In late February this year, a senior official of Leads Corporation Limited called retired banker Mizanur Rahman and offered him the position of Chief Executive Officer.
Having previously served as head of information technology at three state-owned banks, Rahman was already familiar with Leads’ operations and products. Despite becoming aware of the company’s financial and legal difficulties, he joined Leads as CEO in early March.
The number of companies in Bangladesh involved in developing core banking systems for banks has remained relatively limited over the past two decades. Leads Corporation has been active in this sector for years.
A core banking system is integral to maintaining customer accounts and financial information, operating banking services and providing information required by regulatory authorities. Developing and maintaining such systems therefore requires technical expertise, system-design capabilities and substantial financial resources.
From NCR equipment supplier to core banking provider
Leads Corporation was established in Bangladesh in 1992 after purchasing equipment from the local operations of NCR Corporation.
The company entered the core banking business in 1999. According to Leads Managing Director Sheikh Abdul Wahed, the company developed its banking-sector expertise in the 1990s through its involvement in NCR’s ATM operations at various banks. It subsequently used that experience to develop its own core banking platform.
Before Leads’ financial difficulties became public, the company had around 300 employees, roughly half of whom worked in technical roles.
According to employees, problems with regular salary payments began toward the end of 2018. Former Chief Operating Officer S M Saifur Rahman said that although salary payments had become irregular, the board and owners initially described the situation as a temporary problem.
The situation subsequently became more complicated.
BankUltimus heads for auction
In February this year, an order of the Joint District Judge, First Court, Dhaka, initiated proceedings to auction Leads’ core banking software, BankUltimus.
The move stemmed from a legal dispute involving Khan Akhtar Alam over recovery of outstanding dues. By that time, the amount claimed had reportedly risen to approximately Tk 83 crore.
Because BankUltimus was Leads’ principal product, the proposed auction created considerable concern among employees.
Saifur Rahman, who had worked at Leads for more than two decades, said that when he eventually left the company, more than Tk 1 crore was owed to him.
A dispute dating back to 1981
The dispute between Khan Akhtar Alam and Leads traces its origins to a civil case filed in 1981.
According to court records and related information, Khan Akhtar Alam was then an employee of NCR Corporation and filed the case seeking sales commission. He claimed Tk 6.4 lakh in unpaid commission for the period from 1972 to 1981.
The case was dismissed in 1986, after which he filed an appeal in 1987. Meanwhile, NCR withdrew its operations from Bangladesh in 1992, and Leads Corporation began its operations after acquiring equipment from the company.
Lawyers representing Leads argued that the company had neither acquired nor merged with NCR Corporation. Rather, they said, Leads had purchased equipment from NCR and had not assumed liabilities arising from NCR’s relevant contracts.
However, in 1999, Khan Akhtar Alam added Leads Corporation and NCR’s then regional manager as parties to the case. The matter was subsequently considered by the Joint District Judge, First Court, Dhaka.
Claim grows over the years
In 2010, the court ordered the preparation of an audit report to determine Khan Akhtar Alam’s outstanding claim. N L Ray & Company was appointed for the purpose.
The audit completed that year assessed Khan Akhtar Alam’s dues, including interest, at US$720,000.
By 2018, the claim had risen to approximately Tk 57 crore, and the Joint District Judge, First Court, Dhaka, ordered Leads to pay the amount.
Leads employees alleged that they were not informed about the court order in 2018. Around the same time, salary payments began to become irregular.
Former employee Arifur Amran Chowdhury said salaries were subsequently delayed by three to four months on many occasions. When he left the company in early 2023, he said more than Tk 17 lakh remained unpaid to him.
Questions over fund management
According to Saifur Rahman, Leads’ monthly salary bill was approximately Tk 2 crore, while the company collected Tk 6 crore to Tk 7 crore every month from core banking systems used by various banks and financial institutions.
When employees sought information about their unpaid salaries, he said the finance department told them that substantial amounts were being used to repay bank loans belonging to the owners.
After taking responsibility for reviewing the company’s financial position, Mizanur Rahman also raised questions about the management of funds.
According to him, before the company’s bank accounts were frozen, Leads was receiving approximately Tk 4 crore to Tk 5 crore per month, while its monthly salary expenditure was around Tk 1.5 crore.
He claimed that although the financial records indicated the presence of funds, the money was not available when needed. He suspected that the funds might have been transferred elsewhere.
When contacted about the allegations concerning unpaid employee dues, Leads Managing Director Sheikh Abdul Wahed said the employees would be paid their outstanding amounts quickly.
He later informed employees by email that Mizanur Rahman had been removed from the position of CEO and urged employees to return to work.
Rahman, however, alleged that the company’s financial and legal problems stemmed from decisions made by the owners and that the situation had gone beyond the point where it could be resolved.
No conclusive evidence of fund diversion or misuse has been found in publicly available records. The allegations should therefore be treated as claims made by the individuals concerned.
Implications for banks using BankUltimus
The situation also became significant for banks using BankUltimus. A core banking system is directly connected to a bank’s day-to-day operations. A decline in the number of technical employees at the software provider can create difficulties in system maintenance, introducing new services and carrying out software upgrades.
Published reports said most of Leads’ technical employees had left the company, raising concerns about the continuity of services for banks using BankUltimus.
Managing Director of Uttara Bank Md Rafiqul Islam, whose bank uses BankUltimus, said a sudden disruption in software services could affect the bank’s operations.
In his view, replacing a core banking system is not something that can be completed quickly, and the consequences of such a disruption could extend beyond an individual institution to the broader banking system.
Bangladesh Bank spokesperson Mezbah-ul-Haque said the central bank has information-technology guidelines for dealing with software-related issues.
He said a reduction in the number of IT employees at a software company would not necessarily have an immediate impact on a bank’s day-to-day operations. However, he noted that it could result in delays in launching new products or updating software.
A wider picture of corporate vulnerability
The developments surrounding Leads Corporation offer a broader picture of how financial difficulties at a technology company can become intertwined with its employees, ownership, court proceedings and the delivery of banking services.
Salary irregularities beginning in 2018, employee dues, a decades-old civil dispute, court orders for recovery of money and, ultimately, the proposed auction of BankUltimus have emerged as interconnected elements of the company’s recent history.
At the same time, the subsequent court decisions and the company’s current ownership and management structure also need to be taken into account.
For banks using BankUltimus, the critical questions extend beyond the legal ownership of the software. They include the platform’s maintenance arrangements, the availability of experienced technical personnel, the provider’s financial capacity and its plans for future development.
For a core banking platform that supports essential banking operations, the stability of the technology provider is therefore not merely a corporate matter. It can become an issue with implications for the banks that depend on the system and, ultimately, for the customers who rely on those banks every day.