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Ministers' role in Jirongo-NSSF housing deal returns to haunt them

By | Updated Sat, April 28th 2012 at 00:00 GMT +3

By BEN AGINA

Political sins from two decades ago have returned to haunt two Cabinet ministers after the National Social Security Fund paid out close to Sh500 million to a firm Lugari MP, Cyrus Jirongo, owns.

The move attracted anger from taxpayers unhappy at public money being lost over "old Kanu deals".

Details emerging about the 20-year battle between Sololo Outlets and NSSF show Education Minister Mutula Kilonzo and his Internal Security counterpart George Saitoti had a hand in creating the mess that has now paid off for Jirongo.

The two were apparently involved in political schemes to limit the influence of the Youth for Kanu ’92 powerbroker by frustrating his attempts to milk NSSF on a major housing estate contract in 1993. While the move succeeded in crippling the former YK’92 chairman’s firm, Jirongo is now getting his pound of flesh from the social security fund over the cancellation of the Hazina South B estate deal.

Three weeks ago, it emerged that NSSF recently paid Sh490 million to Sololo Outlets after years of litigation over the fund’s decision to back out of a deal to buy the Hazina development. Sololo is now pursuing NSSF for another Sh1.5 billion to cover changes in the project’s scope and the cost of materials for the "75 per cent finished" housing estate.

Title deeds

NSSF has, however, refused to pay out any more money, considering the Sh490 million to have settled the matter. Jirongo’s response was to suggest a cancellation of the troubled sale instead of continued arbitration. He offered to refund the Sh1.39 billion NSSF had paid for the estate so far and take back possession of the property. The 500-house Hazina Estate, whose title deeds NSSF officials say are "defective", is now valued at billions of shilling more.

In a letter to NSSF’s Managing Trustee, Jirongo wrote: "By the Sale Agreement dated February 23, 1993, the NSSF agreed to purchase our development on LR No. 209/9101 and 209/9103, Hazina Estate, South B. The purchase has been bedevilled by political interference, negative publicity and bad faith on the part of the (NSSF) Board. It is now our conviction that we shall never get a just resolution of this matter. We, therefore, demand that we bring all matters to closure by restoring each party to their original position: Give us our development project in South B back and we will refund all the monies ever paid to us totalling Sh1.39 billion."

The letter raises several questions: Why hasn’t the sale of Hazina Estate to NSSF been concluded in 20 years? What political interference is Jirongo talking about?

Documents in our possession reveal several key players in the Kanu regime worked in concert to frustrate the deal closed by the politically connected Jirongo. Mutula, then a lawyer representing senior officials at the Office of the President, appears to have written a series of letters strategising on how to cut Jirongo down to size. Allies of Jirongo say Mutula was acting as a "hatchet man" to resolve political infighting within Kanu after the 1992 General Election.

Asked about his role in the NSSF/Sololo deal yesterday, Mutula insisted he acted professionally with no thought to any political machinations.

"I acted in the best interest of my client," he said when contacted. "I was doing legal work, not politics. I did what my client wanted me to do."

NSSF spent more than Sh250 million on legal fees in 1994 alone, an amount the Auditor General criticised as "grossly excessive". About Sh180 million of this went to Kilonzo and Company Advocates. Mutula noted that the NSSF/Sololo matter was still active and being handled by a law firm he has since resigned from.

Credible sources familiar with the matter say Mutula was set upon the YK-92 chairman by three political players, who were unhappy with the high profile he got campaigning for then President Moi in the country’s first multi-party elections. The three – Prof Saitoti, Nicholas Biwott, and Joseph Kamotho – were said to be unhappy with the influence Jirongo had gained after helping Kanu fight off challenges from opposition leaders Kenneth Matiba, Mwai Kibaki and Oginga Odinga.

YK-92 boss

Insiders say Jirongo was pushing for the appointment of a youthful Vice-President, with Musalia Mudavadi as his candidate of choice. The YK-92 boss allegedly turned down a ministerial post in January 1993, to pursue this agenda. This set him at odds with the ‘Kabisa axis’ (Kamotho, Biwott, Saitoti), which was behind Saitoti for the post and perhaps the presidency in future. This, Jirongo says, was what led to the political, financial and propaganda offensive that was concluded with the disbandment of YK’92 and the sabotage of the Sololo/NSSF deal over Hazina Estate. A paper trail unearthed by The Standard On Saturday reveals how Mutula Kilonzo’s firm co-ordinated efforts by Jirongo’s lenders, NSSF, the Special Branch, the Land Office, the Criminal Investigations Department, the Registrar of Companies, the Nairobi Town Clerk, and others to deal with Jirongo.

In a confidential report to the Office of the President dated June 30, 1993, Mutula summed up his execution strategy this way: "We have identified more than 180 properties belonging to either (Mr Jirongo’s) companies or Jirongo personally. We have recommended that the Special Branch investigate to locate other assets owned by Mr Jirongo, his relatives, and associates."

Confidential memos

The confidential memos went to several arms of Government and show two successive Heads of Civil Service were drawn into the activities. At one point Mutula reports on how a CID Head of Investigations who was not co-operating was "replaced" on his recommendation.

He complains that the CID "lacks interest or other proper attitude toward the need for a proper investigation". Prof Phillip Mbithi and his successor Fares Kuindwa not only knew about the strategy, but also provided Government resources and personnel to the effort to recover money lent to the real estate developer.

The politically connected Jirongo had financed the construction of Hazina Estate from, among others, Postbank Credit, an institution that could be forced to comply with political instructions. When it was forced to recall its debts just as NSSF backed out on the Hazina deal, Jirongo was out of luck.

Mutula’s memo advises that attempts to neutralise Jirongo by charging him with any crime could fail. He says the pursuit of Jirongo was a political strategy, not a criminal matter. He, instead, suggests using a conspiracy theory.

"Another method of approaching the problem would be to ensure that only conspiracy charges are raised as the evidence for conspiracy is always much easier to investigate and produce," he says, in a letter to Prof Mbithi. Communication between Mbithi and Mutula details how State agencies were co-ordinated to locate and seize Jirongo’s assets.

In one letter Mutula urges Mbithi to instruct the Criminal Investigations Department to "induce/seduce Jirongo to surrender title deeds, and log books" and to ask the Special Branch to "mount detailed surveillance on Jirongo and associates to ascertain whether they are threats to State security as a result of the massive cash believed to be in his possession."

In the same letter, dated June 16, 1993, the lawyer spells out a strategy to tackle Jirongo’s ownership of Hazina Estate, and distance NSSF from its contractual obligations to Sololo Outlets Ltd. While appreciating how "various recommendations to NSSF have been pursued actively by the management", he also reports how "the issue of NSSF has been effectively (though temporarily) isolated from Post Bank Credit. …The advantages (to Sololo) of the link up between Post Bank Credit and NSSF will not have escaped you (Prof Mbithi).

It is vital, therefore, that such link-up be avoided at all costs."
He goes on to advise that, after Sololo’s expulsion from the Hazina site, NSSF immediately advertise for a replacement contractor.

The strategy also called for Post Bank Credit, which held Sololo’s titles on Hazina, to be pushed to begin a "recovery process".

Jirongo says Post Bank Credit held the titles for the Sh1.2 billion estate and were secured against losing any money as the firm had done 75 per cent of the work, and was months away from completing the project.

In an interview with NTV last week, anti-corruption lobby, Mars Group, Chairman Mwalimu Mali says: "NSSF were used to execute an agenda, which has ended up costing pensioners unnecessary legal fees".

To force Post Bank Credit to institute a "recovery process", the next step was to get NSSF to cancel the contract and use Government muscle to transfer Sololo titles to the social security fund.



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