BoU to pay Shs25 billion in legal fees over closed banks

KAMPALA. The parliamentary committee investigating alleged irregularities in the closure of seven commercial banks has obtained documents from Bank of Uganda (BoU) which contain key details showing private lawyers are demanding more than Shs25b for legal services.
The MPs on the parliamentary committee on Commissions, Statutory Authorities and State Enterprises (Cosase) are reviewing the new documents which include invoices presented by external lawyers for payment of legal fees.
The tax invoices/debit note to BoU legal counsel contain, among other things, the 18 per cent Value Added Tax (VAT) charge, professional fees, and other detailed expenses covering photocopying of documents, drafting letters and perusing documents, legal counsel and representation in court, telephone costs and lawyers’ transport to court.
Although professional legal fees are billed in accordance with the Advocates (Remuneration) Regulations, Cosase will be seeking details on the hiring and payment of more than Shs25b to legal firms Masembe, Makubuya, Adriko, Karugaba & Ssekatawa (MMAKS Advocates), Bowman’s Uganda, Cohen and Collins Solicitors and Notaries and Sebalu & Lule Advocates.
The MPs also want the law firms to provide evidence for payment of VAT. They have been reviewing the documents for a week in preparation for today’s meeting with BoU board members.
The documents were sourced from BoU and supplementary information came from the Office of the Auditor General and Financial Intelligence Authority.
Mr Timothy Masembe of the MMAKs Advocates confirmed they are demanding payments from BoU but could not confirm whether it is Shs15.6b as the documents show.
“Yes, we are demanding payment, but I am not sure of the amount. I am not the accountant. But what I know is that lawyers’ fees are provided for by law and are based on statutory instruments. I am not in position to comment on the amount,” Mr Masembe said by telephone yesterday.
Asked whether the firm has received any payment so far from BoU, Mr Masembe said: “No part of it has been paid.”
Asked about the likelihood of his firm being summoned to appear before the Cosase for interrogation, Mr Masembe said lawyers are not regulated by Parliament because all matters concerning their professional fees and other charges are regulated by the court registrar.
In September 2017, Cosase halted investigations into payment to private lawyers for legal services to the Central Bank in order not to interfere with the Auditor General’s forensic audit into closed banks, which was going on at that time.
The committee chairperson, Mr Abdu Katuntu, and other members said it was untenable to provide for a legal directorate at BoU, yet most of the legal work is done by private lawyers. The MPs were investigating the expenditure of Shs1.4b in legal fees to private law firms.

Cosase’s say
“I cannot give you specifics now, but what I can tell you is that the budget for external lawyers has gone up and we are going to look into these matters, including terms of engagement,” Mr Katuntu told Daily Monitor on Friday.
“We have received some of the documents and we would like to hear from BoU officials before we interact with the lawyers and other stakeholders. We are going to study the professional fees and VAT payments in order to understand the justification for hiring of external lawyers yet BoU has a fully-fledged legal directorate,” he added. The Central Bank’s legal director, Ms Margaret Kaggwa Kasule, however, said the decisions on what cases are handled by the contracted lawyers are taken with a consideration to the “complexity of the matter.”
The Cosase MPs have also demanded minutes of the board meetings detailing the expenditures on the external law firms hired during the liquidation of Teefe Bank (1993), International Credit Bank Ltd (1998), Greenland Bank (1999), Co-operative Bank (1999), National Bank of Commerce (2012), Global Trust Bank (2014) and the sale of Crane Bank (CBL) to dfcu bank (2016).
The BoU Governor, Mr Tumusiime-Mutebile and his team return to Cosase today to answer questions on alleged irregularities in the closed banks. Mr Mutebile and his deputy Louis Kasekende were last week kicked out of the committee’s proceedings for lack of particular documents demanded by the investigating MPs.
They have since submitted photocopies of some of the documents the committee demanded. The MPs are already raising more queries after reading the documents.
The budget for external lawyers started growing in November 2016 after BoU hired MMAKS Advocates as transaction adviser in the controversial Crane Bank takeover at $251,045 (about Shs943.3m).
The invoice was sent to BoU legal counsel on November 28, 2016, and BoU paid on December 15, 2016.
On April 24, 2017, MMAKS asked for an additional $847,175 (Shs3.2b) as fees for recovering $14.3m (about Shs54.5b) from the shareholders of Crane Bank Ltd.
However, the documents indicate lawyers have not recovered the money from CBL shareholders, but show that BoU paid MMAKS on May 12, 2017.
The payment of the money in question, however, is now subject to a court decision and mediation between BoU and former Crane Bank owner Sudhir Ruparelia.
According to new documents before the parliamentary committee, BoU officials paid MMAKS another Shs427.5m in three instalments between June 29, 2017 and December 19, 2017. On June 6, 2018, MMAKS raised 11 invoices for various cases involving Crane Bank in receivership worth Shs11b.
The MPs will today ask BoU officials to confirm whether all the 2018 payments were made to MMAKS or not.
The new documents under examination show that another law firm, BOWMANS submitted three invoices worth Shs9.8b to BoU.
The invoices were issued on June 26, 2018. The MPs have demanded supporting documents on this transaction and the unspecified amounts to another law firm, Sebalu & Lule Advocates, including evidence of VAT payment.
The Central Bank hired Sebalu & Lule Advocates after the Commercial Court ruling in December 2017 by Justice David Wangutusi disqualified MMAKS advocates and AFK Mpanga Advocates from representing BoU in a case against Sudhir.
The court disqualified them on account of conflict of interest having been Crane Bank lawyers before. Court held that the legal firms were privy to confidential information regarding Sudhir and for them to represent BoU against him would be to his disadvantage.
A committee member told Daily Monitor at the weekend that Mr Mutebile will be asked to present his response to a November 30, 2016, letter from BoU’s former director for commercial banks supervision Justine Bagyenda on the decision to hire private lawyers.
Ms Bagyenda wrote to Mr Mutebile asking him to approve the payments to external lawyers.
The Cosase members will also ask the governor to explain the expenditure of Shs409.3m as legal fees in regard to Global Trust Bank.
The bank also paid Cohen and Collins Solicitors and Notaries Shs17.4m for unspecified assignment. It is also not clear whether BoU hired other law firms after the liquidation of Teefe Bank, Greenland Bank, Co-operative Bank and National Bank of Commerce.

What does the law say?
Under the regulation, a law firm can elect to charge on percentage basis where the value of the subject matter is ascertainable in monetary terms or charge fees per hour of service provided to the client.
But the MPs will today demand minutes of the negotiations with the various law firms and the justification for hiring external lawyers when the Central Bank has a directorate for legal affairs.
The remuneration of an advocate of the High Court by his or her client in contentious and non-contentious matters, the taxation of that remuneration and the taxation of costs as between party and party in contentious matters in the High Court and in magistrate’s courts are contained in the Advocates (Remuneration and Taxation of Costs) Rules. Arrangement of Rules.