Why did health ministry pay Sh265 million to Cooperative Bank?

Glaring inconsistencies have emerged from the response issued by the Ministry of Health relating to Sh265 million paid to the Co-operative Bank.

The amount was supposedly for goods imported by LifeCare Medics, but the firm only recognises that the commodities brought into the country were in a tender worth Sh201 million.

Permanent Secretary Nicholas Muraguri said in his Monday evening statement that the transaction worth Sh201 million was for goods sourced locally.

TWO PAYMENTS

It begs the question whether the two payments were made for the same delivery of "ready to use therapeutic food and supplements."

Following the statement, it has also emerged that the ministry took extraordinary steps to enable the supplier in importing goods, among other questions that remain unanswered.

It is unclear why the ministry paid amount to the Co-operative Bank of Kenya to guarantee Lifecare Medics, yet none of the other suppliers received a similar treatment.

The PS said in the response to allegations of widespread fraud earlier estimated at Sh5.3 billion at his ministry on Monday that the bank was meant to open a supposed letter of credit.

"The payment was for establishing a letter of credit for Life Care Medics Limited for the supply of food supplements which were in the high seas and the funds were to be released upon confirmation of the receipt of goods," Dr Muraguri said.

He claimed that the Sh201 million paid to the firm was for goods sourced locally, while Lifecare claims the same goods were imported and taxes worth Sh32 million paid to the Customs Department.

Customs taxes are only paid on imported goods, which would only mean that the company could not have bought the products within the Kenyan borders as claimed by the PS.

Among the supplies delivered by Lifecare Medics were food and rations for people living with HIV and Aids, which were supposedly stored at the Kenya Medical Supplies Authority's go-downs.

Muraguri's explanation, however, would mean that the State was the buyer of the goods that would eventually be supplied by Lifecare Medics.

The thinking that the ministry was acting as a direct purchaser is further reinforced by audit report which cites that Cooperative Bank would be a supplier to warrant the arrangement of the State issuing it with a letter of credit.

"Co-operative Bank of Kenya cannot be a supplier of food rations and hence the real payees were not disclosed.

The payment vouchers were not made available for audit in order to establish who the bank was instructed to pay," the audit said.

In essence, the firm owned by billionaires Paul Wanderi Ndung'u and Richard Ngatia could have earned profits from making deliveries of goods on which it did not spend or commit any of its funds.

CREDIT LETTER

Typically, suppliers approach their bank for a letter of credit guaranteeing an overseas seller that the payments for their goods would be made upon the arrival of the consignment.

Lifecare Medics did not mention the existence of the Sh265 million in its response in a paid-up advert last weekend, and only mentioned a bid bond – used to guarantee that a contractor will deliver as per agreed terms, that was issued by the Co-operative Bank.

The firm said it was granted the bid bond by the lender on November 12 2015, before winning the tender a month later worth Sh201 million to supply food rations and supplements for patients.