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State seeks Sh3.8 billion from businessman Kamani

BUSINESS
By | June 4th 2011

By Ben Agina

The Government is pushing to recover Sh3.8 billion irregularly paid to businessman Deepak Kamani in one of 16 Anglo Leasing projects in which the country lost over Sh50 billion.

The new resolve comes a month after Interpol issued an arrest warrant in Jersey, United Kingdom, for Nambale MP Chris Okemo and businessman Samuel Gichuru for allegedly concealing and transferring proceeds of crimes amounting to over Sh900 million.

Interpol has sent a ‘red notice’ to Tanzania, South Africa and United Arab Emirates requesting for the location and arrest of Okemo and Gichuru.

Although Kamani has been on the run since the Anglo Leasing scandal broke out in 2004, he has returned to the country and appeared before the Kenya Anti-Corruption Commission (KACC).

Among the controversial contracts awarded to Kamani was the supply of 994 security vehicles and spare parts to the Office of the President.

The company apparently arranged for an interest-free loan facility for the supply of the security vehicles, whose delivery would be done over eight years. The Government was to repay the company over a period of 13 years.

Kamani was the director of Kamsons, a motor firm that sold a fleet of low technology India-manufactured Mahindra four-wheel drive vehicles to Kenya Police in 1993.

Some of the contracts awarded to Kamani that have been negotiated for cancellation and restitution include supply of the Forensic Laboratories for CID, Immigration Security Equipment, E-Cops/Infotalent, security vehicles for the police, and modernisation of police equipment.

According to valuation reports prepared by PriceWaterHouseCoopers, the Government paid the suppliers more than the value of works, goods, and services delivered under each of the contracts associated with Kamani.

The Permanent Secretary in the Ministry of Finance Joseph Kinyua has in, a letter dated April 9, last year, and addressed to the Attorney General Amos Wako and KACC Director, PLO Lumumba, sought immediate recovery of public funds.

Mr Kinyua also gave Mr Wako and Prof Lumumba a summary of the status of each of the 18 security-related contacts, and the proposed strategies and action taken to resolve the disputes.

"We are aware that some initiatives are in progress at both the KACC and State Law Office to resolve the above issues but we require special focus on the five contracts linked to Kamani companies," said Kinyua, in the letter copied to the Secretary to the Cabinet and Head of Public Service Francis Muthaura.

Kinyua added: "The purpose of this letter is to urge your two offices to co-ordinate action on the five contracts and to assure you of Treasury support and co-operation towards speedy recovery of the funds."

Yesterday, KACC Director while acknowledging effort for restitution of the billions lost through dubious means noted that the commission would have to make such recoveries public.

"Kenyans must know out of these Sh3 billion how much more is remaining … we can celebrate that we have the Sh3 billion because its the first step, but how much is remaining?" said Lumumba.

However, he warned that it is not enough to recover or surrender the money. "The culprits must be prosecuted," he said.

Lumumba said he would soon give details of how they would go about the recovery.

In August 2004, the Treasury suspended payments due to 11 security related contracts commonly referred to as ‘Anglo Leasing’ over concerns that the Government was not receiving value for money.

Following findings and recommendations contained in the Special Audit by the Controller and Auditor General covering 18 contracts, PriceWaterhouseCooperas prepared forensic audit and valuation reports on 17 contracts. Valuation was not done on one of the contracts — project Flagstaff.

KACC facilitated and had input in the report, which revealed that all contracts were overpriced and possibly fraudulent.

The Government had earlier authorised the Attorney General to negotiate settlements after it became clear it might lose some of the legal battles in international courts.

Two court rulings, one in 2006 and another this year, have led to attempts to seize Kenya’s assets abroad by Anglo Leasing creditors.

In an attempt to minimise Government liability, the Cabinet is expected to approve payments for several related deals.

A draft Cabinet memo, dated November 20, 2006, gave a summary of the strategies for resolving the security contacts.

The memo followed directives given by the Cabinet on how to resolve two contracts that were the subject of international commercial arbitration and posed the greatest risk to the Government.

They are Project Nexus, a communication centre for the military, and the purchase of an oceanographic survey vessel for the Navy.

The disputes on the two risky contracts were to be resolved through negotiated settlements under expert guidance.

The existence of ‘revoked’ promissory notes has been cited as a danger to taxpayers because the Government may pay up even where no services were rendered.

When the Anglo Leasing scam broke out in 2004, John Githongo, who was then President Kibaki’s chief advisor in the fight against corruption, resigned and went into exile, fearing for his life.

A memo to the Cabinet Committee on Security and Foreign Relations limited it to resolution of the remaining 16 contracts that continue to pose various degrees of potential liabilities to the Government.

The projects that the Government intended to negotiate settlement with a view to seeking favourable terms are on the Oceanographic Navy Vessel (Sh4.6 billion), Project Nexus (Sh3.2 billion), Bandwidth Spectrum and Broadband Network, both under the Postal Corporation (Sh2.6 billion, Sh885 million), and Project Flagstaff, for services to the National Security Intelligence Service (Sh3.1 billion).

The technical team has also recommended to the Cabinet to cancel and seek refunds on 13 other projects whose contract sum is Sh40 billion.

Universal Satspace, Nedemar Technology BV and Euromarine Industries have begun arbitration proceedings against Kenya in the United Kingdom and The Netherlands.

The three firms began proceedings after the Government refused to pay on Githongo’s advice.

Universal Satspace entered into a $28.1 million (Sh2 billion) contract with the Government on July 11, 2002, for the provision of Internet services to the Postal Corporation of Kenya.

The firm disconnected the service after the Government failed to pay bills amounting to more than $12.3 million (Sh897 million). The Government is holding back payment because it suspects the company was involved in corrupt deals.

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