Ham verses DTB: The case that has thrown bankers off balance

It has been a talking point and it might remain so no matter how quick you might want it to vanish. 
Since the case was filed in March, too much has been thrown around. In fact, most people have, and continue to struggle to separate hearsay from matters of fact.
Considering which side you listen to, you are bound to get half-truths or twisted narratives bent on driving a certain agenda. 

From the onset, it was obvious there had been a purposed agenda to influence the case.  
Bloggers, social media influencers and online publishers and indeed some main stream media, had seemed to rally around a converging point from which they sourced real or perceived information that was later shared in a syndicated manner.

Daily Monitor has not obtained any evidence to suggest a syndicated arrangement but one might want to understand who was generating and coordinating the narrative, which at some point had reported that Diamond Trust Bank (DTB) had run bankrupt. 
Actually, there had been reports suggesting that DTB, in a scheme to stay afloat, had resorted to siphoning money from Ham Enterprises accounts. 
This could have been an ordinary case of mis-reporting but in hindsight, it hurt the bank and in different statements, it came out to correct the misinformation as malicious propaganda. 

Therefore, in looking at this case, we shall seek to understand some of the key ingredients but we shall limit this article to matters before court with references extracted from the ruling of Justice Henry Peter Adonyo, filed applications, defences and statements from representatives of the parties involved. 

How it all started 
It all starts on October, 23, 2017 when DTB Kenya, in an offer letter, informed Ham and others that an application of the $4m (14.8b) loan had been granted. 
The loan offer, which after various computations would make a consolidated sum of $4.5m (Shs16.7b), had been part of an application in which Ham had sought to access about $8m in funding for projects in and outside Kampala. 

In advancing only $4m, it meant that the rest of the loan would be sourced from DTB Uganda. 
Indeed, it is not a refutable fact that the money was advanced. However,  trouble started mid last year, after, according to details before court, the performance of the loan had become unhealthy. 
Details indicate the bank had grown concerned as the facility started to default on due payments for extended days or even weeks.

The defaults later escalated into months, which prompted DTB to remind Ham of the consequences that would among others force the bank to recall the loan. 
Indeed, later in November 2019 DTB informed Ham of its intention to foreclose on properties against which the loan had been advanced, unless the company owned by businessman Hamis Kiggundu, had provided sufficient commitment to repay the loan in its entirety.
It is here that hell started to break loose, tearing apart a relationship that had spun over a decade and thrown the entire banking sector “under the bus”. 

The storm had been building silently for months between November up to December 2019 and into the first months of 2020 before it was all clear in March that indeed it was not all well between DTB and Ham Enterprises. 
Before March, Ham had written to DTB threatening to withdraw his accounts from the bank and seeking an explanation, in which he alleged that DTB had been illegally siphoning money from his accounts. 

Subsequently, in March, Ham filed an application in which he sought court pronouncement on a number of issues, part of which sought an order that would force DTB to refund close to Shs120b, which was allegedly siphoned from Ham’s accounts as well as a determination on whether DTB Kenya had acted illegally in purporting to operate business in a jurisdiction where it was not registered. 
In the application, Ham had also sought an audit into the company’s accounts so as to understand the magnitude of the illegal siphoning.

Ham had claimed that DTB Uganda had provided DTB Kenya an illegal cover to conduct business in Uganda and other illegalities such as  money laundering. 
However, in an affidavit sworn by Stephen Kodumbe, the DTB Kenya head of legal DTB refuted the claims and noted that at no time had DTB Kenya conducted business in Uganda and it had sufficient evidence to prove Ham’s loans had been offered in Kenya.   

“ … the second respondent [DTB Kenya] never carried out any financial institutions business in Uganda and that the credit facilities alluded to by the Applicants [Ham and others] were offered … in Kenya after [Ham] applied ... there with the said facilities transferred to [Ham’s] account in Kenya,” the affidavit reads in part and notes that DTB Kenya only instructed DTB Uganda to act as a collection agent through an escrow account but not acting as its agent in conducting financial institution business.  
Actually, the gist of the case is, away from other issues, contained in the merits of the law that demand that for any financial institution to conduct business in Uganda, it must be registered by the Central Bank. 
 
In a defense filed through K&K Company Advocates and AF Mpanga, Advocates, DTB Kenya,   according to Kodumbe’s affidavit and another by Mbabazi K Emejeit, the DTB Uganda head of legal, denied to ever have conducted financial institutions business in Uganda, saying it had evidence to prove that the ($4.5m) referred to were offered to Ham in Kenya.

Court ruling
However, in his ruling Justice Adonyo said that whereas the loans had been offered in Kenya, they had been advanced to “Ugandan entities without the approval of the controlling authorities as provided for under the [law], which …. requires a foreign bank to seek authorisation of Bank of Uganda before it can engage in ... lending and extending credit facilities”. 

Therefore, he ruled: “I am of the considered opinion that indeed ... [DTB Kenya and DTB Uganda] committed illegalities when money facilities were rendered … without prior authorisation of the Bank of Uganda.” 
Court also found that DTB Kenya had acted illegally in appointing DTB Uganda as a collection agent since the law, under the Financial Institutions Act, 2004, does not permit any  “ financial institution to conduct agent banking in Uganda without written approval of the Central Bank”.

In a statement on Wednesday, whereas the Central Bank indicated that “an entity that is not licensed in Uganda is not eligible to apply to the Bank of Uganda to conduct agent banking, it went on to suggest that perhaps DTB had not acted illegally when it said it was not “mandatory for a foreign bank to establish a representative office in Uganda in order to conduct lending or non-deposit-taking activity”.

 However, the statement signed by Emmanuel Tumusiime-Mutebile, the Bank of Uganda governor, noted that the Central Bank’s regulatory and supervisory powers only apply to financial institution business conducted by Central Bank licensed entities. 
Justice Adonyo also granted Ham’s prayer for the refund of close to Shs120b that the company claimed had been siphoned out of its accounts. 

However,  asked how court had arrived at the Shs120b without an independent audit, Fred Muwema, a lawyer, whose law firm – Muwema Company Advocates and Solicitors - is retained by Ham to provide legal counsel, told Daily Monitor Ham had, through his auditors, established that DTB had been siphoning his accounts for close to 10 years. 
The evidence, he said, had been provided to court and the Judge was satisfied thus the award. 

However, it should be noted that Ham had applied for an audit of his accounts which court had granted but the request was later withdrawn on Ham’s own volition. 
The Institute of Certified Public Accounts had been directed to identify an auditor but it was never executed since Ham had filed an application withdrawing the request. 
Therefore, in whichever direction it goes, it remains to be seen how the case that has thrown Uganda’s banking sector off balance, will pun out at the appeal level or even beyond. 

Some of the court orders                               
1. I do order for the recovery by Ham from DTB of Shs34.2b and $23.4m being monies that were unlawfully taken from Ham’s loan accounts.
2. I do declare that since DTB Kenya did not produce a licence allowing it to conduct financial institutions business in Uganda from Bank of Uganda in respect of the business alluded hereto then the alleged credit facilities that were stated to have been offered were illegal and thus void ab initio and consequently unenforceable.

3. I do declare that the appointment of DTB Uganda  by DTB Kenya as agent bank and security agent was illegal, unethical, unlawful, in breach of trust, in breach of fiduciary duty and in breach of the Financial Institutions Act 2004 and the Kenyan Banking Act.
4. I do hereby issue an order for the unconditional release of mortgages allegedly created over properties comprised in Kyadondo at Kawuku, Victoria Crescent II Kyadondo at Makerere Hill Road and all corporate and personal guarantees issued by Ham.

Additional reporting by Dorothy Nakaweesi