Ugandan named in Credit Suisse leaks

Credit Suisse kept open an account held by Ugandan arms dealer Emmanuel Katto even after he was publicly named in a judicial investigation as being involved in a corrupt helicopter deal, leaked banking data shows.
Mr Katto’s account at the bank was opened in January 1995, two years before he struck a deal with the Ugandan government to buy combat helicopters from Belarus’s state-owned arms company.

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When Ugandan forces tried to field the helicopters, they found them “in a sorry state,” according to a judicial commission report.
That commission, appointed in 2000, found that Mr Katto’s deal, and related expenses, had caused at least $6.8m (about Shs24b) in losses for the Government of Uganda (GoU). 

Mr Katto was also found to have paid $800,000 (Shs2.9b) in bribes to President Museveni’s brother—Gen Salim Saleh, who was then a Special Advisor to the President on military and political affairs in northern Uganda—as he pushed the deal through.
It is unclear whether any of those funds passed through Mr Katto’s Credit Suisse account, which had a maximum balance of just more than 78,000 Swiss francs ($56,000 or Shs200m) in August 2003, and was only closed in late 2005, three years after the commission’s findings were leaked to local media. 
It’s also not clear why the account was closed. The Suisse Secrets data does not indicate whether or not accounts were frozen.

Ms Monika Roth, a lawyer and academic specialising in financial crime, said Swiss banks were obligated to use due diligence systems to carry out ongoing checks on potentially dubious clients, such as those from the arms industry.
“The banks run their customer base through these systems every month, sometimes more frequently,” Ms Roth said.

Mr Katto was named in Thomson Reuters World Check, a database used by financial compliance officers, as someone who had been accused of supplying faulty military helicopters to Uganda’s government, according to data from 2014 obtained by Organised Crime and Corruption Reporting Project (OCCRP). The data does not specify when Mr Katto first appeared in World Check, but Mr Katto’s name was in the press long before his Credit Suisse account closed: A Ugandan media report from 2002 revealed the commission had recommended criminal prosecution of Mr Katto over the helicopter deal.
Credit Suisse did not respond to questions about specific accounts or customers. In a statement, the bank said it “operates its business in compliance with laws and regulations in all markets in which it operates” and that it “continues to strengthen its compliance and control framework.”
Efforts to get a comment from Mr Katto were futile by press time.

Chopper corruption
Uganda reportedly bought the helicopters to bolster its fight against the Lord’s Resistance Army (LRA), a violent, fundamentalist Christian rebel group led by the infamous Joseph Kony. 
The militia took up arms in the late 1980s and has been waging an insurgency ever since.

The LRA served as a proxy militia to Sudan’s Omar-Bashir, then an implacable foe of Mr Museveni as Uganda supported the Sudanese People’s Liberation Army (SPLA) led by John Garang (RIP) in retaliation.
The helicopter gunships were meant to ramp up the Uganda People’s Defence Forces (UPDF’s) aerial firepower against the rebels, who relied on thick jungles to slip away from the dragnet before returning to their safe haven in South Sudan.
During informal talks starting in 1996, Mr Katto offered government officials what seemed like a bargain: Eight MI-24 gunships for just $1.5m (Shs5.3b) each, less than a quarter of what they cost when new.

But instead, for reasons that remain unclear, the government agreed to pay $12.26m (Shs43.7b) for just four of these helicopters. The deal was signed on February 7, 1997.
To carry out the deal, Mr Katto used a British Virgin Islands-based shelf company called Consolidated Sales Corporation (CSC), which he had purchased in January 1996. The company was later described by the commission investigating the deal as a “special purpose vehicle” created to handle the helicopter purchase.

According to the commission, Consolidated Sales Corporation was to buy the gunships from the Belarusian state arms company, Belspetsvneshtechnika, via Triton SAL, described in the commission’s report as a “Lebanese arms dealing company.”
The shoddy condition of the helicopters eventually brought the deal under scrutiny. Belspetsvneshtechnika admitted that the aircraft would need to be “overhauled.” 
When the Ugandan army ordered two of them to be deployed to the north of the country, they were said to be found “in a sorry state,” according to the commission.

The report of the commission overseen by High Court Justice Julia Sebutinde said Saleh had “exhibited the highest form of greed, self-interest and corruption.” (He could not be reached for comment by press time).
The commission recommended that Gen Saleh and Mr Katto be prosecuted. Mr Katto was later charged with corruption for offering a bribe to Gen Saleh, but was acquitted of wrongdoing in 2005.

A Pandora’s box
When Gen David Tinyefuza, one of the most outspoken UPDF officers, testified before Parliament’s Committee on Defence and Internal Affairs, he revealed what some government critics had earlier on pointed out. 
Gen Tinyefuza told the Committee that the army leadership was corrupt and incompetent, which resulted into untold suffering for millions trapped in the theatre of war. 

Viewed as the point-man of the West in the volatile Great Lakes region and one of the new breed of leaders in Africa, Mr Museveni was keen to prove to donors that he was eager to stamp out graft, the NRM government’s Achilles heel.
In the late 1990s and early 2000s, Justice Ssebutinde—then a High-Court judge—ruled the roost. She had earlier on presided over a Commission of Inquiry into the Uganda Police Force, where high-ranking officers were found to have converted the institution into a den of thieves. 

On August 24, 2001, Justice Ssebutinde—who now serves as a judge at the International Court of Justice (ICJ)—handed her report to the government. The report that called for the prosecution of Mr Katto and other high-ranking government officials was, however, not made public. The government also did not implement its recommendations. 

After being briefly detained in 2005 at Luzira prisons, Mr Katto was granted bail. He was later acquitted on the basis of no case to answer.
Among its findings, the commission of inquiry established that—after inspection—two of the four aircraft that had been delivered to the Entebbe airbase had rusted pipes, worn-out tires and were not air-worthy. The inquiry also established that Gen Saleh took a bribe of $800,000 from Katto. 

This only came to light when Mr Museveni complained of the inflated price of the helicopters. 
“By agreeing to accept for himself a hefty commission of $800,000 from Katto, knowing well that the money would have to come from the government coffers, Maj Gen Saleh exhibited the highest form of greed, self-interest and corruption, the type that is proscribed under the above cited provisions of the law [Prevention of Corruption Act],” Justice Ssebutinde postulated.

Enter the Ruyondos
Mr Katto, then a greenhorn in the murky world of arms dealing, enlisted Mr Kwame Ruyondo—an aide to Gen Saleh, who was also known to the President—to lobby the senior army leadership in order to give his (Mr Katto’s) firm an edge over other competitors. A commission was consequently offered for assisting Mr Katto to secure contracts with the Defence ministry. 
Uganda’s turbulent history had brought Mr Ruyondo closer to the inner-sanctum. His father, Nathan Ruyondo (RIP), was fondly remembered by Mr Museveni in his memoirs (Sowing the Mustard Seed).

“I fabricated a story that I was going to Sembabule to attend a wedding,” Mr Museveni, who ascended to power in 1986, wrote about the incident when he borrowed a Peugeot belonging to Ruyondo senior, then the Town Clerk of Masaka.
Mr Museveni later used the vehicle to drive towards a barracks on February 6, 1981, alongside 41 others, including his protégé—Rwanda President, Paul Kagame. The attack on the barracks saw the first shots of the five-year Bush War struggle fired. 

Mr Katto had earlier on purchased CSC, which was originally incorporated in the British Virgin Islands on September 18, 1995 as an offshore company. OCRA World Wide, an international agency that sells pre-registered companies off the shelf, pulled the levers in this undertaking.
The Commission established that CSC was in effect a “special purpose vehicle” bought by Mr Katto purposely for handling the helicopter contract. It also heard that when Mr Katto set out to solicit for the contract to supply the MI-24 helicopters to the Defence ministry, he approached Almavale Limited S.A., a British-registered company. Almavale Ltd was unwilling to get directly involved and instead advised Mr Katto to incorporate his own company.
 

Almavale, who themselves had no direct links with the Belorussian suppliers, connected CSC to Triton Sal, a Lebanese arms dealing company, who in turn purchased the helicopters from BT, the Belorussian suppliers.
The Commission established from a fax by Valerie Kopeikirie of Triton Sal dated January 9, 1998 that Triton was a middleman who purchased the goods from BT, the Belorussian supplier. A profit of $1,105,120 (Shs4b) was consequently made. Even then, the total cost was far less than CSC had contracted with the Ugandan government.
“The cost of transacting through the two middlemen; Triton Sal and CSC would have been a whooping US$6,919,850.00. To put it differently, that is the saving that government would have made simply by procuring the goods directly from BT and avoiding middlemen,” read the report.

Muntu speaks out
Maj Gen (rtd) Mugisha Muntu, who was the Army Commander during the procurement, told OCCRP in a recent interview thus: “Any ruling party in power should be ready to sacrifice anybody [corrupt], even those who have come to power through the gun or ballot. You fight corruption as long as there are no sacred cows in the system so that a culture is established that nobody can cross the line.”
The commission of inquiry observed that Mr Museveni’s clearance to Gen Saleh to “go ahead and receive the commission and to apply it to special operations in northern Uganda to pursue the insurgency” was telling. It further noted that the President was essentially granting his brother permission to apply the proceeds of the commission to undefined or unspecified purposes and probably in his exclusive discretion since he (Saleh) was at the time in charge of operations in the north.

Mr Muntu said the principle of accountability was flouted ‘the moment Gen Museveni said Gen Saleh apologised and directed him to use the money to execute the war in the north. The only way was to put the money [$800,000] into the Consolidated Fund.” 
This itself, Gen Muntu opined, robbed the President of the moral authority to take any action against any other person.
Speaking by phone in February, Justice Sebutinde—who is based at The Hague—said her work was largely persuasive and its implementation entirely depended on government’s political will.
“The appointing authority retains the authority to implement recommendations; I can’t question that because it was their mandate,” she added.

Looking back
Mr Augustine Ruzindana, who was Uganda’s ombudsman from 1986 to 1996, said these inquiries were smokescreens.
“The report recommendations should have been implemented,” he said in an interview, adding: “It then became habitual not to implement reports. Culprits became comfortable when the commission of inquiries were implemented.”
Justice Sebutinde said she heeded the clarion call to serve on the commission of inquiry even when she knew the assignment was dangerous. 
“It almost cost our lives,” she recalled, adding: “We did it as impartially and fearlessly as we could. It is not easy for a civilian woman to interview [army] generals.”

In 2002, attackers raided a suburb on the outskirts of Kampala where they fired bullets at Justice Sebutinde’s house. She emerged from the incident unhurt after her guards fought back.
Offering a philosophical view, Justice Sebutinde said: “If a patient goes to hospital, the hospital being the commission of inquiry, we diagnose and recommend the treatment that is required. If it is cancer, then it should be chemotherapy. Any wrongdoing in government should be addressed; in the police, in the Judiciary, it should be dealt with or else it grows into a cancer.”

With hindsight, some observers say the junk helicopter scandal was only a tumour that insidiously spread into cancer. 
In June 2003, the UPDF High Command established a probe into ghost soldiers—a scheme created by senior army officers to inflate the army payroll during the LRA insurgency. 
Among its findings, the probe established that at least a third of soldiers—ostensibly deployed in northern Uganda to fight the LRA—were ghosts as this resulted into low morale at the treacherous frontline. 
Mr Ruzindana, who later served as the Public Accounts Committee (PAC) chairperson in the Sixth Parliament, opines that graft thrives as a result of weak systems, corruption of persons, processes and systems. 

“When the recommendations were not implemented, this undermined the fight against corruption. One of the important guiding principles of public administration is consistency. One of the major tenets of the law is that it must be certain and its application consistent and not arbitrary,” argues Mr Ruzindana.
To which Justice Sebutinde says: “As a Ugandan citizen and taxpayer, I would like to see the country moving forward. Whenever an issue arises in a department in respect of which a commission of inquiry made certain findings, and those ills persist today, it makes you wonder whether we are moving forward or stagnant.”
Mr Ruzindana says at the time the junk helicopters scandal unfolded, there was a modicum of free speech, tolerance and democracy. 

“The assumption was that everybody was clean, however, control mechanisms were weak and a lot of things happened. I did try to intervene. One time, the late Daniel Kigozi, [then] minister for Works, visited a road in western Uganda, which was reportedly tarmacked and it was not the case. This was the era of payment for air and ghost-workers and ghost pensioners were quite common.” 
Asked why the findings of the inquiry were not implemented, the UPDF and Defence ministry spokesperson, Brig Felix Kulayigye, said on March 30, 2022: “That [Judicial commission of] inquiry was overtaken by events. What is the motive of trying to revive it?”

Explainer on Suisse leaks

The huge leak of Credit Suisse banking data that captured the fancy of the world at the backend of February is a partial capture of the Swiss bank’s 1.5 million private banking clients.
The cache looks at accounts that on average hold 7.5m Swiss francs. It spotlights clients—among them the shrewd Ugandan wheeler-dealer, Mr Emmanuel Katto.
More than two-thirds of the accounts—including Mr Katto’s—opened since 2000. A modicum of them—excluding Mr Katto’s—are still open today.
Many of the clients opted for Switzerland safe in the knowledge that the country is steeped in a history of banking secrecy. Its code of silence started in the 18th Century when Catholic royalty from France thronged Geneva to obscure dealings with Protestant bankers. 
The landlocked Alpine country has also over the years developed a reputation of being a tax haven, with nearly half of the 7.9 trillion Swiss francs of assets under management in the country belonging to foreign clients. 
The Tax Justice Network says the country’s financial system—the third-most secretive in the world after the Cayman Islands and the US—annually accounts for $21 billion in lost tax revenue for foreign countries.

Research on this story was provided by Organised Crime and Corruption Reporting Project (OCCRP) ID. Data expertise was provided by OCCRP’s Data Team. Fact-checking was provided by the OCCRP Fact-Checking Desk.