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Caution on ‘Anglo Leasing’ settlement

By | December 7th 2009

Cabinet’s approval of the payment of a few of the ‘Anglo-Leasing-type’ or related security contracts should not come across as legitimising a shameless fraud.

In 2004, news of 18 dubious contracts — a dozen of them signed or negotiated under the Kanu regime — sparked outrage because it showed there were people in Narc willing to go the same way on graft.

Worse, at the highest levels of Government, there was a reluctance to punish such gluttony: Political considerations seemed to weaken President Kibaki’s resolve, and at least two of his senior ministers landed in hot soup for trying to block or slow down efforts by then Governance permanent secretary Mr John Githongo to unmask those involved in the six new deals.

Public outrage at the time was such that all the contracts had to stop. With time, however, it became clear the dodgy deals, linked to businessmen Anura Perera and Deepak Kamani for the most part, were of two types. Several were of completely fraudulent nature, in which the Government had paid or promised to pay monies without the corresponding delivery of goods or service. It was these that saw refunds from some unidentified ‘ghosts’ or disappearances of promissory notes that the Government promises it will not pay. Others were cases of grossly inflated quotations for services and items that were being provided, or would be provided even after the freezing of the 18 contracts.

Prudent strategy

These latter cases present the Government with a problem because it has to pay something for the goods or services. For a while now it has been clear the question was whether payments could be limited to fair levels or whether a raft of penalties or international rulings upholding the contracts would push the figures higher.

In March, we applauded what we saw as a "prudent strategy" to recover as much of the money lost through the contracts as possible or limit what had to be paid out if international arbitrators said so. The Government had experts advising on the legal manoeuvring required to avoid more payments on the contracts. But it seems the poor management of the litigation could mean paying out more than we have to, recovering less than we might and letting some of the Anglo Leasing-deal ‘ghosts’ vanish unpunished.

Lack of co-operation or assistance by the Ministry of Defence, Kenya Anti-Corruption Commission, Communications Commission of Kenya, the Attorney General’s office and others, has been making life difficult for the lawyers representing the State in four cases. It could well be that, eventually, incompetence and negligence lead to a greater loss of taxpayer funds on these fraudulent contracts than corruption.

The problem is not lack of involvement by senior Government officials: There is a Cabinet committee and a technical steering committee leading the effort. The latter involved the AG, Kacc’s Director, the Head of Civil Service and the ministers and permanent secretaries of Finance and other ministries. The problem is not a lack of legal, technical or analytical expertise either. Price-Waterhouse Coopers roped in two international technical advisors to help save taxpayers’ billions.

The result of all this high-level strategising has to be advantageous to the taxpayer, not to those in Government keen to see these embarrassing contracts go away.

If and when Cabinet meets to deliberate on the problem, we hope they will bear this in mind. Promises that revoked payment notes issued for some of the fraudulent deals will not be honoured must be kept. If any money is paid out we expect that it will be for deals where some tangible service was offered or goods delivered.


The approval of possible payment deals should not be an excuse to walk away from the courts. It can not be justifiable where it is clear the defence of a case would be successful. Payments of any money are likely to be controversial, so it behoves the Executive to make them so with a lot more transparency than we saw in the initial cover-up. If any progress is to be made in the fight against high-level corruption, taxpayers must be certain the money is not being frittered away carelessly to bury political ghosts.

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