement between buyers and sellers, to be recognised as capital of the bank). This brought the total to $9.97 million. They want all this money back.

This is a story of double-crossing - a continuation of another controversy with Mbabazi in the thick of things - and a struggle to take over the reins of a bank, whose performance and customer service is so bad, a mystery shopper survey sanctioned by some of the shareholders once found "a chicken walking around" the banking hall.

Some of the bank's documents The Observer has seen show that a sum of Shs 7bn that went out as loans, with some of the beneficiaries as shareholders, was recently declared by a board meeting as nonperforming assets to be written off. One of the beneficiaries was Nzei through Akright Projects Ltd, which received Shs 1.5bn in 2010 plus Shs 55m extended to his Kabale-based Hot Loaf Bakery.

Matthew Rukikaire, the bank's board chairman, received Shs 127m. Other beneficiaries were: Mulenga and Company Ltd (Shs 997m), Rev Ezra Bikangiso (Shs 280m), Kabale Institute of Health Sciences (Shs 150m) and Bunyonyi Overland Resort Limited (Shs 104m). International Investment House, in a series of letters to Bank of Uganda (BoU), accuse the current NBC management of gross misconduct and reserve the stingiest criticism for the top three major shareholders, Mbabazi, Nzei and Rugunda.

In a December 6, 2011 letter to BoU, International Investment House writes: "All effort to clean its [NBC's] portfolio, restructure it and steer it to the right direction to make it qualify to be a rated bank and make it investable and attract more investors to come on board, was hindered and blocked by the MD [Mohammed Wahra], the board and related parties to them...Now it is clearly evidential that the intentions were bad from the beginning and well planned to keep the controlling shares [51%] in the seller's group hands and hijack the project after value creation and strip the capital, which we injected, to their own benefits."

Theinvestors also take issue with Mohammed Wahra, NBCís managing director. Wahra is accused of all sorts of things, including paying himself a hefty salary, interfering with board decisions and mistreating staff, among others. What is not clear from all the documents The Observer has seen is whether he is directly involved in facilitating Nzei, Mbabazi and Rugunda to have a firm grip on the bank.

A letter from International Investment House to Bank of Uganda, dated October 20, 2011, notes: "We are simply suffering from an MD who is making big confusions and some board members who are non-bankers trying to operate a bank, and some others who are more occupied in consuming this public company's [NBC] resources and capital to their benefit... Unfortunately, we were unable to move the issues forward with the current management and board that is steered and controlled by some of the sellers."

Mutebile sucked in

BoU governor Emmanuel Tumusiime-Mutebile has also been sucked into this controversy. BoU regulations warrant that should a bank continue to fail stress tests and show no signs of turning around the situation, it should face penalties or be declared bankrupt. NBC has performed poorly on so many fronts since 2008; it boggles the mind why it remains in existence. And it's the bank's continued existence that brings into question Mutebile's decision-making process to rein in such errant players.

For example, as at December 2011, according to official documents from BoU, NBC made a cumulative loss of Shs 4.1bn - a 389% jump compared to the previous year's loss of Shs 847m. The bank's cost to income ratio (the money it spends to make money) was 220% as at December 2011, far higher than the industry average of about 65%. This high ratio is brought about by the bank's worsening losses. NBC's loan portfolio - an area where banks make money - declined by 18% to Shs 6.9bn in the year ending December 2011. Customer deposits dropped by 16% (to Shs 9.7bn) during the same period.

It is possible BoU is running out of patience. Jane Bagyenda, the Central Bank's executive director in charge of supervision, wrote to Rukikaire, chairman of NBC, on February 29, 2012, raising her concerns about the bank.

"You realise that ever since the new capital requirements came into force on March 1, 2011, the National Bank of Commerce Uganda Limited has not complied with them. Whereas the capital injection in August 2011 improved the bank's capital position, it was not sufficient to bring the bank to compliance, as part of the capital was eroded by losses. You will also note that BoU has been supportive throughout this period when the bank has had shareholding challenges," she wrote.

"We wish, therefore, to reiterate BoU's position that we shall penalise NBC beginning March 1, 2012...The penalties shall run per day in default until the bank complies with the minimum capital requirements of Shs 10bn," Bagyenda added.

A source close to the issue told us BoU has not taken such action yet.

Early signs

To understand just how International Investment House found themselves in this mess, it is useful to look back at the history of NBC. From the start, there were signs that the bank's business model would at some point run into trouble. It started as Kigezi Bank of Commerce sometime around 1991 to provide banking services and cheaper loans to the people of the south-western sub-region of Kigezi. There were rallying calls to all the people in this area to buy shares in the bank, a model almost similar to that of Centenary bank although the key difference is that while the former was spearheaded by ambitious personalities, the latter was by the Catholic Church.

It is, therefore, not surprising that as personalities became ambitious - and perhaps greedy - the issue of shareholding was always bound to pop up at some point. No wonder the 320 minority shareholders, including George Kanyeihamba, Jim Muhwezi and Ezra Suruma, have ganged up against the bank's management and want all those they entrusted with their money brought to book. Some other minority shareholders want the bank liquidated since, as they argue, it benefits a few.

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Comments

 
+15 #1 Kikama 2012-03-18 23:17
It is clear that stolen money has no blessings...it can last some months or years but it cannot see generations. And greedy people never get satisfied however much they steal. So first they broke into pension funds and got a way with it, now they are breaking into savings of their shareholders and clients. Wow.......keep going the temangalo group
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+10 #2 alfonso 2012-03-19 01:35
Amama has money to pay the Arabs , he got a good ''enjawulo'' on purchase of jets , we will help the Arabs obtain an inter nation arrest warrant for Amama and fellow co-thieves , that one we can work on it from tomorrow
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+11 #3 Samson 2012-03-19 04:41
IT IS SECTARIANISM, CLASH OF INTEREST, THEFT AND INCOMPETENCE AT WORK.

I was invited to buy shares in the Bank but once i saw Amama Mbabazi as one of the initiative takers i knew that somehing would go wrong and i declined the offer. Thank God for my intuition.

COMPARE THIS CASE WITH THAT OF DR SULAIMAN GREENLAND BANK? By this time around NBC would be under receivership and the chairman in Luzira.
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+13 #4 stevenkasiko 2012-03-19 06:03
Museveni 's leadership has been used by his family members and friends as a ticket to accumulate wealth and to Museveni corruption is a symbol of power. If you have your money in this bank just withdraw it , You cant trust your money to abank owned by the so called NRM cadre the only thing they ve mastered from Museveni's illict deals and stealing. This bank must be in asorry state
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+7 #5 Joseph 2012-03-19 07:38
BOU is tolerating an MD who has been disowned by the majority shareholder! Who is protecting depositor interests? How many other banks have similar problems?
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+11 #6 NEZIKO 2012-03-19 08:49
That bank is not mean't to do bussiness but it just used by those guys to carry out their deals.
In the Mbabazi temangalo land saga the transactions were done in that bank and now wait for another deal thats when it will become active
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+8 #7 Raymond Otika 2012-03-19 11:19
National Bank of Commerce, my foot. Perversion by perverts. How can a private bank become a national bank of commerce? They sold of Uganda Commercial Bank (UCB, which was a national bank of Commerce in order to pervert it into NBC.

Isn't one of the key shareholder of the NBC the current embattled, Governor BOU and was the main expert architect behind the sale of UCB? They sold off the national airline (Uganda Airline) and perverted into Air Uganda. They sold off the Uganda Railway in order to pervert it into Rift Valley Railways.
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+5 #8 DENIS 2012-03-19 11:41
This MD Wahra (formerly of tropical bank), earns 45 million a month and the bank pays school fees for his kids in malaysia. No wonder this bank is making losses.
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+7 #9 wodgot 2012-03-19 11:46
Easy come easy go!, investors from Arab Emmirates should have first consulted with common people on the street of Kampala. That is what happens if you do business with greedy thieves.
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+8 #10 Youngaman 2012-03-19 12:58
One thing which is not clear here is why BoU is allowing that so called NBC operate when it doesn't possess the minimum requirement.
This Mutebile should be investigated deeply. it looks like there are a lot of mistake willfully ones that this man has done and is doing right from drying the national reserve for buying the jets fighters without the necessary approval in the name of the president promised to pay back with oil money once Uganda starts exporting.I think this man is tied out of old age
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+3 #11 robert 2012-03-19 13:33
there will be no rest for the wicked !!!!!!!
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+4 #12 Francis 2012-03-19 14:17
Am only hopping that the BOU will be able to protect the interests of innocent stakeholders like staff, depositors and all those that that have an interest stemming from the Bank's normal business.

The BOU must also not ignore the loans to connected parties that went bad and now the Board wants to write them off. Naye Mr. Amama God bless you. You are so lucky but just be mindiful that sometimes luck runs out.
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+11 #13 Besigye 2012-03-19 14:19
In the Banking Industry that's what they call Money Laundering
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+9 #14 uh ! 2012-03-19 14:33
If Uganda was ruled under Sharia Law virtually 90% of NRM would have no limbs, they would have been chopped off due to theft.
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+6 #15 Frank Mujabi 2012-03-19 15:55
Uganda is a country run by thieves.

These investors should have known they were investing with crooks.
Now they are going to find out that the judges are also
cronies of the crooks who stole their money.
They will never get their money back.
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+1 #16 Betty Long Cap 2012-03-19 16:08
Quoting uh !:
If Uganda was ruled under Sharia Law virtually 90% of NRM would have no limbs,....
Good point!

My daughter saw first-hand how sharia law worked in Oran, Algeria: a man with just a head and torso had been propped up in a doorway to spend the day begging.

Surely something can be done to stop Ugandan theft short of amputation.
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+5 #17 kizito 2012-03-19 18:33
The best friend of m7 the cartoons in Uganda government just amaze me. Idi Amin killed one at a time these are killing the whole nation.They deserve the bullets they have worked hard for them!
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+4 #18 Murangira 2012-03-20 02:39
Prime minister Amama Mbabazi, has really made a name in a negative way. He is almost involved in every scandle. How are we going to keep calling him the Right Honourable. I suggest we call him Baryeshoni.
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+5 #19 Rutabajuuka 2012-03-20 06:22
I could excuse Nzei because he has been in trading since i was a boy when he drove Rally cars,so he could have been conning people who never came forward to complain, he does not get his money directly from public cash only indirectly. But how do you explain the wealth of Mbabazi who has been a public servant all his life and his earnings can be documented since he started working?

How much do ministers earn? When i was a soldier, we were forbidden from trading to prevent conflict of interests, but i think it applied to us under them. What do they want all that cash for? Even when they can cut clean deals they still want to swindle. Is it a compulsive disorder or kleptomania?

why dont they seek help. Those so called investors are imbeciles, if they know any thing about banking why didnt they send cash to the bank or the investment broker? Were they bribing these people one by one because they thought they were buying a National Bank for a song? Thieves will always bemoan thieves.
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+2 #20 Vincent Kizza 2012-03-20 11:03
Unfortunately,t he name Amama is becoming synonymous with rot everywhere!!
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