Revealed: How top Fund officials looted millions for non-existent ‘consultancies’

Youth Enterprise Development Fund Chief Executive Officer Catherine Namuye. Ms Namuye in collusion with a senior board member and other senior managers are said to be deeply involved in the scheme that has seen the Fund lose Sh180.9 million in two months between February and April. FILE PHOTO | PHOEBE OKALL | NATION MEDIA GROUP 

In Summary

• Documents and information sourced by the Sunday Nation point to a situation where the officials have been forging documents, including bank instructions to defraud the public of millions of shillings in non-existent ‘consultancies’.
• On February 17, 2015 Mr Odhiambo wrote to Chase Bank manager Iman Hussein making Ms Namuye the sole signatory to the account.
• Later, they were transferred to field offices so that they do not raise questions about the withdrawals from the fixed deposit account.

By WALTER MENYA
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By ANDREW TEYIE
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Top officials have brazenly been looting the Youth Enterprise Development Fund as the youths in the country struggle to make ends meet because of lack of employment opportunities.

Documents and information sourced by the Sunday Nation point to a situation where the officials have been forging documents, including bank instructions to defraud the public of millions of shillings in non-existent ‘consultancies’.

The beneficiaries of the private funds, sources say, have been living large and acquiring high-value property with the illicit earnings.

The CEO Catherine Namuye in collusion with a senior board member and other senior managers are said to be deeply involved in the scheme that has seen the Fund lose Sh180.9 million in two months between February and April.

On Saturday, the chairman of the Board of the Youth Enterprise Development Fund Mr Bruce Odhiambo said he had travelled to Nigeria and will comment when he returns to Kenya.

“Hey, I am out of the country but on the way back. I will be in Kenya in five hours. May I call you when I get back home,” said Mr Odhiambo.

The Fund saves money that is not immediately required in short term fixed deposits to earn interest and had opened such an account at Chase Bank with a deposit of Sh400 million.

The money was siphoned from the fixed deposit account on February 11 and April 27 to pay a company known as Quarandum Ltd for “consultancy services rendered”.

SOLE SIGNATORY

On February 17, 2015 Mr Odhiambo wrote to Chase Bank manager Iman Hussein making Ms Namuye the sole signatory to the account.

“The signing rules are the CEO can sign off any instructions. In the absence of the CEO, two signatories must sign with one being a mandatory signatory,” said Mr Odhiambo.

The instructions to the bank raise questions why the chairman would make an individual the sole signatory to an institutional bank account.

According to insiders, this is contrary to government regulations that at least two signatories sign for any bank transaction involving public funds.

The board at its meeting on October 23 suspended Ms Namuye and finance manager Benedict Atavachi as investigators from the Directorate of Criminal Investigations (DCI) moved in to the Fund’s head offices at Corporate Renaissance Park in Upper Hill to investigate the claims of fraud.

But even the rationale of calling the DCI to investigate what is potentially an economic crime, instead of the Ethics and Anti-Corruption Commission (EACC), raises questions.

Even after their suspension, insiders told Sunday Nation that the CEO was on October 28 spotted in a meeting with Mr Odhiambo and another director in the absence of other directors who were in Mombasa for training.

“Staff are eager and wondering why the board of directors are trying to cover up such a big scandal. Is it that they are involved in it or what? The DCI were also requested to investigate the scam. However, the Ethics and Anti-Corruption Commission (EACC) which is mandated to investigate such thefts have not been invited. There is a lot which is not adding up here,” staff members who spoke on condition of anonymity said.

EXPRESS AUTHORITY
According to a brief that Sunday Nation has obtained, a top official is accused of forging the contract for a 2012 ICT strategy to support two payments of Sh115.7 million and Sh65.2 million on February 11 and April 2, 2015 respectively to Quarandum Ltd.

The ICT strategy, the Sunday Nation learnt, had been developed at the cost of Sh6 million by the previous board.

“This purported ICT strategy was not in the procurement plan for 2014/15 and not advertised in the press and the tender committee did not approve such an activity in 2015 neither are they aware of the same,” the brief on investigations in our possession states.

The paperwork for the 2012 strategy has since gone missing from the Fund’s archives, according to investigators and other insiders.

According to the documents, Ms Namuye on February 11 wrote to Mr Ken Ouko, the director of business development asking him to transfer Sh115,710,000 to Quarandum Ltd “for consultancy services rendered.”

“Following the maturity of fixed deposit held with your bank, please take this as instruction to debit our account with Sh115, 710,000 and make payment to our supplier Quarandum Limited for consultancy services rendered.

The money was to be paid to Quarandum Ltd in their account held at Chase Bank Riverside Mews Branch.

“The remaining funds should be rolled over for a further period of three months. Please contact the undersigned (Ms Namuye) should you have any queries or seek clarification,” the CEO letter reads.

To enable the bank to carry out Ms Namuye’s instructions, Mr Odhiambo on February 17 wrote to the bank that “the CEO can sign off any instructions” thereby granting her express authority to be the sole signatory to any recipient.

FURTHER INSTRUCTIONS
With the chairman’s express authority in place, Ms Namuye on April 27 again instructed Ms Hussein to transfer a further Sh65.2 million to Quarandum Ltd account held in the same bank.

“Following the maturity of fixed deposit held with your bank please take this as instruction to debit our account with Sh65,184,946 and make payment to our supplier Quarandum Ltd for consultancy services rendered. The remaining funds should be rolled over for a further period of two months.”

The instruction is again signed off by Ms Namuye alone.

According to information obtained by Sunday Nation, when a member of the audit committee of the board brought up the matter, board members were summoned to a house belonging to one of their colleagues where a reshuffle was done on the composition of the committees.

“On Wednesday October 21, the board held an early morning meeting, also attended by Devolution and Planning Principal Secretary Peter Mangiti.  The whistleblower tabled documents from the bank showing how the money was transferred. The chairman and the CEO both dismissed the documents as a forgery,” a brief obtained by Sunday Nation states.

The matter was then referred to the audit committee which met on October 22 and recommended the suspension of the CEO to pave way for investigations.

The recommendations were then tabled before the full board on October 23 during which the decision to suspend Ms Namuye was taken.

DEPOSIT ACCOUNT
Meanwhile, Sunday Nation also learnt that internal auditors and finance staff who had tried to verify the fixed deposit account at Chase Bank in August 2015 while doing the first quarter accounts, discovered that the account only had Sh104 million after the withdrawal of Sh120 million that had been disbursed to the youths.

There was therefore Sh180.9 million which could not be accounted for which was transferred to the account of Quarandum Ltd on February 2 and April 27.

“The auditors and accountants asked for bank statements but were never supplied with the same. The finance manager asked them why they were following up on that account and told them to stop asking for bank statements.”

And to complete the cover up, the brief states that all the finance staff who were well versed with what was happening in the finance department were deployed to the credit department.

Later, they were transferred to field offices so that they do not raise questions about the withdrawals from the fixed deposit account.

Investigations further reveal that the current board had, without any clear reason terminated the contract of a Nairobi-based Israeli firm that was supplying greenhouses under the agri-vijana loan that is supposed to benefit youths interested in farming.

Instead, the contract was given to a private marketing firm.

“The agri-vijana loan has been giving out two greenhouses of eight by 15 metres for a loan amount of Sh357,344 interest free. However, over the past few months they have changed the loan particulars to just one greenhouse while still maintaining the loan amount of Sh357,344,” the source said.

BENEFICIARIES
The source added: “The market price of the greenhouse is Sh170,000. So my question is, why are they selling the greenhouse to the youth at double the price and yet claim the loan is interest free?”

Beneficiaries who have questioned the district youth officers on the matter were met by rude suggestions that they should go to their head office and ask the bosses.

“I suspect there could be a possible scandal here which is very unfortunate as the youth cannot benefit from these loans,” the source added.

Ms Namuye has been under the EACC radar for some time. She was among the senior public officials whose names were contained in the EACC dossier that President Uhuru Kenyatta presented to Parliament on March 26 State of the Nation Address. 

Sunday Nation also obtained a letter that EACC had written on January 16, 2014 to the former board chaired Gor Semelang’o confirming that she was under investigations and urged the board to be cautious in appointing her to the CEO’s position.

“We also confirm that the commission is undertaking investigations in matters in which Ms Catherine Namuye is adversely mentioned. The allegations are serious and we urge you to take them into consideration in the recruitment of the chief executive officer,” EACC deputy CEO Michael Mubea said then.

The Fund falls under the Ministry of Devolution and Planning who’s Cabinet Secretary Anne Waiguru has been under pressure to resign over loss of funds at yet another institution in her ministry, the National Youth Service (NYS).

Nandi Hills MP Alfred Keter is pushing for an impeachment motion against Ms Waiguru after the first attempt failed following withdrawal of signatures by MPs.