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EACC deal with company to return Sh800 million for clinics

BUSINESS NEWS
By Paul Ogemba | June 19th 2018
Members of the public walk past some of the more than one hundred clinics at the National Youth Service (NYS) camp in Miritini. [File, Standard]

The anti-corruption commission has begun out-of-court negotiations to recover Sh800 million irregularly paid to a company implicated in the multi-million shillings mobile clinics scandal.

The Ethics and Anti-Corruption Commission (EACC) triggered the turn of events when it filed a case to prove how high-end wheeler dealers at the Ministry of Health colluded with unqualified companies to inflate the cost of mobile clinics from Sh308 million to Sh800 million.

Under the well-calculated scheme, a prefabricated medical clinic that could be locally manufactured at a cost of Sh3 million was given to a Chinese Company at a cost Sh8 million per unit.

The deal further shows the Chinese company, Guangzhou Moneybox Steel Structure Engineering Limited, received only Sh525 million meaning the firm awarded the contract, Estama Investment Limited, pocketed Sh275 million for just being a go-between.

Health officials

At the time of the scandal, Dr Nicholas Muraguri, the current Lands PS, was Director of Medical Services. The Health PS was Khadija Khassachoon.

Estama Investment Limited, senior ministry of health officials and the Chinese firm, procured sub-standard products that cannot be used.

Documents EACC filed in court show there was no value for money in the fraudulent deal where the public not only lost Sh491 million through overpricing but also ended up not getting the equipment which have been lying at Mombasa Port.

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The commission’s evidence show a tight case of connection between top officials at the ministry of Health and the director of Estama Investments Limited, and the subsequent flouting of procurement rules and kickbacks paid to the officials’ accounts.

The four companies incriminated in the scandal have sought an out-of-court negotiations to agree whether they will refund the stolen money to public coffers.

When they appeared in court, lawyers representing Estama Investments Ltd, Business Capital Access Limited, Diversity Distributors Limited and Medafrica Limited requested Lady Justice Hedwig Ong’udi to give them two months to complete talks.

“The company has tabled an offer of what they can give back while EACC has also tabled a counter offer of what they believe is the total funds refundable to the public. The parties are seriously considering the offers with a view of reaching a settlement within two months,” said the lawyers.

Although it was not disclosed the amount the company was willing to surrender, Justice Ong’udi allowed the request for negotiations and directed that they report the progress on September 17.

Investigations by EACC revealed the ministry of Health had not budgeted for the mobile clinics at the time the process was initiated in the 2014/2015 financial year. It emerged it is Muraguri who kicked it off through a restricted tender.

The commission puts the blame squarely on Dr Muraguri and former PS Khassachoon, claiming they are among those who unjustly enriched themselves from the Sh800 million proceeds and must return it to the ministry.

“Muraguri and Khassachoon are liable to account to the public and together with the listed companies must be made to refund Sh800 million they fraudulently acquired from the ministry of health,” said EACC.

The evidence further shows senior health ministry officials were bribed by Njage Makanga, the director of Estama Limited. They include Ephantus Thiga and Kariuki Ireri, who received Sh1.4 million kickbacks into their account.

EACC states when the ministry opened the tender in May 2015, none of the ten companies listed was qualified for the job or any experience of prefabricating containers.

“There was no evidence as to how the firms were identified. Even the list did not originate from the tender committee which shows the fraud and collusion from the officials to award the contract to undeserving company,” EACC said.

According to the commission, the ministry irregularly awarded the contract to Estama Limited when it was aware the company had no capacity to supply the materials.

Clinics containers

Since the company had no capacity to deliver, it sub-contracted Chinese firm Guangzhou Moneybox Steel Structure Engineering Ltd to fabricate mobile clinics containers.

And out of the Sh800 million the ministry wired to Estama, Sh776 million was transferred to Business Capital Access Limited.

“A valuation of the 100 portable medical clinics sows it was supposed to cost Sh308 million as opposed to the Sh800 million that was paid. It means Sh402 million in public funds were used to enrich a few individuals,” said EACC.

The commission added that an audit of the Ministry of Health at the end of the 2015/2016 financial year confirmed over expenditure and misappropriation of funds which included diverting funds meant for other budgeted activities.

They argued that Estama Limited colluded with Muraguri, Kassachoon and the ministry officials in the fraudulent scheme to procure over-valued and unsuitable portable medical clinics which are still idle because they cannot be used locally.

Muraguri, in his reply, denied any wrong doing. He said he had no interest in the tender given he was not the accounting officer at the time.

“EACC filed the suit herein in a selective and discriminatory manner. Tendering committee members have also been enjoined selectively hence an inference of bad faith and malice,” he said.

Their response will however wait for the outcome of the negotiations initiated by Estama Limited and whether they will reach an agreement with EACC to refund the money.

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