The Supreme Court has embarked on the process of hearing an appeal filed by Kampala businessman Hassan Basajjabalaba following a March 24, 2020 order by the Constitutional Court that he pays back Shs142b to the government.
Government had compensated Mr Basajjabalaba after the cancellation of his lease contracts to develop several markets and other facilities around Kampala city.
The same ruling is subject of a cross appeal by the Legal Brains Trust, which filed the initial suit against Mr Basajjabalaba, a former chairperson of the Entrepreneurs’ League ruling National Resistance Movement (NRM), accusing him of having used Bank of Uganda (BoU), four commercial banks and several government officials to facilitate the theft of billions of shillings from the consolidated fund.
Parties to the suit appeared before Justice Michael Chibita last Tuesday and worked out timelines and direction that the suit will take.
Mr Basajjabalaba’s lawyers made written submissions last Friday. Legal Brains Trust was expected to file its own responses by yesterday.
The businessman and his five companies Haba Group, Victoria International Trading Company, Sheila Investments, Yudaya International Limited, and the First Merchant International Trading Company Limited got short term credit to the tune of $65 million from the Bank of Africa, Tropical Bank, Bank of Baroda, and Orient bank in a period of seven months between October 2010 and April 2011.
Between January 2000 and December 2011, Mr Basajjabalaba and his companies entered into contracts with Kampala City Council (KCC) to manage, own and redevelop Owino, Nakasero and Shawuliyako markets, and the Constitution Square but the contracts were cancelled amid unrest on the part of traders.
The businessman then appealed to President Museveni who referred the matter to the Attorney General.
How loans emerged
Bank of Uganda guaranteed the loans on the grounds that Mr Basajjabalaba’s companies were owed money in compensation for losses incurred after their contracts to manage the markets were revoked.
Whereas KCC had entered into the contracts with Mr Basajjabalaba without seeking the advice of the Attorney General, an interdepartmental evaluation committee, which was set up to review Haba Group’s claim recommended Shs54.7 billion.
Mr Basajjabalaba was not satisfied with the figure and reported to President Museveni.
Whereas Nakawa market had never been part of the contracted markets, then Attorney General Khiddu Makubuya proposed in a memo to the Solicitor General compensation in the region of Shs142.7 billion and another about Shs29.9 billion in respect of Nakawa market.
The Secretary to the Treasury wrote to the Auditor General and requested for a value for money audit.
“Government did not owe Basajjabalaba and his Haba Group of Companies any money… the group instead owes government a net amount of Shs994,039,186”, the Auditor General concluded in a July 26, 2011 letter to the Secretary to the Treasury.
Before an official audit report could be released, the Minister of Finance, Ms Syda Bbumba, wrote to Bank of Uganda, to consider raising credit for Haba Group.
Letters of comfort
Bank of Uganda then issued various letters of comfort to Bank of Africa, Tropical Bank, Bank of Baroda, and Orient Bank, which Haba Group used as security to get the loans.
The letters of comfort include one that was issued on October 28, 2010 to Orient Bank guaranteeing a short term loan of $10 million, one that was issued on November 25, 2010 to Tropical Bank guaranteeing a short term loan of $10 milliom and a third, which was issued to Bank of Baroda on December 3, 2010 guaranteeing a short term loan of $1 million.
The others are one guaranteeing a short term loan of $24,350,000 which was issued to Orient Bank and one guaranteeing a short term loan of $10 million, which was issued to United Bank of Africa on January 15, 2011.
Mr Basajjabalaba and his firms, however, defaulted on the payments and the banks used the letters of comfort to recover the money from Bank of Uganda.
Suit in Constitutional Court
Legal Brains Trust prayed that the Constitutional Court orders that all monies paid to the businessman and his companies be paid back to the consolidated fund with interest of 30 percent within six months from the date of the ruling.
They further sought orders to the effect that the commercial banks pay back all monies paid to them as a result of Mr Basajjabalaba’s failure to pay loans that he took out; that Mr Basajjabalaba and his companies pay back to the consolidated fund an additional Shs994 million; all respondents to jointly pay Shs189.6 million as damages for loss caused to the taxpayers and; the dismissal or removal from public office of among others Ms Syda Bbumba, Prof Khiddu Makubuya and Mr Tumusiime-Mutebile.
In a minority ruling, Justice Kenneth Kakuru described the transactions as “fraud” and accused politicians of being “masterminds behind this fraud”. He described the commercial banks as “part of the oil lubricating the wheels of corruption”.
“The colossal sums of money set out in this judgment would never have been lost without the involvement of [UBA Bank, Orient Bank, Bank of Baroda, and Tropical Bank]. They are the ones individually and collectively that provided [Basajjabalaba] with the key to the national treasury. They provided him with the password to the safe. Without them, this money would never have been lost. They are to blame for the loss of over Shs142,698,096,338 of taxpayers’ money. This money ought to be recovered and paid back to the Treasury,” Justice Kakuru ruled.
The majority of the judges, Geoffrey Kiryabwlre, Elizabeth Musoke, Barishakl Cheborion and Stephen Musota, did not agree with their colleague, but ruled that Mr Basajjabalaba refunds the Shs142 billion.
However, both Mr Basajjabalaba and Legal Brains Trust were dissatisfied with the ruling and filed appeals in the Supreme Court.
Legal Brains Trust argues that majority of the judges of the Constitutional Court erred when they failed to determine all issues that required resolution by the court.
They argue that the court should have declared the letters of comfort void and directed the commercial banks to pay back the money they got from the consolidated fund.
They also took exception to the Court’s decision not to hold Mr Tumusiime Mutebile, Ms Syda Bumba, and Mr Khiddu Makubuya personally liable for the loss of public funds.
They are also asking the Supreme Court to determine all unresolved issues in their favour and declarations to the effect that the letters of comfort issued by Bank of Uganda are void; orders for the four commercial banks to pay back money to the consolidated fund; that Mr Basajjabalaba and his companies pay back the money that they took.
Businessman Hassan Basajjabalaba has in his cross appeal rejected personal liability. He is seeking an order that detaches him from the companies.
“(The respondent has identified…whether the learned majority justices of the Constitutional Court erred in law and in fact in ordering (Mr Basajjabalaba) to refund the money paid as compensation jointly and severally with (Haba Group, Victoria International Trading Company, Sheila Investments, Yudaya International Limited and the First Merchant International
Trading Company Limited),” he wrote in his submissions.
A marathon hearing is expected to be held between Tuesday [today] and Thursday.