By Hope Muhairwe
A police report, very devastating to the reputation of MTN Uganda, has been tendered in court as evidence in a case Western region youth MP Mpaka Mwine filed against the telecom giant seeking to vicariously hold it liable for the actions of its employees. The report was initially prepared for the consumption of CID Director Grace Akullo to whom Mr. Ronald Munduni, a security manager at MTN, complained. In his complaint, Munduni reported fraudsters who had gained unauthorized access to the MTN internal systems and criminally swapped phone numbers of many MTN customers including two Ministers and MPs. The police report, a copy of which we have seen, shows that Munduni lodged his complaint a day after fraudsters, now confirmed to be patronized by MTN managers, had successfully ripped off Shs400m purporting to represent the two Ministers and MPs. The Ministers whose phone lines were fraudulently switched off and new lines issued under the guise of replacement, according to the police report, include Parsis Namuganza of Lands and State Agriculture Minister Christopher Kibazanga. Working with Nasser Kigenyi an MTN employee, the police report shows that, the fraudsters on 15th February 2018 successfully swapped 19 phone lines including two ministers’ and MPs’. The report shows that Mpaka Mwine’s 0783799892 (registered under SN 0118224031) was swapped on that day along with 0776679365, 0782670551 and 0772970393 respectively belonging to Mercy Kyakunda, Parsis Namuganza and Christopher Kibazanga. “The fraudulent sim card swap was done from Mubende branch of MTN Uganda by a one Nasser Kigenyi, an employee of MTN Uganda, working under a contractor that oversees the region of Mubende, Kyegegwa and Kyenjojo. After the unlawful swaps were done, the fraudsters used the swapped numbers to solicit for money from the public to an estimated tune of Ugx400,000,000 through deceptive means while pretending to be the rightful owners of the said phone numbers,” the police report discloses adding that this offensive activity occurred on 12th February 2018 prompting MTN security manager Munduni to formally complain to CID on 15th February. The CID Headquarters then commenced investigations under CIDHQTRS GEF186/2018. Munduni and Nicholas Kimbowa, a forensics investigator at MTN, are among those CID detectives interrogated under this General Inquiries file. Subsequently Nasser Kigenyi and Henry Magembe, both MTN Uganda employees, were arrested and detained before being arraigned at Buganda Road Court. The following charges were preferred against them; abetment of electronic fraud, unauthorized obstruction of use of telephone and conspiracy to defraud. A review of Nasser Kigenyi’s mobile phone statements disclosed numerous transactions with accomplices involved in defrauding the general public under the fraudulent sim swap scheme.
THE FINDINGS;
The CID forensic investigation established that the gadgets and user name that MTN has assigned to Nasser Kigenyi were variously used to conduct criminal transactions victimizing many people including the two Ministers and MPs. That the sim swaps, targeting the two ministers and MPs, were done without following due process which is well stipulated and applies to whoever applies for swapping and eventual replacement of MTN lines. What makes this as more complicated and damaging case for MTN Uganda is that this wasn’t the first time same employee Nasser Kigenyi, in concert with others, was orchestrating such fraud. He had been found culpable doing the same activities on 16th October 2017 but was simply cautioned and allowed to carry on. He had been warned against swapping and replacing anyone’s phone line without the actual owners physically appearing before him yet here he was doing the same thing barely 5 months later. It appears having gotten away with it on earlier occasions, emboldened Kigenyi and his accomplices to become addicted to committing fraud using the MTN infrastructure entrusted to him. It’s this addiction that led him to go after ministers and MPs. These two categories had previously been identified and agreed upon as next targets because they are presumed to be very rich. “We also established a suspiciously high volume (61 transfers) of mobile money transfers totaling to Ugx1,751,000 from Henry Magembe (an MTNU Trade direct sales representative) to Nasser Kigenyi between November 2017 and February 2018,” the police report reads in part adding that many of the fraudulent sim card swaps were done with “knowledge and consent of Nasser Kagenyi” and his other accomplices within the MTN establishment. The report then explains the steps Kigenyi and other fraudsters took to effectively compromise the MTN internal controls and successfully executed their mischief. They secured “access to logon credentials at two levels; the MTN Local Area Network [LAN] and the MTN Concierge application. The perpetrator also needed to have access to a computer on the MTNU LAN, they had technical knowledge on how to perform the sim card swap and they had knowledge obtained through training on how to use the concierge application to perform sim swap.” The report adds that the perpetrators must have had unfettered access to the place where MTN new sim cards are kept as well as access to “new unassigned sim cards on which replaced numbers then become activated.” The report further implicates MTN Uganda thus: “We have analyzed all the fraudulent transactions and related evidence in the form of access logs and audit trails available. Based on the examinations and correlations, there is evidence of direct involvement of MTN contract staff.” The report says there exists a racket of fraudsters who identify wealthy MTN customers whose phone numbers are identified to rogue staffers inside MTN whereafter the fraudulent unauthorized swapping of those subscribers’ phone numbers commences. Once the illegal swapping is successfully executed, the rightful subscribers’ genuine line is switched off meaning he/she can’t receive or make calls. It’s in this period that the fraudsters, in connivance with their accomplices inside MTN, will begin sending out messages soliciting financial assistance purporting to be genuine owners. All this criminal swapping of innocent customers’ numbers is possible because the MTN managers, who are supposed to enforce controls including requiring genuine owners to personally appear inside the MTN service hall, are part of the game and will instantly wave that requirement to enable the fraud go unrestricted. The Police report also attaches a copy of Nasser Kigenyi’s employment history clearly showing he is an MTN Uganda employee designated as a Service Center Advisor. He has a two year contract running between 1st November 2017 to 31st October 2019. The report also refers to another MTN female customer whose phone number (0776679365) was criminally swapped by MTN employees who went on to use it sending out messages to her friends asking for emergency financial help until Davis Muhangi, a former MTN employee, alerted her regarding what was happening behind her back. The report notes that whereas prudent practice requires reference to NIRA documentation, when one’s line is being replaced, the MTN insiders connive to criminally issue out new phone lines without reference to any previously constructed documentation relating to a given customer’s bio-data. The report also attaches brief profiles of the Ministers and MPs and the circumstances under which they were defrauded in a syndicate involving MTN insiders. Mpaka, who is represented by prominent city lawyer James Akampumuza, is excited this latest police report will be relied upon to vicariously hold MTN Uganda liable for the actions of Nasser Kigenyi and other employees on 26th July when full hearing of his case is scheduled to commence.
DREADED KATAMBA WINGS TRIMMED;
This development, relating to the latest Police report, is emerging at a time when MTN Uganda has just trimmed the wings and powers of Mr. Anthony Katamba who has for many years served as its larger than life General Manager Corporate (including legal) Services. In a sudden change of guard in the legal department, the much dreaded Katamba was trimmed to GM Business as Enid Edroma, previously NIRA lawyer, was recruited to shepherd Legal affairs at MTN Uganda. She is expected to rectify many of the Katamba era anomalous decisions that subsequently cost the company dearly in terms of money and reputation as seen in Saatchi & Saatchi wrongful termination of contract case. The Katamba era strategy has been going for time-consuming appeals each time MTN loses a case. Earlier this year, MTN Group Africa CEO Sbu Luthuli was in Kampala and held talks with Daudi Mpanga and other BOWMAN lawyers representing SMS Empire which is just one of the many entities having long costly-and reputation injuring-litigation battles in court against MTN. Coincidentally the meeting took place in the Prime Minister Rugunda’s Board room at the OPM Building. MTN Chairman Charles Mbire was present. In that meeting, the MTN big man from South Africa, understood to be cautious to avoid costly litigation having greatly regretted the $3.9bn the Nigerian authorities ordered MTN to pay for obstinately refusing to switch off unregistered subscribers, wondered why MTN Uganda bosses, Katamba inclusive, weren’t enthusiastic about honestly engaging aggrieved entities like SMS Empire and amicably resolve disputes. Luthuli, who was in Uganda for the Group’s beginning of year business retreat, subsequently issued some directives to expeditiously resolve all pending court cases but the Katamba-led legal department was never in a hurry to act as instructed. In one of their civil suits in the High Court (seeking to block UCC from renewing MTN license), the SMS Empire lawyers (Dr. James Akampumuza & Mpanga) are planning to refer to torture allegations previously made against Anthony Katamba in order to impeach his character and that of the company whose legal department he has headed since 2002. The Court papers, on the SMS Empire vs. MTN Uganda file, show that the Katamba-led MTN legal department procured the services of notorious Nixon Agasirwe to torture some of the MTN ex-employees who were being prosecuted for mobile money criminal activities. They included Joan Nabugwawo, Richard Mwami and others. In their defense, the accused employees clearly implicated Katamba claiming that, at his prompting, then very powerful police officer Nixon, unleashed his torture experts to extract false confessions from them. Fear that this could demonize the MTN brand when the trial finally commences, must have prompted the company to get Katamba out of the way.
FALLING OUT WITH UCC;
There are also concerns that cracks in the hitherto warm relationship between regulator UCC and MTN could have resulted from the indifferent attitude with which Mr. Katamba (who by the way is related to KCCA ED Jennifer Musisi) has lately been treating UCC officials. It’s alleged that staffers of his legal department have previously conducted themselves very disrespectfully during meetings at the regulator’s head offices in Bugolobi including sometimes angrily storming out of meetings. In fact there is another Judicial Review application in which MTN is challenging UCC’s decision awarding hundreds of millions of shillings to VAS Garage, a Value Added Service (VAS) provider, which is aggrieved with the way MTN terminated dealings with them and expired their database of subscribers. UCC awarded them damages against MTN, something the Katamba-led legal department protested by dragging UCC to court where they are inter-alia disputing UCC’s powers to entertain such complaints. South African supervisors of MTN Uganda, and some in the Mbire-led BoD, feel such confrontation with the regulator, moreover at this point in time when MTN badly wants their license renewed in the face of SMS Empire suit challenging the same, would have been avoided if MTN legal department was being led by a more prudent person. There are many noncompliance issues the Katamba-led legal department is thought not to have properly advised management about including some of the areas highlighted in the performance evaluation report UCC released prior to the MTN public hearing. The UCC report showed numerous violations by MTN including refusal/failure to meet statutory timelines in negotiating interconnection agreements. Other areas of breach, that could cost MTN, include nonpayment of spectrum fees, false billing of customers, discriminatory trade terms, delayed reconciliation of revenues with 3rd party dealers and unfair pricing, which actually SME Empire too raises in their court claim. The UCC report also indicts MTN for not complying with regulator directives.
FALSE BILLING;
On false billing, in just 4 months (June-November 2014), UCC compelled MTN to refund Shs770m arising from the 360,000 complaints reported by its data users. The UCC performance evaluation report also shows that whereas the industry regulations require that a telecom operator instantly addresses a minimum of 90% of the service complaints reported by customers, MTN averages at just 76% when it comes to satisfactorily responding to customer complaints. As regards the VAS Garage matter, instead of advising management to address the basic demands made by UCC including restoring the database that had been improperly expired, the Katamba-led legal department instead referred to technicalities such as the absence of a properly-instituted Tribunal at UCC. Many corporate lawyers consider this choice to have confrontation with the regulator to be an imprudent decision any corporate lawyer could make at a time his company is waiting on UCC to determine their fate regarding license renewal. When you read UCC lawyer Kenneth Seguya’s affidavit in reply (which we shall be publishing later) you clearly get to see how deeply complicated the once blossoming relationship between UCC and MTN has become partly because of the telecom’s legal department’s decision to pursue the path of confrontation. Sometime back, as they waited for Group CEO Sbu Luthuli’s remedial intervention, Wireless Applications & Service Providers Association of Uganda (WASPA-U), which boasts of 60 VAS provider firms, directly petitioned the President accusing MTN of unfairly getting them out of business (in favor the Dubai firm IMI Mobile) and thereby rendering thousands of young Ugandan IT innovators jobless. In a meeting with the WASPA-U representatives, the President who is no doubt under increasing voter pressure to do something about unemployment, was very furious and made many unflattering comments about MTN Uganda. The President’s anger partly derives from intelligence reports that have previously accused MTN of profit repatriation and under declaration of revenues made from especially mobile money transactions in order to escape tax liability. Indeed MTN has many times had reputation-eroding court battles with URA-many of them are still pending determination. SMS Empire alone claims to have gainfully employed hundreds of young IT innovators many of whom are now languishing on the streets. Indeed in their affidavits, SME Empire bosses accuse MTN of unfairly terminating their business in a manner that has since condemned them to economic destitution. The firm is demanding billions of shillings from MTN Uganda in their breach of contract suit against which is different from the more recent Judicial Review application seeking to block UCC from renewing MTN operating license. In their pleadings, the SMS Empire executives too accuse MTN of under declaring revenues from VAS transactions in order to diminish tax liability. In all this, SMS Empire bosses are partly emboldened by the contents of a survey report Kelk Macmillan, a Geneva-based consultant, wrote previously on being hired by UCC. The report highlighted for UCC glaring evidence of abuse by MTN in the area of SMS services. The telecom giant was accused of routinely deploying dirty competition practices against VAS providers like VAS Garage, SMS Empire and others. The consultant’s report, that was too sensitive and destabilizing for UCC to implement, recommended that MTN Uganda pays a fine equaling to 10% of its annual turnover. In his Affidavit on the court file, we perused, MTN CFO Mike Blackburn, downplays SMP Empire’s multi-billion claim arising from deprived revenue and wonders why SMS Empire did for all these years not complain of being cheated. SMS Empire lawyers are urging court to block MTN license renewal until all the resultant revenues due to URA are properly audited and paid to the tax body. It’s understood that the Sbu Luthuli meeting with Rugunda, brokered by Mbire, was meant to politically appeal to the President to be more accommodative of the MTN mistakes but its doubtable if Museveni, who must politically placate himself against an increasingly angry population, is going to remain prepared to keep being there for an indifferent telecom giant that clearly doesn’t care about the plight of his own citizens. Still at the political level, there are concerns as to why MTN isn’t enthusiastic about calls on it to list shares for Ugandans to acquire stake in it.
SMS Empire court papers implicating Anthony Katamba in torture along with ex-Kayihura assistant Nixon Agasirwe
ABOUT SMS EMPIRE;
To industry watchers, the SMS Empire case shows MTN’s indifference: operating on 6868, the medium tax-paying company had grown to the level of paying Shs50m to URA per month. Its database painfully built over a 5 year period, with millions of subscribers who always got news alerts, was indifferently expired (call it destroyed) by MTN in favor of foreign firm IMI Mobile from Dubai. SMS Empire had partnered with over 100 media houses (mostly radio stations) which used its SMS platform to share breaking news to paying MTN subscribers. Monthly reconciliations would be made every 30 days and revenue was subsequently shared with the partner radio stations. As of 2015 when MTN Uganda mischief took them down, SMS Empire’s net monthly revenue had grown to over Shs300m, something expatriate MTN bosses became envious about and brought in the Dubai foreign firm. The monthly revenues would be shared with partner radios and TVs. MTN too would be entitled to a fraction. Their unique model, involving media houses to mobilize subscribers, saw SMS Empire grow into a model business in Eastern and Central Africa. It had become the region’s biggest entity of its kind in terms of subscriber base and monthly revenues. In their claim, SMS Empire executives want court to compel MTN to pay them $3.5m which was the company’s value at the time MTN sabotage forced them out of business. UCC investigations, on being petitioned, confirmed that the firm was collapsed by MTN’s aggressive actions. The company also contributed to knowledge transfer by bringing in IT expatriates from Israel and India. It also employed hundreds of Ugandan IT innovators, 80 of them directly and on permanent terms. Many other VAS providers had similar claims against MTN and plotted court action but gave up after MTN bosses called them for financial gratifications. In fact these gratifications have since polarized the WASPA anti-MTN solidarity that once existed. Firms that accepted and took the MTN offer continue to be accused of betrayal-and all this is hurting growth of the VAS providers’ fraternity and the loser in the long term is Uganda as an economy and not the MTN Group. For comments, call/text/whatsapp us on 0703164755.
