Damning scandals: It didn’t start with the dams

President Uhuru Kenyatta is once again under immense pressure to walk the talk in the fight against corruption. And it didn’t start with the dam projects.

 The country has lost over Sh30 billion to corrupt deals in key state departments such as the Ministry of Water and Irrigation, National Youth Service, Kenya Pipeline Company, National Cereals and Produce Board, NHIF and the Ministry of Lands.

The National Cereals and Produce Board is reported to have lost Sh1.9 billion, Kenya Pipeline Company Sh2 billion, Kenya Power Sh470 million, National Youth Service (NYS) Sh10.5 billion and the latest Sh21 billion dam scandal that has been described as Kenya’s biggest scam since Jubilee took power in 2013.

First, the dams scandal

Two cabinet secretaries and directors of about 107 firms have already been questioned by the Directorate Criminal of Investigations over the multi-billion-shilling scandal involving the construction of two dams which has unearthed major loopholes in the tendering process.

The cost of construction of Arror and Kamwarer dams in Elgeyo Marakwet County, a project that was to ensure more supply of water for domestic use, as well as irrigation, by expanding dam networks across the country, has generated more heat than light.

A significant proportion of the Sh21 billion meant to fund the dams has already been paid and at stake are huge loans the contractor borrowed.

The financial position of the contractor, CMC Di Ravenna of Italy, is in question with talk that it has applied for bankruptcy.

One of the shocking findings is CMC Di Ravenna, which is expected to deliver the dams that have since stalled amid corruption claims, never entered into any contract with Kenyan agencies.

Instead, different tender documents were signed and brought by various companies from Italy, South Africa and Kenya.

In one instance, a Paulo Porcelli signed a contract for the Sh38.5 billion Kimwarer Dam in Elgeyo Marakwet, but as a representative of CMC Di Ravenna South Africa.

Mr Porcelli also signed as the agent in the Sh28 billion Arror Multi-Purpose Dam, also in Elgeyo Marakwet.

CMC di Ravenna South Africa was never a party to the contract entered into between project client, Kerio Valley Development Authority, and the contractor. The project was to be executed jointly by CMC di Ravenna and Itinera.

NYS Scandal

The scheme involved at least 48 individuals drawn from senior management at NYS and National Treasury as well as suppliers.

Now suspects face charges that include forgery, money laundering, abuse of office, obtaining money by false pretence and fraud. Former Public Service and Youth Principal Secretary Lillian Mbogo, who was linked to the scam faced it all from being arrested to her accounts being frozen by a court of law.

The Assets Recovery Agency officially froze her accounts and her kin’s after getting a green light from the courts.

The agency froze a total of $105,293.7 (Sh10.5 million) and Sh22.4 million held in 11 bank accounts in the name of Lilian Wanja Muthoni Mbogo, Sahara Consultants, Lidi Holdings Limited and Lidi Estates Limited.

Several bank accounts which the prosecution said were used as conduits for looting more than Sh1 billion from the National Youth Service were also frozen.

Justice Jessie Lessit issued the orders following an application by the Assets Recovery Agency claiming that beneficiaries of the stolen public funds were colluding with banks to withdraw all the money and destroy evidence linking them to the scandal.

Among the accounts frozen were those held by Firstling Supplies Limited at Standard Chartered Bank; four accounts at Diamond Trust Bank operated by Sahara Consultants, Sheela Mbogo, Stephanie Mbogo, Shalom Kamweti and another account at Consolidated Bank operated by Ersatz Enterprises.

Justice Lessit also ordered the freezing of 10 accounts at Equity Bank belonging to Lilian Wanja Muthoni trading as Sahara Consultants, James Thuita Mwangi, Lidi Holdings Limited, Lidi Estates Limited, Ameri Traders, Interscope Tech and Services, Flagstone Company Limited and Ellywn Supplies.

For failing to do due diligence and for allowing questionable transactions through their systems, the Central Bank of Kenya punished the banks that aided the NYS scam.

Kenya Commercial Bank had to pay Sh149.5 million, Equity Bank parted with Sh89.5 million, Standard Chartered Bank was fined Sh77.5 million, Diamond Trust Bank paid Sh56 million and Co-Operative Bank of Kenya Sh20 million. In a statement, the Central Bank of Kenya said that the first phase of the investigation of banks that were used in transacting fraudulent NYS funds is complete.

 "The main objective of the investigation is to examine the operations of the NYS-related bank accounts and transactions, and in each instance assess the banks' compliance with the requirements of Kenya Anti-Money Laundering laws and regulations," read part of the statement.

The banks were found guilty of failing to report large cash transactions, failure to undertake adequate customer due diligence, lack of supporting documentation for large transactions and lapses in the reporting of suspicious transaction reports to the financial reporting centre.

Maize Scandal

Another major scam involved National Cereals and Produce Board top officials and traders who cheaply imported maize from Uganda and Tanzania. The maize was delivered to NCPB depots in Western Kenya while local farmers were being turned down at depots.

The multi-billion maize scandal saw NCPB officials arrested.

The Agriculture permanent secretary and a former boss of the cereals board also became a casualty of President Uhuru Kenyatta's all-out war on corruption.

PS Richard Lesiyampe and former National Cereals and Produce Board (NCPB) managing director Newton Terer appeared in court to answer corruption charges relating to maize purchase saga.

The two were charged alongside 16 others. They were accused of fraudulently acquiring public property worth Sh468 million through irregular purchase and supply of white maize to NCPB.

According to the State, the crime was committed between October 17 last year and June 1 this year in Nairobi and Uasin Gishu counties.

Lesiyampe faced an individual count of failing to follow the law while managing public funds. The prosecution argued that the PS failed to comply with the Public Finance Management Act while approving payment worth Sh5.6 billion for the purchase of the maize. Lesiyampe, said the prosecution, failed to consult the SFR oversight board before making his decision.

The PS was also charged with unlawfully spending the money without authorisation. According to the State, the PS bought maize beyond the approved budget set by the cereals board.

Politics found its way into the maize scandal with three North Rift Jubilee MPs claiming that the Deputy President William Ruto was to blame for the farmers’ woes.

Alfred Keter (Nandi Hills), Joshua Kutuny (Cherangany) and Silas Tiren (Moiben) claimed Ruto is a commercial maize farmer and that he owns 500,000 acres of land in Congo where he grows maize.

The MPs also linked him and his allies to the importation of maize from Mexico as well as subsidised fertiliser. According to the lawmakers, this is why maize farmers in North Rift have no market to sell their produce.

Ministry of Energy

A number of departments within the ministry of energy were also implicated in all forms of scandal with top managers from Kenya Power and the Kenya Pipeline Company apprehended, and taken to court to face various charges related to economic crime.

Former Kenya Pipeline Company (KPC) boss Joe Sang and four other managers are the latest executives in the Energy ministry set to face graft-related charges as the Directorate of Criminal Investigations (DCI) tightens his noose around parastatals under the Energy ministry.

Other suspects arrested were KPC company secretary Gloria Khafafa, procurement head Vincent Cheruiyot, procurement manager Nicholas Gitobu and general manager in charge of infrastructure Billy Aseka.

KPC has been in the eye of a storm in recent months after more than five scandals rocked the entity.

They include the Sh2.5 billion oil spillage scandal where millions of litres of oil disappeared from the pipeline system to the Sh4.4 billion price variation of the cost of building the 450km pipeline from Mombasa to Nairobi due to delays. The contract was being done by a Zakhem International Construction, a Lebanese firm.

The firm is also facing corruption-related investigations over the Sh1.8 billion oil jetty in Kisumu.

In October, the DCI boss George Kinoti summoned Sang, board director John Ngumi and five other officials to record statements on the oil jetty scandal.

In the same year, KPC was also dogged by controversies involving inflation of contracts estimated to be between Sh70 billion to Sh95 billion.

Besides KPC, the Kenya Electricity Transmission Company Limited (Ketraco), another parastatal in the Energy ministry, also has a fair share of scandals on its head.

The firm's internal auditors put the amount of money lost at more than Sh6.3 billion.

Variations of contracts

For instance, one of the contractors at Ketraco claimed idling fees for 21 months for his workforce and equipment at a rate of Sh108 million per month for doing nothing. Some expatriates were being paid Sh200,000 daily. These led to a Sh3.8 billion bill slapped on the taxpayer.

The same auditors also flagged variations of contracts whose prices had been set beyond the 20 per cent variation limit stipulated by procurement law. One of the projects was varied by up to 86 per cent, resulting in additional charges of Sh430 million.

Kenya Power has had its fair share of scandals that saw almost the entire management arrested and suspended. Its waterloo was the procurement of defective transformers and the irregularities in pre-qualifying 525 companies for labour and transport contracts.

The deals are estimated to be worth more than Sh4.5 billion.

In May, Kenya Power fired some 18 employees who were linked to the irregular pre-qualification of 350 companies in the labour and transport tender, a revelation that was made in an audit report.

Kenya Power is also facing a poles scam. Through price-fixing, reserving bids, restricting players and collusion with senior officials,  a group comprising about 40 treatment plants spread across the country has completely ring-fenced the contracts, supplying poles at approximately twice their market value.

Its latest controversy is how it was used by the government to play politics in the 2017 election, delaying charging of correct bills to keep the cost of electricity low, only to slap the inflated bills on the consumers after the election was over.

The Geothermal Development Company (GDC) has also not been free of scandal. Six managers at GDC were also sent home for inflating rig moving charges at the parastatal.

GDC has also come under the attention of the Auditor General for terminating a contract and exposing the taxpayer to the loss of Sh3.3 billion in compensation.

Bonfide Clearing and Forwarding Limited went to court seeking the monies as compensation for work done, loss of business and damages.

NHIF

A new status report on three major scandals involving the National Hospital Insurance Fund has detailed how the insurer has been plundered since 2001.

It paints the picture of a helpless institution at the mercy of managers who did everything to abet the loss of billions of shillings meant to pay members' medical bills.

The report dated November 26 was given to the directors during last a board meeting in December where a resolution was reached to suspend Geoffrey Mwangi as chief executive.

It is believed that the report is part of the responses sought by the Directorate of Criminal Investigations (DCI) in an ongoing probe targeting past and present managers. All board members have been summoned to give an explanation on the scandals that have rocked the insurer for decades.

First was the controversial Karen land paid for in 2002 but which could be lost should a group of claimants have its way in an ongoing ownership battle in court.

The war on graft is expected to spill over to next year due to President Uhuru's commitment to end the vice.

Speaking during the 54 Mashujaa Day celebrations at Bukhungu Stadium in Kakamega County last year, the Head of State was categorical that he was determined to fight graft because the vice undermines unity, prosperity and happiness of a nation.

"I am often asked why at every gathering and in every speech I give I always talk about the need to fight corruption and impunity. These two undermine the growth of a society," argued Uhuru.

According to him, countries that have achieved development have had a dedicated and effective public service that is trusted by its citizens.

"My administration is taking measures to bring accountability to the Public Service.  These include the fresh vetting of all senior accountants and procurement officers and enhanced lifestyle audits. We have also provided resources to the investigatory agencies that are working to bring cases against the corrupt in order to deter these crimes," he said.

Uhuru said the Ethics and Anti-Corruption Commission (EACC) has to promulgate regulations and guidelines to enable all investigative agencies to access Wealth Declarations of all State and Public Officers.