Curse of being the boss as scandal after scandal stalks NSSF

He was to be the second managing trustee at the National Social Security Fund (NSSF) in five years.

But on Monday, July 22, 2013, Tom Odongo received a letter that made it clear he had no option but to pack up and leave his corner office. It also made him the sixth chief executive in five years to leave the national pension fund.

“Please arrange to return any company property that is in your possession and hand over the office to Ms Hope Mwashumbe ....”

Mr Odongo had hardly served half his three-year term when he was asked to leave by the then Labour Cabinet Secretary Kazungu Kambi.

His exit left Kenya’s 51-year-old fund management firm in the hands of the company secretary.

Odongo tried to fight his sacking at the Industrial Court.

“In all fairness, I am entitled to reasons of the termination. Without reasons, the termination is unfair. I know of my own knowledge that the Board of Trustees did not meet to consider the question of termination of my employment,” Odongo, who had served in an acting capacity for six months before being confirmed, complained in a sworn affidavit.

On November 8, 2013, however, the court dismissed his application for reinstatement. In his ruling, Justice Nzioki wa Makau said since the former boss had accepted Sh2.9 million for the dismissal, he had no grounds to sue.

And with this, he joined the many faces that came, saw, but failed to successfully wade through the murky waters of this NSSF seat.

Ms Mwashumbe herself lasted just five months before being replaced by the firm’s finance manager, Richard Langat. Eighteen months later, he was suspended.

The fund’s acting boss is currently Anthony Omerikwa, but even this appointment has courted controversy.

NSSF has once more advertised for a managing trustee, with Kenyans interested in this opportunity having until tomorrow to put in their applications.

Centre of excellence

The fund is supposed to be a “trusted centre of excellence in the provision of social security”, its vision says, and to offer among other services, prudent fund management. It exists to offer social protection to formal and informal workers.

The fund’s latest books show contributions from its more than 1.7 million members stand at Sh8.4 billion. Formal sector workers contribute Sh400 per month, though there are attempts to increase this amount.

NSSF invests these funds largely in property, equities and Government securities to give members a return on their contributions; money which is usually accessed upon retirement.

But the fund, whose asset value hit Sh153 billion as at June 2014, according to its latest financial statements, has been mired in scandal after scandal as regards how it invests workers’ contributions.

Claims of impropriety and shoddy deals have inevitably tainted its managing trustees, who are charged with implementing the business plans of one of the country’s largest public funds.

In an opinion piece for Business Beat on April 21, 2009, Caleb Atemi, a veteran journalist who once served as the fund’s public relations manager, described NSSF as having suffered a history of abuse.

“The history of Kenya is written not only in the blood and sweat of its industrious people, but also in the stubborn ink of impunity,” he wrote, adding that NSSF had been robbed almost to the point of nakedness.

Since 1965, when NSSF was founded through an Act of Parliament, through to this year, the fund has only held three annual general meetings.

The last one was on August 5 this year, and it may as well have been ceremonial, with the board tabling books for the 2013-14 financial year, leaving members in the dark about NSSF’s performance in the financial years to June 30, 2016.

The explanation given was that these financial statements had yet to be signed by the Auditor General. Still, the books that were tabled paint a worrying picture of the fund, whose slogan is: ‘Growing you. For good’.

From contingent liabilities as old as 1993, including those touching on the controversial Mugoya Construction Ltd, still reflected in the financial statements, the books reveal a history of scandal.

In November 2012, for instance, a funeral announcement, accompanied by an appeal for M-Pesa contributions to support the interment, was made. The funeral was for former NSSF boss, Ben Mtuweta, who once served at Kenya Revenue Authority.

He died before answering to a scandal that saw the fund lose a Sh251.5 million investment. This is still in NSSF’s books as a contingent asset, which means it has potential economic benefits depending on how future events, which cannot be controlled by the fund, play out.

The money was reported to have been irregularly moved from the Central Bank of Kenya (CBK) and wired into since-collapsed stockbrokers Shah Munge, which invested in Euro Bank.

The bank, however, went down in 2002 before the fund could recover its money. The scandal cost Mr Mtuweta his job, but court records still bear criminal case number 2789 of 2003, ‘Republic vs Benedict Nyange Mtuweta & Another.’

Shown the door

This ‘Another’ was Stanley Chemng’orem, a former deputy managing trustee who allegedly signed away the money.

The shares that NSSF said it had invested in Euro Bank were contested by Southern Bell Ltd, preventing their sale.

Naftali Okongo Mogere was then hired to replace Mtuweta. He did not last long.

“Some learn to run with the hares and at the same time hunt with the hounds because you do not know who will sack you tomorrow. As an MT [managing trustee], you report to everybody and you have to repulse interests on a daily basis,” he was quoted saying in July 2013.

His sacking turned controversial when the fund’s board of directors tried to reinstate him without telling the public why he had been sacked.

At the time, it was alleged that he had been shown the door for refusing to award an illegal multi-billion-shilling contract.

Mr Mogere, a familiar figure in various company boardrooms, including National Bank of Kenya and National Cereals and Produce Board, would later open a can of worms in February 2014.

When appearing before Parliament’s Labour committee, he said NSSF may have lost millions of shillings in the controversial Tassia II land bought between 1992 and 1995.

The Sh2.2 billion that was spent on the land, Mogere said, was way above the market price at the time.

Other areas where workers’ money may have been lost in land purchases include Athi River, Ngong, Karura Forest and Mlolongo.

Next on board to try and steady the ship was Rachel Lumbasyo who stepped in following Mogere’s sacking on December 19, 2005. Labour Minister Newton Kulundu later confirmed her.

However, just 90 days before she finished her three-year tenure, controversy struck.

The new Labour Minister John Munyes sent her on compulsory leave in 2008. In 2010, she was charged with conspiracy to defraud the fund of Sh8 million.

According to court documents, it was said that on or about July 7, 2008, Ms Lumbasyo together with the corporation’s secretary fraudulently paid Kipkenda, Lilan & Co Advocates for services not adequately rendered.

That was in respect to the sale of the fund’s Kenyatta Avenue plots.

The duo was also charged with abuse of office by allegedly paying Sh112.6 million to the Ministry of Land in land rent.

“I have said before [that] I look at NSSF as a cloud, I don’t understand it and that is why I wanted to make those changes. We have to look for that money,” Mr Munyes later said, referring to his decision to dissolve the fund’s entire board.

In October 2011, Lumbasyo and the secretary were acquitted of any wrongdoing.

“Putting the accused on their defence will be shifting the burden of proof to them .... It is like asking the accused why they have been arrested,” ruled Principal Magistrate Lucy Nyambura.

Financial difficulties

In 2013, a case against both Lumbasyo and her predecessor Mogere, came up. During Lumbasyo’s tenure, the court was told, directors allegedly made fraudulent payments of Sh1.6 billion from the fund to troubled Discount Securities Ltd (DSL).

According to the Ethics and Anti-Corruption Commission (EACC), the directors paid for shares they never purchased. There were also no share certificates that would have proved the transactions.

Reacting to a ministerial statement to Parliament dated October 21, 2008, where Munyes confirmed to the House that NSSF was going to lose money, former Mutito MP Kiema Kilonzo said: “The House may also want to know that Mr [Wiliam] Murugu, who is the director of DSL, was also the director of Pan Africa Bank, which was the genesis of the Goldenberg scandal.

“The Capital Markets Authority did warn NSSF that DSL was experiencing some financial difficulties and therefore it should not put any money in it, but it went ahead and did that.”

NSSF is still holding onto the remote hope that it will recover this money. It still reflects Sh1.2 billion in its 2013-14 books as a contingent asset.

The case, Republic vs Francis Moturi Zuriels & Others, is still open.

Munyes picked Fred Rabongo to act in Lumbasyo’s capacity.

But barely two weeks later, in what may be a record at the fund for the shortest stint, he had his appointed overturned.

The board refused the appointment, with Central Organisation of Trade Unions (Cotu) boss Francis Atwoli, a board member, terming Munyes’ move “illegal and unacceptable”.

Alex Kazongo was appointed in Mr Rabongo’s place on May 2009.

His recruitment was done by human resources firm Manpower Services.

“As you know, we have had problems appointing, and it’s been my advice that this time we follow due process,” Munyes said as he brought on board Mr Kazongo, a former Kenya Ports Authority financial controller.

Recruited competitively

Kazongo became the first managing trustee to be recruited competitively – his predecessors were presidential and ministerial appointees. Yet, between 2002 and 2009, eight bosses had been shown the door over cases of impropriety.

But just like at KPA, where he had been dismissed before contesting the decision in court, Kazongo’s tenure at NSSF, which was holding Sh90 billion in pensions at the time, was not smooth.

His services were terminated in February 2012 over what was termed as failure to satisfy the board’s expectations.

In 2015, he was taken to task to explain how China Jiangxi International Ltd was awarded a Sh6.5 billion tender to construct additional floors at Hazina Trading Centre.

Parliament’s Public Investments Committee accused him of procuring consultants for the project without following provisions of the Public Procurement and Asset Disposal Act, 2005.

“I was implementing the directive of the management and the board of trustees who approved the project. I, however, do not have documents with me now to confirm that indeed the management and the board of trustee approved this project,” Kazongo told the committee.

This contract featured in NSSF’s 2013-14 books: “The extension of Hazina Trade Centre, Nairobi, is expected to cost Sh6.7 billion. The construction is underway.”

Tom Odongo was next on the hot seat. He served in an acting capacity for more than six months before being confirmed on November 28, 2012. He lost this position after just eight months.

Some insiders at the time said Odongo’s ouster was due to his openness with the media on the fund’s investment decisions.

Mwashumbe took over as acting managing trustee when the fund was implementing three major projects worth Sh100 billion.

Her replacement, Mr Langat had served as chief finance officer at NSSF since November 2013. But in August last year, he was suspended.

He was to resume office in February, alongside former tender committee members Gideon Kyengo and Mutemi Nzatu, but Cotu blocked them.

Langat was accused of having varied the cost of the Tassia II Infrastructure Development Project contract from the initial Sh3.3 billion to Sh5 billion.

Langat, who has declared he will vie for the Kericho governor’s seat in the next general election, has been offered an exit deal that could see him walk away with millions of shillings in compensation. His contract was to run until March 2017.

Politically motivated

The chair of the tender committee, Anthony Omerikwa, was made acting managing trustee.

But in a statement, Cotu opposed this move, raising doubts about Dr Omerikwa suitability, as he chaired the fund’s tender committee whose decisions have been subjected to scrutiny.

It was not long before the acting boss and his team were put to task by the Public Investments Committee to explain how workers stand to benefit from multi-billion-shilling projects in Mavoko, Kenyatta Avenue and Hazina Trade Centre. The managers were unable to explain cost estimates for the projects.

A dig through the past takes you to the National Assembly Official Record (Hansard) dated April 8, 2003, which exposes the extent of the decades-long rot that has plagued NSSF, and the high-profile people said to be the masterminds.

Then Assistant Minister for Labour and Human Resource Development Peter Ochieng Odoyo told the House: “The NSSF has had bad investments .... In total, the amount of money in suspect banks whose investment was politically motivated is Sh3.5 billion.”

Mr Odoyo also quoted instances where well-connected individuals sold land to NSSF at exorbitant prices.

“Immorality on the part of MPs of previous governments was so high that one wonders why some of them have the moral authority to sit in this House,” he said.

The construction of Nyayo Estate was another one of NSSF’s mega scandals, and it took down Samuel Muindi, a former managing trustee in the deal that began on November 21, 1994.

The construction was supposed to cost Sh2.5 billion, but by March 2003, NSSF had paid out more than Sh12 billion for it.

And as Kenya’s workers wait to hear who will become the next boss at NSSF, Atemi, who was once a PR manager at the fund, had this to say: “To serve the fund as managing trustee and leave unscathed by corruption or its scent requires extraordinary or superhuman effort, if not the grace of God.”

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