Former Kemri boss ordered to pay Sh18.5m

By Wahome Thuku

Early 2007, representatives of donor agencies detected figures were not adding up in the accounts of the Kenya Medical Research Institute (Kemri). Some Sh19.3 million had left the Kemri account in Kisumu unprocedurally.

An audit had revealed in August and December 2006 some Sh800,000, other Sh6 million and another Sh12.5 million had been transferred from Kemri account to that of African Medical Services Trust (Amset) owned by the then Kemri managing director Davy Koech.

The Kemri account was held with Standard Chartered Bank in Kisumu and the Amset was held with the same bank at Yaya Centre, Nairobi.

Former Kemri boss Davy Koech

Lady Justice Kalpana Rawal

An America-based donor organisation, CDC, raised questions. Koech is the founder and a trustee of Amset.

On February 6, 2007, Koech wrote to the Grant Manager of the agency — CDC in Atlanta, US — explaining "the Kemri account in Kisumu was inadvertently debited and process of reversal of the funds to its correct account started".

Koech then attempted to refund the money through cheques from Amset. A cheque of Sh800,000 went through but the other two for Sh6 million and Sh12.5 million bounced.

On February 14, he wrote another letter to the same officer, saying Kemri had completed the reversal of Sh12.5 million.

On March 12, the same year, Koech and another signatory to the Kemri account, a Dennis Chivatsi, wrote to the bank stating the transfer of Sh18.5 million were bona fide and proper.

The Ministry of Public Health, through the Department of Health and Human Services (HHS), questioned the transaction in July 2007 and Koech explained it was a mix-up or error.

On August 16, Koech was suspended as Kemri chief executive officer. Four days later, he wrote to HHS, saying he would proof the money had been refunded to Kemri.

Inspector General of State Corporations took up the matter and investigated and prepared a report detailing other cases of mismanagement in Kemri. On September 1, 2008 Koech was formerly dismissed as Kemri boss and on July 16, the following year, he was arraigned before a magistrate court in Nairobi charged with several counts of abuse of office.

Denies allegations

Even as the trial continued, on January 18, last year, Kenya Anti-Corruption Commission served him with a demand notice to pay the money. He replied on February 23, last year, denying knowledge of the allegations in the letter.

KACC filed a civil application at the High Court on August 16, 2010 under Section 7(1) of the Anti-Corruption and Economic Crimes Act. It demanded Koech be ordered to refund the money with interest.

Lady Justice Kalpana Rawal heard the application. KACC investigator Ignatius Wekesa said in an affidavit that as Kemri CEO, Koech was signatory to various Kemri bank accounts and also the dedicated accounts for donor funds. And though there were other signatories to the Kemri account, he transferred the money through cheques solely signed by him. KACC claimed the money was transferred fraudulently and converted into personal use.

Koech filed a statement of defence denying the allegations. He argued the Kemri account was not to be operated by any two of the board members. He said Kemri and Amset had a collaborative deal in which the latter was to assist the former in various research projects.

His lawyer maintained the transfers were regular and properly authorised and the money had not moved fraudulently or converted in to personal use. He said if money was transferred to Amset accounts it should be claimed from the organisation and not from Koech as a person.

Justice Rawal said KACC had proved Koech could operate the Amset account solely and had done so in the attempt to refund the money.

Other signatories

Koech had not provided evidence of collaborative agreement between Kemri and Amset and had not even mentioned it in his correspondence with HHS.

The judge said Koech had thrice changed his story in explaining the transfers. Koech signed the cheques for the attempted refund alone yet Amset had other signatories.

"The amount transferred to Amset account under the defendant’s (Koech) written instructions are to any standards not small and cannot be expected to be transferred from a Government institution funds without any documents in support thereof," Rawal ruled. The court ruled that Koech could even persuade the bank to comply with his instructions given unprocedurally and transferred the money from Kemri account.

Refund it

"The attempt to regularise his actions by sending a letter signed by another signatory after almost three months cannot justify his earlier actions…it contradicts his stand or error and mix up," the judge said.

She also held that the withdrawal could be taken as misappropriation or conversion on the funds and Koech was liable to refund it. She allowed KACC application and ordered Koech to pay Sh18.5 million with interest and costs of the suit.

The ruling may not directly affect the outcome of the criminal case in which the prosecution must proof Koech abused office as Kemri CEO. Equally, Koech reserves a right to appeal against Rawal’s ruling.