A fraud orchestrated by slain businessman Jacob Juma has come back to haunt his business associates in an Sh297 million scandal.
Sirisia MP John Waluke, who stands to lose his parliamentary seat, has now carried the cross along with Grace Wakhungu, the mother of Ambassador Judy Wakhungu for using fake documents to obtain the funds from the National Cereals and Produce Board (NCPB).
The two obtained the funds as co-directors of Erad Supplies & General Contractors Limited.
The company won a tender to supply 40,000 metric tonnes of white maize after the government advertised for the supply of 180,000 metric tonnes to ameliorate hunger in August 2004. The company was obliged to ship the maize to the port of Mombasa within four weeks from August 26, 2004, when the deal was signed.
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Juma and his then two co-directors are said to have obtained a performance bond from Dubai Bank after getting a bid bond from I&M Bank using the contract between them and NCPB.
In the deal with Juma and his colleagues, they were to share the profits with the bank at the ratio of 50:50 because the bank undertook to pay NCPB in the event of default. Erad was advanced a loan of Sh50 million by the bank when the contract was not performed, an amount they have not refunded to date.
The bank’s lawyer, Katwa Kigen, denied claims that his client had agreed to share the proceeds with Waluke and Wakhungu.
However, the contract period expired and the company along with its two co-directors filed an arbitration application for an award for storage charges and loss of profit plus interest and cost of the arbitration, a dispute which they won against the Cereals Board.
In the arbitration, Erad alleged Chelsea Freight of South Africa stored its maize and produced an invoice for the storage charges.
The company won the arbitration claim against NCPB on July 7, 2009, in a decision in which the arbitrator ruled that the parastatal was in breach of the contract for failing to open a letter of credit for the company in 2004.
Aggrieved by the decision, NCPB moved to the High Court seeking to have the award set aside on grounds that the arbitrator dealt with a dispute not contemplated by the parties; that the award smacked of mischief, corruption and/or pure theft of public funds against public policy.
Specifically, NCPB asserted that the respondent had no maize for delivery within the contract terms.
The High Court dismissed the application on June 28, 2011.
Having won Sh577 million as compensation for damages suffered, Erad was paid Sh321 million in 2016 as the remaining Sh264 million was put on hold as the Court of Appeal to heard an appeal by the board. The money was paid through garnishee proceedings.
A few months later, Juma was shot dead while driving past Lenana School.
The company and its remaining two co-directors’ tribulations started when the Ethics and Anti-Corruption Commission (EACC), now led by Twalib Mbarak, came knocking on the grounds that the invoice used for payment was fraudulent.
The petitioners had argued that they were paid the money in the execution of an arbitral award of the High Court, adding that the Clerk of the National Assembly had in November 2013 submitted the PIC report to EACC to investigate them.
EACC’s investigator Kipsang Sambai told the court he was told the company used an invalid tender security bid and should never have been evaluated for the supply of maize to the NCPB, adding that Waluke and the other two had also obtained the arbitral award by means of false testimony and forged documents.
In its investigations to establish claims that Erad had made arrangements to import maize procured and stored by Chelsea Freight of South Africa, the court was told that through mutual legal assistance, EACC established the documents said to have been from firms in the foreign country did not emanate from them.
Chelsea Freight director, Mr Freddy Chetty, testified that the invoice used to get the payments did not emanate from the company in Durban and they were not involved in the storage of maize as alleged by Erad in the document.
He also denied knowledge of Waluke, Wakhungu and Erad company, adding that his company had also not dealt with one identified as Rockpack.
The court was told no money from the transaction by the accused persons was wired to the Chelsea bank account.
Under a Mutual Legal Assistance, Mr Andries Chritoffel (a police officer from South Africa), testified that he investigated suspects and companies said to have been involved in the deal and found the invoices did not emanate from South Africa.
Wakhungu, who started as a teacher and retired at the position of general manager at Kenya-Re Insurance in 1997, said in her defence that the company applied to supply NCPB 85,000 metric tonnes of maize but were awarded 40,000 metric tonnes.
The court was told that she is the one who prepared and submitted the bid documents and they were to deliver the consignment three weeks after signing the deal. Unlike the other companies that were importing their maize from South Africa and Brazil, Erad’s was from Ethiopia.
Wakhungu produced in court documents showing that she wrote to Ropack International Company that was to supply them with the maize and Chelsea as the one to ship the consignment to Mombasa via Djibouti.
The invoice that has led to their predicament was exchanged between Jacob Juma who was following up the tender and one Chiko Slanders of Chelsea.
The defence argued that it was Juma who wrote to NCPB on October 8, 2008, informing it that they were being pursued on storage charges, adding that the arbitration award was paid to Erad’s lawyers.
Out of the Sh278 million, Wakhungu got Sh40 million, Walukhe Sh50 million, while Juma who played a major role in the deal is said to have pocketed more than Sh100 million.
Out of the Sh40 million, she paid some creditors - Brian Yongo (Sh7.5 million and Sundip (Sh6 million).
As for Waluke who joined politics after serving in the military, he confirmed to the court to have received the money paid to him by Messrs Saende and Company Advocates, adding that he did not participate in the arbitration matter that awarded them the money in question.
Waluke, who was mainly involved in Erad’s construction projects such as roads, told the court that he did not know why Juma paid them the money, adding that Juma had not resigned from the company as claimed by the prosecution and that he was the only one who could explain where he got the invoice.