Judges clear graft probe into Anglo Leasing deals

The Ethics and Anti-Corruption Commission offices in Nairobi. FILE PHOTO | NMG 

By SAM KIPLAGAT
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Summary

• Dubious Kibaki-era security contracts can now be audited to establish if public got value for the billions of shillings paid to overseas companies.

Five Court of Appeal judges have cleared the way for investigations into Anglo Leasing type and other suspicious mega contracts through which the government risks losing billions of shillings in suspect payments to overseas companies.

The judges cleared the way for the investigations after they overturned a 2008 barring order by Justice Joseph Nyamu, who has since been sacked.

The Nyamu order had barred the State from contracting PricewaterhouseCoopers (PwC) to investigate Sh6.7 billion Anglo Leasing type contracts for installation of communications systems for the Administration Police (AP) and the provincial administration. The Ethics and Anti-Corruption Commission (EACC) had appealed the contentious ruling.

A key reasoning of the Court of Appeal judgment was that the Attorney-General had sanctioned the agreements and an arbitral process was in place. Repudiation of the judgment now clears the way for investigations into suspected corrupt deals through which companies and individuals have been lining up to cash in billions of shilling in dubious payments.

The judges said the orders by Justice Nyamu were final in nature and even if parties were to proceed to arbitration, the government was already adjudged as the wrong party.

In his decision, Justice Nyamu had barred the Ministry of Finance from hiring the consultancy firm to investigate whether the government got value for money in the 18 Anglo Leasing security related contracts. PwC was to specifically carry out an audit in regard to procurement of a supplies contract entered by the government and Midland Finance & Securities Ltd and Globetel Inc. The contracts were signed in May 2003, five months after the Narc administration dislodged Kanu from power.

The companies were to install a nationwide Dedicated Digital Multi-Channel Security Systems Telecommunication Network for the AP and the Provincial Administration known as “Project Nexus”.

The tender was originally quoted at Sh588 million ($7.35 million) by a French company, but was awarded to a non-existent British firm, Anglo Leasing Finance, at an inflated cost of Sh2.9 billion ($36.25 million).

Investigations into this scandal later saw the then Finance minister David Mwiraria resign from President Mwai Kibaki’s administration and the dismissal of three top civil servants as more security contracts were unearthed.

A legal opinion by the then Attorney-General Amos Wako said that all pre-contract authorisations had been obtained and that the contract was lawful. An audit report later found that the government had paid for unfulfilled contracts or was overcharged on security equipment by up to five times the market price.

In April 2006, a special audit report of the Controller and Auditor-General stated that the government had suffered loss due to the single sourcing mode of procurement.

The report further stated that there was absence of complete information on the work, goods or services delivered in respect of each contract and in that regard, the responsible accounting officers were advised to carry out professional valuation of the actual performance of the contracts.

PwC was to establish whether there had been pricing, finance and other irregularities in the said contract and whether there was market value for goods and services delivered. But the two firms moved to court arguing that it would be used against them yet the AG had sanctioned the contracts.

Justice Nyamu agreed with the companies and prohibited the government from investigating the contracts or using any information obtained from the investigation.

However, Justices Martha Koome, Hannah Okwengu, Asike Makhandia, Daniel Musinga and Sankale ole Kantai, however, have now said that PwC was required to find out whether there was value for money for goods and services alleged to have been supplied, rendered or to be supplied in future, and whether there were irregularities that could lead to civil or criminal actions.

They said there were no criminal charges preferred against the two companies and their case as far as the alleged criminal investigation by PwC was concerned was based on fear of what was going to happen or likely to happen. “We further agree with the submissions by counsel for the appellant that the said provisions cannot be construed to oust criminal jurisdiction which is independent, especially for acts that occur post the supply contracts. We therefore find the apprehension that the 1st and 2nd respondents’ rights were about to be violated was rather premature and not ripe for litigation,” the judges said.

They said that when a party like the Ministry of Finance, which is responsible for payment of contracts, undertakes an exercise of verifying the basis for making payments, they are not persuaded that was tantamount to usurpation of the appellant’s mandate. “To us, this is like seeking an opinion and until that opinion is given and acted on, it was too early to conclude, as the judge did, that the appellant ceded its authority to a private entity,” the Judges said.

The judges agreed with EACC lawyer David Ruto that it was necessary for the government to verify the value of security related goods, works and services relating to the Anglo-Leasing contracts.

They noted that the ministry had a right and a public duty to verify whether there was value for the money. The companies maintained that the contract with PwC was illegal because there was a State organ mandated to perform the task and the Ministry of Finance had no role in purporting to investigate allegations of corruption in a contract. They thus demanded to be paid the balance.