Inside cooperatives cash scandal that sunk MPs in deep trouble

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Inside cooperatives cash scandal that sunk MPs in deep trouble
Michael Mawanda and Mudimi Wamakuyu are expected to appear before CID in Kibuli today

A report by the Trade committee reveals a web of rot tying several persons including Odonga Otto and Geraldine Ssali in the scandal for which Mawanda and Wamakuyu face the grill today

SPECIAL REPORT | Earlier this week, the Criminal Investigations Directorate (CID) summoned Igara County MP Michael Mawanda and his Elgon County counterpart Ignatius Mudimi Wamakuyu to answer for the alleged mismanagement of war loss compensation funds paid to cooperatives.

Mawanda and Wamakuyu are required to report to CID headquarters in Kibuli at 2pm today.

According to copies of the summonses seen by this reporter, the police are investigating corruption, theft, and conspiracy to defraud Buyaka Growers Cooperative Society and Bumwambu Growers Cooperative Society in relation to compensation for past war losses.

The Nile Post delves into the details of the rot that was unearthed after Speaker Anita Among, August 25, 2023, directed the Sectoral Committee on Tourism, Trade and Industry to conduct an inquiry into the status, governance, resourcing and value for money for public funds allocated to Cooperatives during the Financial Year 2022/23.

A report from the Committee on Tourism, Trade, and Industry's investigation into the financial dealings of Bumwambu Growers Cooperative Society Ltd and Buyaka Growers Cooperative Society Ltd has revealed a pattern of mismanagement and alleged fraudulent activities involving significant sums of money.

The report details instances of unauthorised transactions, unaccounted funds, and dubious legal representations, raising serious questions about the integrity and governance within these cooperative societies.

The committee's examination of Bumwambu Growers Cooperative Society Ltd revealed substantial financial irregularities. Payments amounting to Shs13.79 billion were documented, whereas the Ministry of Trade, Industry and Cooperatives (MTIC) had only disbursed Shs11.2 billion. This discrepancy of Shs2.59 billion has led to concerns about fictitious accountability.

"No due diligence was carried out before the purchase. The committee further established that the society was not in possession of the title even after paying 93 percent of the total value of the land," the report says.

The Buyaka Growers Cooperative Society Ltd, established in 1949, was found to have appointed two law firms for the same legal representation task, leading to accusations of document falsification.

Initially, M/S E Angura and Company Advocates were appointed on March 5, 2020, then M/S Mungoma, Mabonga, Wakhaka & Co. Advocates on August 4, 2020.

"This communication was never received by the MTIC and would therefore not have formed a binding document to bind the MTIC," the committee highlighted, pointing towards procedural lapses.

Further compounding the issue, the coop's chairperson claimed that a MTIC officer, Mr Leonard Kavundira, recommended hiring Kirya and Company Advocates.

However, there was no documentary evidence of such instructions. An attempt by Mr Kavundira to hand over Shs200 million in cash to the society at a restaurant was documented, leading to its eventual deposit in the society’s bank account on March 24, 2023.

The committee's scrutiny revealed that Shs5.37 billion was verified for payment to Buyaka Cooperative Society. However, only Shs490 million was found in the Society’s bank account, leaving Shs4.88 billion unaccounted for.

"The committee was astonished that to date, the bank statement of the Society only reflects a receipt of only Shs200,000,000 banked by Mr David Watuwa. That on November 18, 2021, the Cooperative received Shs290,000,000 from Kirya & Co Advocates," the report noted.

Kirya & Co Advocates and Probata Advocates were at the center of these transactions, with substantial sums reportedly received but not remitted to the Cooperative.

"Hon. Mudimi suggested that the lawyer should take 10 percent," Kirya testified, explaining that he was instructed to make payments to various individuals, including a Shs1.05 billion transfer to Mawanda and Shs200 million to Paul Akamba, further muddying the financial waters.

Mr Akamba was separately investigated by CID over budget kickbacks before being charged last week. However, upon gaining temporary freedom, he was immediately re-arrested and taken into detention by armed men in plain clothes.

The committee, whose investigation was ordered by Speaker Anita Among, recommended a thorough investigation by CID into the roles of MPs Wamakuyu and Mawanda in the financial dealings of the Buyaka Cooperative Society.

Additionally, actions against Kirya & Co Advocates and Mr Ezra Kabali of Masereje & Co Advocates have been proposed due to professional misconduct and non-remittance of funds.

"That the CID should investigate Mr Kabali for holding out as a lawyer from Probata Advocates whereas not, contrary to Section 381 of the Penal Code Act," the report recommended.

East Acholi Cooperative Union is one of those whose funds were misappropriated in the corruption scandal

The stench filters out

The investigation into Bwavumpologoma Growers Cooperative Union also revealed a series of financial mismanagement and questionable transactions, highlighting severe irregularities in the management of funds and registration processes within the cooperative sector.

In testimony before the Committee, the Commissioner for Cooperative Development, Mr Bob Bariyo Barigye, acknowledged significant procedural breaches.

"The verification of Bwavumpologoma was done after payment had been made," he admitted, referencing the Shs1.74 billion disbursed to the cooperative union prior to its re-registration and proper verification.

Permanent Secretary Geraldine Ssali defended her decisions, claiming that her actions were in the interest of streamlining operations within the cooperative department.

"I tasked the officer to help put back the cooperative bank, and when I did not give them funding, it was because they had not streamlined their activities," she said.

However, the committee's findings suggest otherwise. The cooperative union, which received its registration certificate on March 4, 2022, was already paid significant sums prior to this date.

Moreover, multiple substantial withdrawals from the union's bank accounts lacked corresponding requisitions or proper documentation.

Further complicating matters, it was revealed that payments amounting to hundreds of millions of shillings were deposited into personal accounts without adequate oversight.

On May 16, 2021, Shs350 million was deposited into Wilson Kasule Martin's account, and the same day, the entire amount was withdrawn. Similarly, Victor Busuulwa deposited Shs300 million into his account on the same day, reflecting suspicious financial movements.

The committee was particularly disturbed by the role of Ms Ssali in these transactions. It was disclosed that Ssali retained the original certificate of Bwavumpologoma Growers Cooperative Union to continue exerting financial control over the union.

"The committee is astonished, perplexed, and unnerved that of the Shs2.74 billion, the union received only Shs1.8 billion for its activities, after the deduction of a 'token of appreciation' of Shs936 million to Ms Ssali," the report said.

The committee's investigation into West Mengo Growers Cooperative Union uncovered additional anomalies. Testimony from union officials indicated that Mawanda influenced the selection of legal representation for the union's compensation claims.

Mr Moses Lubega Kitaakule, the secretary manager, recounted how Mawanda's recommendation led to the sidelining of the union's lawyer in favor of an external advocate.

"We relied on the advice of the person to whom we were referred," Lubega said, highlighting the manipulation faced by the union.

Payments to the union totaling Shs1.49 billion were ostensibly for legal services and compensation for war losses, yet significant sums were transferred under unclear circumstances.

The committee's efforts to engage with Mawanda were met with written submissions rather than a direct response.

The committee recommended that state agencies, including the Directorate of Public Prosecutions and the Inspectorate of Government, further investigate and prosecute those involved.

"The Permanent Secretary, Ms Geraldine Ssali, and any other implicated officials should be interdicted immediately to pave way for thorough investigations," the committee noted.

Ms Geraldine Ssali's name has been a beautiful problem in many scandals | Courtesy

Ms Ssali's daring acts

On September 21, 2023, the Chairperson of the Verification Committee, Mr Leonard Kavundira, alongside Robert Mpakibi, revealed that the selection of cooperatives for verification was solely determined by the accounting officer.

This officer also approved the facilitation for the verification committee's operations.

"The accounting officer's role in selecting which cooperatives to verify is crucial. They provide schedules and approve the facilitation, essentially controlling the verification process," said Mr Kavundira.

The committee established that two separate verification committees existed. The first was an Inter-Ministerial Committee constituted by the Cabinet, and the second was formed by PS Ssali. The latter committee effectively rendered the former redundant.

Ms Ssali, in a March 21, 2022 letter, assigned duties to specific ministry staff members to verify war debt claims for several cooperative unions. These unions included East Acholi, Lango, Busoga Growers, Bugisu Growers, and Bwavumpologoma Growers Cooperative Unions.

"Despite the existence of an Inter-Ministerial Committee, the permanent secretary assigned a parallel committee to handle verifications. This move raises questions about the necessity and intentions behind creating such a committee," noted the committee report.

The parallel verification committee had several terms of reference, including developing guidelines for managing claims, reviewing and processing claims, and submitting reports to the permanent secretary.

However, internal memos revealed that Cooperative Policy and Development commissioner Barigye played a pivotal role in reconstituting the committee, indicating internal conflicts and overlapping responsibilities.

During the committee meeting, Mr Barigye explained that complaints about the seniority of officials on the verification committee "led to my proposal to reconstitute the team, ensuring a commissioner-level oversight for better management of verifications."

Ms Ssali denied creating a new committee, attributing the actions to the acting permanent secretary during her absence. However, members of the new verification committee confirmed that Ms Ssali had indeed assigned them verification duties.

Additionally, Ms Ssali’s direct involvement in prioritizing certain cooperatives, such as Bwavumpologoma, raised concerns of vested interests.

"Bwavumpologoma's inclusion was personal. The cooperative, founded by my grandfather, lost significant assets during the war. I felt it necessary to ensure their claims were addressed," Ms Ssali explained.

Further scrutiny revealed inconsistencies and irregularities in the verification and payment processes for cooperatives like Okoro Coffee Growers Cooperative Union.

The union’s claims varied significantly between submissions, and substantial payments were made without proper verification.

Payments to law firms and individuals indicated possible fraudulent activities and misuse of funds.

The committee observed that some cooperatives received payments without verification, highlighting systemic flaws in the verification process.

"Verification was not a prerequisite for payment, as evidenced by unverified cooperatives receiving funds. This undermines the integrity of the entire process," the committee reported.

In light of these findings, the committee recommended investigations by the Directorate of Public Prosecutions into the actions of key individuals, including Mr Kavundira and Ms Ssali, for their roles in the irregularities and potential misuse of public funds.

"The evidence points to serious breaches of procedure and misuse of authority. It is imperative that these actions are thoroughly investigated to uphold accountability and transparency," noted the committee.

Former Aruu County MP is said to have dived into the pie with his law firm in tow | Courtesy

Odonga Otto grabs his pie

The East Acholi Cooperative Union Ltd, established in 1951 and operating across Kitgum, Lamwo, Agago, and Pader districts also faced significant governance issues revealed in a inquiry report.

The union's financial mismanagement and forced legal representation raised serious concerns.

According to the report, the union's business and asset base were severely affected by the liberation war between 1978 and 1986.

This resulted in a claim for compensation totaling Shs5.42 billion, with Shs1.62 billion received from MTIC.

Chairperson Hellen Aceng testified that officials from MTIC compelled the union to use M/S Odonga Otto & Co. Advocates for their war loss compensation claim.

“When I objected to using this law firm, they instituted a suit against the union, forcing us to sign a consent judgment,” Ms Aceng said.

This judgment allowed the law firm to retain 30 percent of the compensation.

In November 2020, the union paid Shs300 million to the law firm's account at Bank of Baroda, covering future installments from government compensation.

The committee noted that this agreement resulted in only Shs410 million being available for the union's intended purposes, significantly undermining the war loss compensation policy.

Ms Aceng also disclosed that she and Union treasurer Severoni Opio Asony met with then Deputy Speaker Jacob Oulanyah in October 2020, who proposed that the union's claim would be paid at once for a fee of Shs300 million.

Unable to afford this amount, they delivered Shs100 million to the Speaker’s residence in December 2020.

Mr Oulanyah would become a Speaker in 2021 but he passed on before the committee probed the rot in which it discovered a pattern of financial misconduct involving high-ranking officials and the union’s leadership.

Ms Aceng further revealed that a state witness from MTIC collected Shs130 million in 2020 for delivery to Leonard Kavundira, chairperson of the verification committee, and Shs60 million was brought to the Ministry of Trade's finance team in Kampala.

The report said MP Frederick Gume Ngobi’s conduct amounted to influence peddling and abuse of office.

“I did not force them, but I gave them an option to use Odonga Otto as he is a Member of Parliament,” Ngobi said.

Mr Odonga Otto was at the time Aruu County representative.

The inquiry also uncovered a lawsuit by Odonga Otto and M/S Odonga Otto & Co. Advocates against the East Acholi Cooperative Union and the Attorney General. The committee concluded that the union’s consent to use the law firm’s services led to immediate compensation, suggesting undue influence.

“Only Shs410 million out of Shs1 billion was available for the union’s intended purposes, clearly exhibiting the extent to which the war loss compensation policy is grossly undermined and abused,” the report said.

The report recommended seeking court orders to vacate earlier order Odonga Otto had secured, lodging a complaint with the Uganda Law Council for professional misconduct against Odonga Otto and his law firm, and investigating Mr Kavundira for possible prosecution.

Evolution of cooperative unions

  • The evolution of Cooperatives in Uganda can be traced to present-day Mubende District in 1913, where four farmers decided to market their crops collectively.
  • They became known as "The Kinakulya Growers" in response to exploitative marketing systems that disadvantaged native farmers.
  • Under colonial rule, Africans were pushed into producing cash crops like coffee and cotton, while Europeans and their Indian allies controlled processing and marketing, reaping the profits.
  • Recognising the need for a unified voice and bargaining power, Baganda farmers formed the pseudo-cooperative mentioned above in 1913.
  • The discontent among African farmers led to strikes, prompting the establishment of parallel associations such as the Buganda Growers Association in 1923 and the Uganda Growers Cooperative Society in 1933.
  • Cooperatives operated under restrictive conditions until 1946 when the Cooperative Ordinance was enacted to legalise their operations.
  • Following independence in 1962, the government actively promoted cooperative development, particularly in agricultural sector involved in marketing, processing, and exporting cash crops.

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