The recently released report by parliament’s Committee of Commissions, Statutory Authorities and State Enterprises (COSASE) on closure of seven defunct banks continues to cause unease in the country.
One of the findings of the report puts on the spot legal firm MMAKS for its alleged conflict of interest in the closure of some of the banks.
“This is a probe meaning bringing facts on table. This isn’t court of law where we are going to write and convict people. That anger we will have it and we will have to measure it,” Abdu Katuntu, the Bugweri County MP who also chaired the committee said, adding that they have 43 recommendations in the report.
“The worst about it is that the external lawyers are actually directors of commercial banks so how do you get directors to be principle legal advisors of the central bank against another bank. In economics, it is called regulatory capture. BOU has eleven lawyers all with masters yet even simple things like drafting agreements they are going to commercial lawyers.
The issue of BOU hiring external lawyers should be done in rarest of circumstances and Board must be involved,” he revealed.
MMAKS ON THE SPOT
MMAKs Advocates is co-owned by Apollo Nelson Makubuya, Timothy Kanyerezi Masembe and Moses Adriko. It is a commercial law firm, dealing in matters relating to banking, corporate and commercial law, acquisitions and intellectual property among others.
During the investigations, Katuntu discovered that while the Central Bank hired MMAKS Advocates to provide legal services, which led to the closure of the banks, some of its staff was directors in different commercial banks.
A case in point is the closure and sale of the National Bank of Commerce (NBC) in 2012. The negotiations were conducted by a team consisting of the former BoU Executive Director Supervision Justine Bagyenda, Legal Counsel, Margaret Kaggwa, the former Crane Bank Managing Director, A. R. Kalani and Timothy Kanyelezi Masembe, a lawyer from MMAKS Advocates.
COSASE then questioned the advisory role of Masembe since he is the Board Chairman of NC Bank. Masembe is a partner in MMAKS Advocates together with lawyer Apollo Nelson Makubuya who is Board Chairman of Equity Bank and lawyer Moses Adriko who is on the board of Standard Chartered Bank.
Vincent Wabwoya, the Budadiri East MP said it was just common sense for MMAKS Advocates to see that their conflict of interest for them to advise the Central Bank and also remain legal advisors to different commercial banks.
Masembe confirmed that MMAKS Advocates continued serving as legal advisors to Crane Bank even when they were contracted as transactional advisers by the Central Bank.
He explained that MMAKS Advocates acts for different banks on an adhoc and retainer basis, saying that if they act for one bank under this arrangement, it doesn’t stop them for advising another bank. He however said that working on a retainer basis, which was the case with the Central Bank was something different.
In relation to being directors of different commercial banks and their contract with the Central Bank, Adriko said that none of the commercial banks on whose boards they served expressed interest in any of the closed commercial banks.
COSASE established that Masembe and his MMAKS Advocates pocketed tax payers’ money amounting to shs4.2bn in the sale of Crane Bank without any documentation or receipts.
Masembe’s MMAKS Advocates were paid Shs914, 272,722 for legal advice during the CBL intervention, resolution and advice on the sale of CBL assets and assumption of liabilities.
The firm would further be paid extra Shs3 billion as 5% commission monies recovered from CBL shareholders.
While meeting COSASE, MPs asked for records or minutes from the meetings between MMAKS Advocates and Bank of Uganda which culminated to disbursement of such monies.
However, Masembe could not avail any minutes or documents regarding the payments saying that “lawyers don’t take minutes of meetings and in any case, the minutes should have been recorded by the Bank of Uganda.”
“How can shs4.2bn of tax payers’ money be given for legal advice without any minutes? This is ridiculous,” MP Odonga Otto said during the hearings.
COSASE Chair Abdu Katuntu also found it strange for a public institution to advance massive payments to a private law firm without any minutes for reference.
“We need minutes of such meetings with the Central Bank that show the kind of legal opinion that you gave to the Central Bank. As a public institution, how does one say this was a proper payment?” Katuntu said.
Neither Bank of Uganda nor Masembe have produced documents showing their terms of reference in offering legal opinion in the sale of Crane Bank.