UBA sues ‘negligent’ former top official over Sh200m loss

United Bank of Africa (UBA) has sacked and sued the head of its legal department for professional negligence that saw the lender lose Sh200 million to two clients.

Sylvia Mututsi Magotsi, who served as the bank’s company secretary and head of legal affairs, is accused of failing to scrutinise documents that the two clients used as security to secure credit, causing the lender massive loss.

Ms Magotsi was sacked after an internal disciplinary hearing where she allegedly confessed to negligent behaviour. She was sent home with a Sh2.2 million termination package.

The bank is now pursuing her for damages and compensation for the multi-million shilling loss. UBA accuses Ms Magotsi of failing to advise that standby letters of credit that the bank received as security from Suisse Bancorp for loans advanced to PES South Africa and Mits Electricals were fatally defective.

“As a result, UBA has incurred losses and hereby claims against her $1.64 million (Sh150 million),” UBA says in court papers.

UBA says the amount it lost accounts for most of the Sh282 million loss it recorded in the last financial year. The bank has recorded losses for five consecutive years.

UBA sunk deeper in the red with a Sh282 million loss compared to the Sh272 million it made in 2013, taking its cumulative losses to Sh1.27 billion.

The bank’s loan book shrunk to Sh734 million from Sh789 million in the same period, but its customer savings rose by Sh1.1 billion to Sh3.5 billion.

READ: UBA sinks deeper in the red with Sh282m loss

Ms Magotsi is accused of not seeking consent from Mits Electricals and PES South Africa’s guarantor (Suisse Bancorp) before making any demands for payment as that would have revealed that the documents were defective.

“Ms Magotsi also failed to duly advise UBA that the customers had not provided standby letters of credit from first class banks as required and as agreed between the bank and the said customers,” the lender says.

UBA now wants Ms Magotsi compelled to refund the amount and to compensate the bank through general and punitive damages. It also wants the former company secretary to pay the cost of the suit.

Ms Magotsi was hired as an assistant manager in June 2009 but was elevated to company secretary and head of legal in November of that year.

The suit comes as banks grapple with employee fraud, which has cost the financial institutions and their clients billions of shillings.

Kenya Commercial Bank last November revealed that it had sacked about 90 employees for fraud and professional negligence.

UBA has also accused Ms Magotsi of sharing confidential bank information with third parties without the consent of the board of directors. The lender says Ms Magotsi leaked customer statements, internal bank communication and transaction details involving the bank and its clients to unknown persons.

The bank has asked the court to issue restraining orders stopping her from using the said confidential information as it does not know the third parties in possession of the material.

“As a result of some or all of the foregoing, UBA’s reputation in the eyes of its customers and the public at large has suffered and continues to suffer greatly. The said confidential information could be used to its detriment and that of its customers,” UBA adds.

UBA says it has evidence of emails exchanged between Ms Magotsi and the third parties she sent confidential information to, but has asked the judge to allow it to only provide the dossier at the full hearing of the case.

It has requested the court for the same in respect to documents proving how negligence led to the colossal loss. Justice Hellen Wasilwa ordered UBA to serve Ms Magotsi with the suit papers.

UBA says it served Ms Magotsi with a notice to show cause why disciplinary action should not be taken against her in December after she was accused of absenteeism, insubordination and negligence in performance of her duties.

A month later, she was cited in a report prepared by the group chief inspector in respect to a number of non-performing customer accounts, including the ones owned by Mits Electricals and PES South Africa.

The investigations were carried out to evaluate all employees’ performance. Those named in the report, UBA holds, were accorded a fair hearing before the internal disciplinary committee.

It was at the hearing that she allegedly confessed to negligence, and the bank has attached a copy of proceedings from its internal trial as evidence.