Friday, November 23, 2012

What happened to old scandals

i am going to review slowly by slowly old scandals that 'died'.... We seem to forget quickly that the fresh ones had a foundation and until the foundation is broken, we are in trouble....

On Mismanagement and corruption at NSSF there was once a joint venture between Mugoya Estates Limited and Premier Developments Limited for Development of Nsimbe Estate Housing Project.

The Inspectorate of Government received a request from his Excellency the President to investigate allegations of mismanagement and corruption in several investments undertaken by NSSF. These investments included the joint venture between Premier Developments, which was a Private Limited Liability Company owned by NSSF and Mugoya Estates ltd for the development of the Nsimbe Estate Housing project.

The allegations with regard to the Joint venture were:

• That there was no independence of objectivity in the transaction since the Chairperson of Premier Developments was also the Chairperson of Nsimbe Holdings in which NSSF held 499 shares.
• NSSF Managing Director and NSSF Board Chairperson manipulated the transaction by intimidating and influencing other Baord members and the NSSF Board.
• 840 acres of land presented to the Joint Venture by Mugoya was valued at shs. 7,100,000,000/= bot this value was increased to shs. 8,500,000,000/= after dubious negotiations by NSSF Managing Director and NSSF Board Chairperson leading to a lost of shs, 1,400,000,000/=
• NSSF Managing Director, NSSF Board Chairperson and NSSG Investment Manager appointed MBW Consulting Engineers Limited without competitive bidding.
• NSSF tranferred the sum of shs. 8,166,000,000/= to a Bank Account belonging to the Joint Venture Company which was controlled by Mugoya Estates Ltd, NSSF Managing Director and NSSF Board Chairperson.
• NSSF Manging Director and NSSF Board Chairperson were planning to lend US$5,000,000 to the Joint Venture Company.
• No due diligence was carried out on Mugoya Construction andn Engineering as was the case with other firms despite several reports cases of under performance of Mugoya Construction Company.

• Investigations established that:

• Premier Developments, a Joint Venture Company between Mugoya Uganda and NSSF was formed irregularly without Government sanction through Cabinet.
• Premier Developments was operated with membership below the legal minimum required contrary to provision of Section 1 and 29(1) of the Companies Act. This therefore exposed the workers and empoyer’s funds to liability.
• NSSF failed to follow the mandatory provisions of the Public Procurement and Disposal of Assets (PPDA) Act while the procuring during the Joint Venture Partner Mugoya Estales Ltd. This makes the Joint Venture illegal.
• Mugiya Uganda was engaged to under the construction work at Insimbe Estates while at the same time Mugoya would also perform the functions of the Architects and Quantity Surveyors. This was irregular.
• Shs. 2,1000,000,0000 was paid to Mugoya Uganda before the construction contract was executed and with nowork doen and without any security.
• Shs. 6,871,088,555/= was paid to Mugoya Uganda for work allegedly done in respect of Nsimbe Estates which was not the case. This referred that Mugoya Uganda had undertaken substantial work even before Mugoya Uganda had executed the construction contract and been handed the site.
• The Chief Government Valuer found out that the probable market value of Nsimbe Estates was shs. 4,500.000,000 billion/ rather than the value of shs.8,005,000,000/= presented by M/S Bagaire and Company (the value of the |Managing Director of Estates and Mugoya Uganda)
• The assessment of Minsitry of Works, Housing and Communications was to the effect that by the time of the operations of Nsimbe Estates Housing Project were halted, the value of the works executed was only worth shs. 1,028,174,551/=.
• Kampala Associates Advocates received legal fees amounting to shs. 454,770,000/= or incorporating the Joint Venture Company, Nsimbe Holdings and drafting the Joint Venture Shareholders Agreement. These services could have bee rendered by the NSSF legal department at no cost.
• NSSF through Premier Developments undertook the Joint Venture with Mugoya Estates without a specific and comprehensive feasibility study carried out to determine whether the investment was sound and economically viable. NSSF instead came up with what it termed as Business Case (emphasis added) for the Joint Venture, which it prepared using the data from research studies carried out by other bodies. This was inconsistent with the practice at NSSF in which other significantly less costly investments have been subjected to specific and comprehensive feasibility studies carried out by external consultants engaged by NSSF.

• It was therefore recommended that:
• Appropriate Action be taken against the persons who were involved in conceptualizing, authorizing and implementing the Joint Venture including possible prosecution and former Chairperson of NSSF Board of Directors and former Managing Director for the offences of causing financial loss and abuse of Office.
• The Government should take steps through NSSF to have the Joint Venture wound up because if it left to continue, it will put the worker’s and employer’s contribution at risk.
• Alternatively should it be argued that the Joint Venture Share Holders Agreement was valid, which is not the case, and then the agreement shoul;d be rescinded for fraud. This is because Nsimbe Housing Project was portrayed as an investment of worker’s money to generate profits whole the actual intention was to siphon the workers money without any reasonable expectation of profits from the project.
• It would be inequitable and not in public interest for the Joint Venture between Mugoya Estates and Premier Developments to be allowed to continue since the Joint Venture was designed clearly in such as way to benefit the individuals behind the scheme is identified in the report.

Nsimbe Holdings Ltd versus The Attorney General and Anor(Constitutional Pertion No, 2/2006 [2007] UGCCC 4 (November 2007)

When the President received the IGG report, he requested the Attorney General opinion and wanted to know whether formation of Premier Developments Ltd was in violation of the Section 29)1) of the Companies Act. The Attorney General gave his opinion and averred that |it was not and that Premier Developments Ltd was properly constituted with two shareholders namely NSS with 9,999 shares and Mr. Onegi Obel with 1 share”.

Meanwhile under their Nsimbe Holdings Limited the Joint Venture Company formed between Mugoya Estates Ltd and Premier Developments Ltd (the company formed by NSSF (under the Chairmanship of Onegi Obel) petitioned the Constitutional Court on 12th September 2007 for a court interpretation on certain issues (see summary of issues raised in the petition at www.ulii.go.ug)

When the petition came up for hearing, Mr. Kasujja, the lawyer for the Inspectorate of Government applied to raise four preliminary objections against the validity of the petition. The first objection was that the petitioner had no locus standi to file his petition. He contended that the petition was incorporated contrary to the provisions of section 28(1) of the Companies Act (Cap 110). He pointed out that the company was a result of a joint venture agreement between …Premier Developments Ltd and Mugoya Estates Ltd. Premier Developments Ltd was itself owned by the National Social Security Fund (NSSF) which is a body corporate under an Act of Parliament (Cap 3001). He argued that section 28 of the Companies Ac prohibited a body corporate like NSSF to be a member of such as company (Nsimbe Holdings Ltd).

The Consequence of this is that the agreements leading to the formation of Nsimbe Holdings Limited were unconstitutional and therefore the company does not exist in law. It is a non-entity which cannot sue or be sued. The petition was thrown out as incompetent. On this ground alone the Preliminary Objection succeeds. Bakoko Bakoru was dropped and when charged she fled the country!


Ref
IGG report
Constitutional Petition No. 2 of 2006[2007] UGCC November 2007
UDN- Gariyo Dossier 2011

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