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Suit papers reveal how Kenyan tycoon helped Uganda bank fraud

NAIROBI – When Crane Bank Uganda hurtled towards a crash last year, Rasiklal Kantaria quietly quit the lender a month before it was shut down by the Bank of Uganda.

Court documents show that Mr Kantaria, the Prime Bank chairman, may have been one of the main players in the murky world of Ugandan tycoon Sudhir Ruparelia, who siphoned $92 million (Sh9.5 billion) out of Crane Bank. Mr Sudhir’s business associates named in the alleged fraud include Jitendra Sanghani, Rasiklal Chhotalal Kantaria, Godfrey Kirumira and Mohammed Ali.

According to Bank of Uganda (BoU), the tycoon perpetrated sophisticated false accounting “to cover up the hole in Crane Bank accounts.” Clever plot As at December 2015, the volume of non-performing loans and advances at the lender stood at USh142.358 billion (Sh4.15 billion), accounting for a quarter of Uganda’s banking sector bad loans.

Mr Sudhir, who had a 48.67 per cent stake – held directly and through his wife Jyotsna, daughter Sheena and son Rajiv – hatched a clever plot where he used associates to create shell companies with shareholding in the bank, yet he actually controlled them 100 per cent.

While Mr Kantaria supposedly owned his Crane Bank stake through an investment vehicle dubbed White Sapphire, and had served on the Ugandan lender’s board for more than a decade, authorities were puzzled after he just upped and left as if he owned nothing.

“Rather than involve himself in the effort of trying to save Crane Bank from collapse as would be expected, Kantaria, the single largest shareholder in the financial institution, resigned from the board in September 2016, a month before it was taken over by Bank of Uganda and did not attend any board meetings in the year 2016,” the court papers read.

Veil transactions BoU says Mr Sudhir’s dishonest dealings were aimed at enabling him to run the bank without reputable shareholding, create an impression that Mr Kantaria, a prominent and experienced Kenyan banker, was involved in the management of the financial institution and escaped scrutiny.

Besides reputation, the Kenyan investor and Prime Bank director had connections to two other banks – as the chairman of First Merchant Bank in Malawi and Capital Bank in Botswana – which would come in handy when Mr Sudhir wanted to veil his transactions.

In 2012, dividends were paid to Mr Kantaria’s account at Capital Bank Botswana and then wired back to Mr Sudhir, the court papers show. Apparently Mr Kantaria did not own White Sapphire at all; the investment vehicle domiciled in Mauritus was bought by Ugandan depositors’ cash using his name.

“White Sapphire, which was allegedly owned by Mr Kantaria, was actually controlled by Mr Sudhir who conducted its day-to-day business, answered regulatory queries and paid its auditors,” BoU says.

The allegations against Mr Kantaria, a former director of the Deposit Protection Fund – now Kenya Deposit Insurance Corporation – came in the wake of the collapse of Imperial Bank, another Kenyan lender with shady business that operated a subsidiary in Uganda.

Back home, although Prime Bank has reportedly denied that it had any facility with the Crane Bank, and hence had no case of contagion, the shared directorship risks testing the confidence in the Kenyan bank.

  • Standard Media

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