UDB saga: The IGG’s side of the story
Posted Saturday, March 16 2013 at 02:00
Working relations became strained with those hoping to have the sacked officials reinstated being accused of leaking bank secrets.
The way Uganda Development Bank (UDB) is run and supervised needs to be changed to enable the bank better facilitate development activities, an investigation by the Auditor General has recommended.
Unlike commercial banks which are supervised by the Bank of Uganda under the Financial Institutions Act, 1997 and the Bank of Uganda Act, the report says, UDB does not have a specific independent oversight body to monitor and regulate its activities. “This exposes the development bank to the risk of public and government interests not being sufficiently served and protected,” the report says.
UDB has been in the eye of the storm in recent months following the sacking of the former management by the new board of directors over the loss of more than Shs20b which was lent out as trade finance loans. The former board of directors chaired by former Auditor General James Kahooza, concerned about the poor performance of trade finance loans, instituted an internal investigation in January 2012.
The internal investigation, which was done by Ms Patricia Ojangole, who was then chief internal auditor and is now CEO of the bank, unearthed rot in the management of trade finance loans and implicated a number of officials. The board discussed the report on April 20, 2012 and resolved to caution the then CEO, Mr Gabriel Etou, suspended him for 15 days and warned the director development finance, Mr Stephen Opeitum.
But when a new board chaired by Dr Samuel Sejjaaka was appointed in May 2012, it found the action taken by its predecessor board inadequate and reopened the case. It sought to investigate the matter further and when the officials went to court and blocked the internal disciplinary process, the board reacted by terminating them. Mr Etou and Mr Opeitum were among those terminated.
The others were Ms Priscilla Mugisha (company secretary), Ms Anne Muguluma (head of finance), Mr Wilber Naigambi (head of management information systems) and Ms Florence Mirembe (head of human resource).
The board also asked the Auditor General to carry out a special investigation into the management of UDB’s loan portfolio and issued the final report on March 1, which shows that the bank is at a risk of losing Shs21b in trade finance loans which are non performing.
Battle for control
The sackings kicked off a battle for control within the bank, with the terminated officials accusing in particular Dr Sejjaaka of firing them to fill the positions with “his people”. The battles became particularly intense when Ms Ojangole, who authored the internal audit report that blew the lid off the scandal, was appointed CEO. Critics claimed that her original intention was to have the others fired and eventually take the CEO’s job and they accused her of lacking the experience required to run a development bank.
Working relations within the bank became strained with those hoping to have the sacked officials reinstated being accused of sabotage and leaking bank secrets.
A number of the old workers have since been fired and said “there is a list of people to be fired”. In the recent past, every decision that has been taken in UDB, including moving offices, approving loans and hiring workers, has been publicly queried.
UDB’s management and board have faced inquests from the police, Inspectorate of Government and the Public Procurement and Disposal of Public Assets Authority (PPDA).
For example, the police and IGG, acting on a whistle-blower’s report, last month spent days in the bank investigating a decision by the UDB board to lend out $11m to a Kampala businessman yet UDB would ordinarily lend up to $2.5m. A police source told us that a planned arrest of one of the officials in the bank over the loan was called off in the final stages.
In a letter IGG Irene Mulyagonja wrote to Dr Sejjaaka notifying him about the investigation, she said among the complaints the inspectorate would investigate was a claim that Dr Sejjaaka received “kickbacks” to okay the loan.
So what does Dr Sejjaaka have to say to that? He says the complaint about the loan amount was “misconceived by people who know nothing about how boards work.” “The board of directors is empowered by the shareholders to make policies for the bank,” he said, “If the board approves a loan exceeding the value that the bank has been lending, it is in effect changing policy.”