Taxpayers lose billions of shillings due to State’s failure to defend suits by wily contractors

Deputy Solicitor General Muthoni Kimani and Treasury Principal Secretary Kamau Thugge when they appeared before Parliamentary committee last week.  [Photo: File/Standard]

Kenya: The recent Sh1.4 billion payments for Anglo Leasing contracts shines the spotlight on billions of taxpayers’ money squandered through shoddily defended civil cases against the State.

The cases typically involve breach of contracts but are concluded in cunningly similar fashion; lost because State lawyers either put in weak defence or hastily agreed to pre-mature settlements.

And because the suits are not as high profile as the infamous Anglo Leasing cases, proceedings often continue in secrecy and deals struck away from public glare.

However, the deals become public if the Government dishonours its part of the bargain. Otherwise, if all goes well, lawyers quietly wrap up the deals and the public coffers are emptied.

After the courts make the awards, the Government’s failure to settle the claims on time result in hefty interest fee, which the Auditor General cites in reports as among the many avenues that public funds are wasted.

There are claims that shrewd Government lawyers conspire with lawyers of other parties to “lose” the cases and in return secure their cut after the compensation is awarded.

In certain cases, lawyers appointed by Government to defend the civil suits have complained about frustrations from the State Law Office, including lack of proper instructions and failure to pay legal fees that inevitably weaken the State’s case.

Reprimanding the AG

The Law Society of Kenya (LSK) has threatened to bar three top officials at the State Law Office from future legal practice over their role in proceedings that saw Kenya pay Sh1.4 billion to two Anglo Leasing firms.

Attorney General Githu Muigai, Solicitor General Njee Muturi and his deputy Muthoni Kimani are in trouble with LSK. However, the three say they did their best to defend the cases.

“LSK has reasonable grounds to believe that the office of Attorney General has acted in unconstitutional, illegal and unprofessional manner and has conspired with the Executive branch in dealing with the Anglo Leasing type contracts,” claims LSK Chairman Eric Mutua over the two Anglo Leasing cases.

LSK says the State deliberately failed to argue that the contracts were illegal as they were corruptly procured.

But the AG maintains that he inherited a bungled case. “The man you see before you is a mortician. The patient died on the operating table a long time ago. If you think the patient should have lived, ask the surgeons,” Prof Githu has been quoted.

And in a twist of events, after securing the Sh1.4 billion, reports indicate that the companies associated with Anura Pereira have reportedly made another claim for Sh3.05 billion for yet another Anglo Leasing contract. The Government has been forking out billions for other dubious contracts.

Ken-Ren company

By June 2015, the Government will complete the Sh3 billion payments for Ken-Ren Chemical and Fertilizers Company Limited that never was. By 2011, the Government had already paid Sh2 billion.

“No fertilizer factory had been constructed by Ken-Ren, thus making the entire expenditure of over Sh3.6 billion incurred on the project as at June 30, 2011 nugatory,” said a report of the Auditor General for the year 2010/2011.

The Kenya Government lost claims filed by Austrian bank BAWAG and a Belgium entity of DUCROIRE respectively.

In a case filed in May 1988 by Ducroire of Belgium against the Government of Kenya, the debt due was agreed at Euro 32,520,319 (Sh3,274,934,000), payable between July 2004 and June 2015.

The Government had as at June 30, 2011 paid Sh2,427,184,467.15. In the case filed by BAWAG of Austria in June 1992 an award of Euro 16,635,156.16 (Sh1,330,812,400) was made in favour of the Austrian bank.

According to the agreement, the Government was required to pay a sum of Euro16,635,156.16 (Sh1,330,812,400) twice a year, on every  March 31 and September 30.

As at June 30, 2011, the Government had paid Sh1,172,901,484.90, made up of  principal and interest of Sh959,864,103.35 and Sh213,037,381.55, respectively.

Another example is a contract to build the Lokitaung Sub District Hospital in Turkana district at a contract sum of Sh5.5 million in 1989.

The project was initially funded by an NGO, which later in 1990 pulled out prompting Government to take over the project, and apparently under the same terms of contract.