Firm in NSSF scandal evaded Sh260m taxes

A company that was paid Sh590 million by the state pensions fund wired the money abroad and quickly closed shop to escape paying Sh261 million in tax arrears.

MPs said on Wednesday Pan Africa Builders & Contractors Limited received the last instalment from the National Social Security Fund 10 days before the taxman raised the alarm.

The MPs, who sit in the House Committee on Labour and Social Welfare, took senior NSSF managers to task over the payments, saying the process was calculated to defraud the public.

But the finance manager, Mr Richard Lang’at, said they learnt of the tax arrears after the contractor had already been paid. He said they only deducted three per cent of the principal sum as withholding tax.

The committee chairman, Ms Sofia Abdi Noor, and members Charles Keter (Belgut) and Pollyns Ochieng’ (Nyakach), asked why the fund paid the contractors directly instead of through their lawyers.

“Once you engage the services of a lawyer, all dealings regarding a dispute should be through the lawyer.

“Why would you want to side-step a lawyer? The NSSF is going to lose money because of such carelessness, and when that happens, this committee will be on your neck,” Mr Ochieng’ said.

NSSF secretary Hope Mwashumbe said they had noted the mistake and reviewed payment processes.

The committee heard that Pan Africa Builders was first contracted to build 300 houses at Sh1.9 billion in Nairobi’s upmarket Kitisuru area, before the project was scaled down to 100 houses at Sh822 million. However, the contractor was paid Sh1.6 billion and completed only 22 houses.

The fund’s acting managing trustee, Mr Tom Odongo, was hard-pressed to explain why they did not consult the Attorney-General before making the payments.

The MPs questioned whether the lawyers acting for NSSF, Kajwang’ & Kajwang’ Advocates, apparently delayed filing an appeal against the ruling awarding the contractor the huge sums.

But Mr Odongo said the NSSF acted on the advice of its in-house lawyers.

“Our lawyers advised us that we had a very weak case and that’s why we did not go to the Court of Appeal, but opted for a review at the High Court which we lost. After we lost, they advised us to pay.

We are law-abiding citizens and when a court of law makes a ruling, we abide by it,” Mr Odongo said.

He could not say why the fund paid two subcontractors, Liteline Enterprises Limited (Sh20 million) and Speedwings Mercantile Company Limited (Sh121 million), whose files could not be found at the Registrar of Companies last month.

However, he tabled documents showing that Liteline was incorporated in 1990 and its directors were Parminder Singh Panesar and Malkit Kaur Panesar. The company filed its 2011 annual returns with the registrar.

The MPs asked the managers to unmask the directorship of Speedwings and Pabco and report back to the committee.

Mr Odongo said his predecessor Alex Kazongo had already left the Fund for good and was unlikely to return despite pressure from the Office of the Prime Minister to have him return at the helm of NSSF. (READ: Anti-graft team asked to probe NSSF deals)