Kampala | City businessman Dr Mathias Magoola has refused to pay Equity Bank Uganda and Kenya more than shs250 billion in accumulated loans, claiming they were calculated and advanced to him illegally.
Dr Magoola, the owner of DEI Biopharma Limited, has now petitioned the court in what is being interpreted as an attempt to hide and avoid repaying his bank loan.
He is challenging the shs82.2 billion and $43.2 million outstanding loan, claiming it is inflated, extortionate, and unconscionable.
It is claimed that Dr Magoola obtained the loans to finance his businesses, including a medical plant in Matugga, Wakiso district, which President Museveni commissioned. He rose to prominence after claiming that his pharmaceutical company was about to produce an alleged cure for COVID-19 disease.
Dr Magoola filed a lawsuit in the Commercial Court against Equity Bank Uganda Limited and its Kenyan counterpart, challenging the legality of an outstanding loan worth shs82.2 billion and $43.2 million.
Dr Magoola, jointly with his DEI Industries International Limited, DEI Biopharma Limited (formerly DEI Natural Products International) are seeking for an order to account, audit and reconciliation of their loan and current accounts held with the bank to determine the actual debt due under the credit facilities, variation of terms, loan consolidations and restructures thereto.
“An order directing the defendants to credit the plaintiffs’ loan or current accounts with any amounts found to be unlawfully debited upon the taking of an account, audit and reconciliation,” reads the complaint seeking for another order to the amounts unlawful debited from the plaintiffs’ account against any loan outstanding owed to the banks.
He also wants the court to order the bank to refund him and his companies more than shs47.6 billion that was found to have been unlawfully debited on their loan account during their audit.
The investor claims, through their lawyers, that they were forced to accept the loans, term variations, consolidations, and restructures offered because they were in desperate need of money to fund their capital-intensive projects, a situation exacerbated by the banks’ real threats of default and foreclosure.
However, the banks deny any wrongdoing, claiming that between September 2016 and December 2019, Dr Magoola obtained a number of credit facilities from the bank to finance the completion of the construction of a factory in Kiryamuli, Wakiso district, as well as wheat imports.
According to the bank, all credit facilities were consolidated and restructured in June 2021 into a single facility with an annual interest rate of 17 percent and a 12-month moratorium.
It is claimed that by July 25, 2022, at the end of the 12-month moratorium, the outstanding amount was shs64.7 billion, and that DEI Industries International Limited was expected to begin payment of the monthly instalments of shs1.449 billion but only paid shs129.6 million on July 29, 2022, and shs58,822.23 on October 10, 2022 over the next 18 months.
“As a result of the first plaintiff’s default in making any full monthly instalment payment, the first plaintiff’s above mentioned facility was in default from the end of the moratorium and kept accruing interest and default interest,” the banks allege.
Dr Magoola’s case was filed on August 2, 2024, hardly two months after the government advanced Dr Magoola and his DEI Biopharma Limited shs578.4 billion of taxpayers’ money to save the company plants and property from being auctioned by the bank.
In a letter dated May 31, 2024, the Solicitor General’s Office stated that the Attorney General advised the Minister for Science, Technology, and Innovation, Dr Monica Musenero, to remit shs578.4 billion to M/s Dei Biopharma for the purposes for which it was appropriated by Parliament.
“The said monies should, in accordance with the Memorandum of Understanding concluded between the government of Uganda and M/s Dei Biopharma Limited concerning the acquisition by the government of Uganda of equity in Dei Biopharma Limited, be included in the valuation assessment of government’s equity acquisition in the company; the shareholder’s agreement as well as the share subscriptions and allotment agreement which drafts have been previously shared with your office,” reads the letter signed by Pius Perry Biribonwoha, the deputy Solicitor General.
Finance Minister Matia Kasaija stated in a letter to Equity Bank’s Managing Director dated September 28, 2023, that the government intends to express commitment to Equity Bank, and later the Central Bank of Kenya, as well as their external auditors, emphasising the commitment to seeing the project through to completion.
According to the bank’s defence, on May 24, 2024, the Secretary to the Treasury in the Finance Ministry authorised an additional expenditure of shs578.4 billion for the government’s investment in Dei Biopharma, with a portion of the funds used to offset the bank’s loans.
Dr Magoola and his companies are accused of depositing funds owed to Equity Bank in another bank.
“To date, despite the funds having received the funds and despite many oral and written requests by the defendants, the plaintiffs have refused to make any payment to the defendants to repay the outstanding loan amounts due and every day without payment being made the facilities accrue more interest and default interest,” read the court documents.
The government’s intervention to bail out Dr Magoola and his companies came after a series of correspondences about the default payment, which led to the advertising of his property for sale in order to recover the loan.
According to court documents, on June 17, 2024, Dr. Magoola requested lenience and a meeting to discuss their loan obligations.
“On June 19, 2024, the plaintiffs and defendants held a meeting at which the plaintiffs stated that although they acknowledged the great support they had received from the defendants (banks) while they were still new greenfield organisation, they were only willing to repay the principal loan amounts without any payment of interest or default interest owed to the defendants in full and final settlement of their obligations,” reads the court documents.
It is claimed that on June 20, Dr Magoola wrote reiterating their stated position that plaintiffs were only willing to pay the principal loan sums outstanding, not the interest or penalties, and that on June 21, the complainant offered to pay the bank shs 155 billion, which the bank declined.
According to documents, on September 14, 2023, the bank advertised DEI properties as well as those owned by Dr. Magoola, including his Muyenga-based residential home.
In May of this year, Parliament approved a shs578 billion bailout for DEI Biopharma Limited, despite disagreements among some lawmakers.
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