Treasury CS Rotich and PS Thugge to face charges over dams scandal

July 22, 2019 (4 weeks ago) 11:20 am
DPP Haji and Prosecutors in his office when he announced charges against top officials over the dams scandal. Photo/ODPP.

, NAIROBI, Kenya Jul 22 – Treasury Cabinet Secretary Henry Rotich and other top officials are now staring at arrests and prosecutions over the dams scandal that cost the tax payer billions of shillings in dubious payments.

Director of Public Prosecutions Noordin Haji said Monday he has approved the arrests and prosecution of Rotich, Principal Secretaries Kamau Thugge (Treasury), Dr Susan Jemutai Koech (East African Community) and Kerio Valley Development Authority (KVDA) Managing Director David Kimosop.

Also to be arrested is Kennedy Nyakundi Nyachiro, Chief Economist at the Treasury who also heads Europe II Division alongside 23 other officials who include Italians from the CMC di Ravena—the firm that was contracted to put up Kimware and Arror dams in Elgeyo Marakwet on a government-to-government agreement.

“After analyzing the evidence gathered by the Director of Criminal Investigations, I am satisfied that economic crimes were committed and I have therefore approved their arrests and prosecutions,” Haji told a news conference in Nairobi.

Whereas the alleged commercial contract signed between KVDA and CMC Di Ravenna/Itinera JV clearly states that Kimwarer Dam would cost USD 204,020,149.02 while Arror Dam would cost USD 252,188,732.27 totaling to USD 456,208,881 (approximately Kshs 46 Billion), Haji said, the National Treasury negotiated a commercial facility increasing the amount to approximately Kshs. 63 Billion which is 17 Billion more than necessary or required payable on a timely basis without regard to performance or works.

“We now also know that CMC di Ravenna submitted draft technical designs in February 2019 four years behind schedule,” Rotich said.

Others facing arrests are Jackson Njau Kinyanjui (Director Resource Mobilization Department National Treasury), Titus Murithii (Inspector General of State Corporations), Paolo Porcelli (Director CMC di Ravenna) CMC di Ravenna – Itinera JV Italy, William Kipkemboi Maina (Head of Supply Chain Management), Paul Kipkoech Serem (Manager Engineering Services), Francis Chepkonga Kipkech (Tender Committee).

Haji has also ordered the arrests of Samuel Kimutai Koskei (Tender Committee), David Juma Onyango (Tender Committee), Patrick Kiptoo (Tender Committee), Elizabeth Kebenei (Tender Committee), Esther Jepchirchir Kiror (Tender Committee), Moses Kipchumba (Ad hoc Technical and Financial Evaluation Committee Team 2) and Eng. Nelson Korir (Ad hoc Technical and Financial Evaluation Committee Team 2).

Others are Eng. Isaac M. Kiiru (Ad hoc Technical and Financial Evaluation Committee Team 2), Eng. Patrick Kipsang (Ad hoc Technical and Financial Evaluation Committee Team 2), Fredrick Towett (Ad hoc Technical and Financial Evaluation Committee Team 2), Jotham Rutto (Ad hoc Technical and Financial Evaluation Committee Team 2), Charity Muui (Ad hoc Technical and Financial Evaluation Committee Team 2), Geoffrey Mwangi Wahungu (CEO, National Environment Management Authority), David Walunya Ongare (National Environment Management Authority) and Boniface Mamboleo Lengisho (NEMA).

Charges facing them include conspiracy to defraud, failure to comply with applicable procurement laws, engaging in a project without prior planning and abuse of office among other economic crimes.

“The investigations established that government officials flouted all procurement rules and abused their oath of office to ensure the scheme went through,” Haji said.

While detailing their crimes, Haji said the officials had breached public debt regulations.

“If this project was carried in the strict adherence to the law and existing policies in place to safeguard public interest, it should not have cost Sh63 billion. The evidence establishes malpractices that impacted on our national debt,” he said.

“Some Sh4.6 billion was borrowed in addition to the principal amount to pay interest in advance during the construction period, which to date has not commenced. As a country we continue to pay interest on the loan. We borrowed, the loan had interest, we borrowed more money to pay the interest which also attracted interest,” Haji said, “A further Sh643 million was released by the National Treasury as a counterpart funds which was meant for the resettlements of the persons that would be affected by the same projects for the compensation of land acquired. However, there is no evidence that land has been acquired four years down the line. Furthermore, Kenya Forest Service any excision of forest land, pointing to significant adverse impact on the forest ecosystem.”

Rotich is on record confirming that the government had spent Sh12 billion to secure funding for the construction of the two dams, with the sum having been paid out to meet set conditions before the actual funding.

“Like any other standard loan facility signed by the government, there are several conditions to be met before funds are available to the borrower and the contractor to commence work,” he said in a press statement published in local dailies at the height of the police investigations in March.

The Sh12 billion was part of the conditions precedent outlined in a financing agreement approved by the Attorney General before the National Treasury signed it on April 18, 2017, he explained at the time.

The amount entailed an arrangement fee of Sh545.9 million, a Sh359.5 million commitment fee, a Sh3.5 million agency fee and a Sh11.1 billion insurance premium paid to an Italian contractor.

According to Rotich, the government-owned Italian firm – Servizi Assicurativi del Commercio Estero (SACE) – was paid a Sh7.8 billion advance fee representing 15 per cent of the contract amount.
The National Treasury at the time denied reports that up to Sh21 billion had been paid out in respect to the construction of Arror, and Kimwarer dams before commencement of works.

The figures provided by the Treasury inclusive of the Sh12 billion loan facilitation fee add up to Sh19.8 billion, with Rotich saying the Sh7.8 billion advance payment was in line with Section 147 (1) the Public Procurement and Asset Disposal Act.

“Under exceptional circumstances advance payment may be granted and shall not exceed 20 per cent of the price of the tender and shall be paid upon submission by the successful tenderer to the procuring entity of an advance payment security equivalent to the advance itself and that security shall be given by a reputable bank or any authorized financial institution issued by a corresponding bank in Kenya recognised by the Central Bank of Kenya, in case the successful tenderer is a foreigner,” the Act provides.

Rotich dismissed the alleged financing of the projects without submission of designs saying the procuring ministry – Ministry of East African Community and Regional Development – adopted a design-build model which he argued had been proved to be cheaper and effective.

But Haji disagrees, and has accused him of committing economic crimes.

The design-build model allows the firm contracted to solely engineer, procure, and construct, as well as enter into financing agreements.

The contractor – SACE – covers 85 per cent of an estimated Sh52 billion contract amount with a consortium of banks funding the remaining fifteen per cent.

An Italian banking group, Intesa Sanpaolo, is said to have signed the facility agreement on April 4, 2017 on behalf of three other banks – Paribas Fortis S.AIN.V, UniCredit S.P.A, and UniCredit Bank.

The debate over misappropriation of funds allocated for the construction of the Arror and Kimwarer dams took a new twist Thursday after Deputy President William Ruto dismissed a Sh21 billion figure reported in a section of dailies.

“The money in question is about Sh7 billion and for every coin that has been paid, we have a bank guarantee. No money will be lost because we’re a responsible government; we’ve engaged every arm of government to ensure public resources are safe,” he said during the release of the 2017/18 State of Judiciary and Administration of Justice report.

The DP cautioned against fabrication of information in the fight against corruption saying misleading reports would only derail anti-graft efforts.

“Correct information must be used as we target the fight against corruption so that we can nail the true culprits,” Ruto said.

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