e-Citizen heist: How Pesaflow diverted Sh6.3b to private accounts

President Ruto and PS State Department for Citizen Services Prof Julius Kibet Bitok during the first anniversary of the e-Citizen Directorate, at the KICC. November 28, 2024. [File Courtesy] The e-Citizen platform was billed as a game changer, allowing Kenyans to access numerous government services at the touch of a button. But while it has been touted as a tech success story, reports by the Auditor General paint a picture of a conduit for embezzling public funds. On Wednesday, a parliamentary committee summoned Equity Bank CEO James Mwangi, Attorney General Dorcas Oduor and four other firms linked to the controversial e-Citizen platform over the possible loss of Sh9 billion in revenue through the system. At the heart of the probe is Pesaflow Limited, a private firm whose directors now face scrutiny over its role in the illegal diversion of billions in public funds. Private service providers Webmasters Africa Ltd, Electronic Citizen Solutions Ltd, Pesaflow Limited, and Goldrock Capital Ltd are also set to appear before the House committee to respond to queries on how the e-Citizen system may have led to the loss of an accumulated Sh9.4 billion and how it was used to unlawfully collect Sh2.6 billion from Kenyans in convenience fees for using the platform. Curiously, a check with the Business Registration Bureau indicates that Electronic Citizen Solutions Ltd and Goldrock Capital Ltd do not exist. A search on the ownership of Pesaflow Limited hit a dead end when the government services website displayed a prompt saying, "The company is protected." The probe follows a special audit report covering 2021/2022, 2022/2023 and 2023/2024 financial years by the office of the Auditor General aimed at assessing the platform's operational effectiveness. Ahead of the meeting with MPs, The Standard has unmasked the identities of individuals behind the controversial companies linked to the e-Citizen platform, even as the office of the Auditor General yesterday disclosed that it was denied access to the platform for audit. The genesis of the e-Citizen platform dates to 2023, when the Information Communication and Technology Authority (ICT Authority) entered into the e-Citizen Platform support and maintenance framework and contracted M/s Webmasters Kenya Limited, in consortium with Pesaflow Limited and Olive Tree Media Limited. According to the Business Registration Service (BRS), Webmasters Africa Ltd was registered in 2010 and is owned by Lexco Company Ltd, which has 50 ordinary shares, while James Ayugi Otieno holds 50 shares. Others with one share each are Derick Onyango, Thomas Isack Juma, Robert Obel, Charles Karuri, Kennedy Oduory, Oketch Joash and Samuel Gomba. Abdala Twahir, James Kiarie Gachiu, and Sidney Ngunyi Wachira are directors with no shares. A BRS search shows that Olive Tree Media, incorporated in July 2010, has two directors: Charles Wambani Sewe and James Kabiru Kihia. The company's physical location is unclear, though it has a Nairobi postal code. However, Sewe's address is listed in Kakamega. A further search for the real owners of Lexco at the Registrar of Companies shows the company has 1,000 ordinary shares split between Abdala Twahir (400), Goldrock Capital Ltd (300), and James Kiarie Gachiu (300), while Godwin Wangondu is the company secretary and Sydney Wachira is a director with no shares. Wachira is also a director at Webmasters, again with zero shares. According to the agreement, the government was to pay the vendor for support and maintenance, standardisation of the system and provision of payment gateway services. The Standard has also traced the intricate money trails through which the public could have lost billions. A perusal of the report detailed that total payments made in relation to the maintenance and support contract as at 30 June 2024 amounted to Sh549.69 million, comprising Sh492,162,940 and $414,299.60 (Sh545.8 million), but details show that millions were paid to a company identified as 'Electronic Citizen Solutions Ltd', which was not a party to the agreement. "This arrangement exposes the government to potential legal disputes that might arise from payments to third parties under the contract," reads the report in part. Further, out of the total amount paid, Sh195 million was for the provision of payment gateway services. These payments were, however, deemed irregular by Auditor-General Nancy Gathungu, as the government should not pay for the use of a system it owns. A search of the ownership of Electronic Citizen Solutions Ltd on the BRS yielded no details on its ownership. The audit further shed light on how massive irregularities led to the unauthorised diversion of revenue amounting to Sh6.3 billion to e-Citizen's Equity Bank account from an undisclosed account named Pesaflow. "It was established that the Equity Bank statements for e-Citizen's collection accounts had receipts amounting to Sh68,719,877 and $48,142,844 (Sh6.2 billion) from an undisclosed account named 'Pesaflow'. "This account was not listed among the approved collection accounts by the National Treasury. In this regard, it was used to irregularly collect money," detailed the report. Gathungu noted that the total amount irregularly collected using the 'Pesaflow' account over the years could not be established, as the bank statement for this account was not provided for audit. Records obtained earlier by The Standard from the BRS search indicate that Pesaflow was registered in August 2017 and is owned by Frank Lawrence Ochieng Weya with 15,000 ordinary shares, Charles Wambani Sewe with 10,000 ordinary shares, Evid Araka Sibi with 10,000 ordinary shares, and Larry Ochieng Agoro also with 10,000 shares. Sewe is also listed as a director at Olive Tree Media. During a sitting of the Public Accounts Committee (PAC) on Wednesday, it emerged that the Nancy Gathungu-led office did not have access to the e-Citizen platform to conduct a thorough audit, raising eyebrows among MPs. Speaking during the committee session, which also invited National Treasury Principal Secretary Chris Kiptoo, ICT Principal Secretary John Tanui and Immigration Services PS Belio Kipsang to shed light on the system's operations, representatives from the office of the Auditor General said they had been denied access. But in a quick rejoinder, Mr Kiptoo claimed that the office had not been denied access. "I think that is not true. I want to speak as the accounting officer...nobody denied the office access to the platform. I would want to know who denied them access because that is not right. How can I deny someone access while they are doing their constitutional role?" he said. In his submissions, the PS also told the MPs that the issue of the funds being irregularly diverted had since been addressed and the illegal accounts at Equity Bank frozen. "When the matter came to the attention of the National Treasury, a letter was written to Equity Bank requesting details of the agency accounts and instructions to freeze them. The accounts were frozen and the funds in those accounts were withheld. "In addition to that, the collection accounts held at Equity Bank were closed and the authority to open new bank accounts was issued," he said. The Tindi Mwale-led watchdog committee is also probing how the government irregularly collected Sh2.6 billion in convenience fees by charging Kenyans for use of the platform during the period under review.

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