Big money, power intrigues behind airports chiefs purge

On Wednesday, Transport Principal Secretary Nduva Muli walked into the Kenya Airports Authority Board of Directors meeting in what everyone thought was routine attendance.

From the agenda of the meeting, nothing would reveal to anyone that by close of business, top bosses — Managing Director Lucy Mbugua, General Manager (Finance) John Thumbi, Company Secretary Katherine Kisila and General Manager (Procurement) Obadiah Orora— would be thrown out and left fighting to get their jobs back.

By virtue of his position as PS, Mr Muli is a board member of the authority but, as is the case with most principal secretaries, the law allows them to appoint officials to represent them when they are not available to attend board meetings of corporations under their ministries.

On Wednesday, Mr Muli opted to attend in person.

Those in the meeting say from the beginning, he was a man on a mission. The meeting had been called to deliberate on and approve a number of issues that had, due to change of chairmanship from Prof Mutuma Mugambi to former Inspector-General of Police David Kimaiyo in December last year, had not been dealt with.

In technical terms, it was a statutory meeting normally called to confirm minutes and receive reports from board committees and management.

On getting down to business, Mr Muli requested a change of status from an ordinary board meeting to a special one where issues not on the agenda could be introduced for debate.

After debate, members agreed to proceed as a special board, meaning items that would not fit in a statutory meeting would be introduced.

The first item on the agenda — a report on Wilson Airport land, which is alleged to have been grabbed — was dealt with and finalised.

When the second item on the agenda came up, Mr Muli is said to have fished out copies of a contract that the authority had signed with Dufry International on management of the new duty free shops on the new terminal at the Jomo Kenyatta International Airport.

It is at this point that the decision to send home the four managers was made, leaving other items on the agenda in abeyance.

The board then appointed Mr Yatich Kangugo, who was the Airport Manager at Moi International Airport in Mombasa, to act as the managing director pending a report from a team appointed by the ministry to carry out investigations.

However, the Sunday Nation has established that State House moved in on Friday directing the State Corporations Advisory Committee to take over the investigations as a neutral body.

The committee is expected to report back in two weeks’ time.

KEY ISSUES

One of the key issues that the committee will be looking into is the way the board sent the managers on leave. A general feeling within government is that the ministry took a rushed decision without following due process.

The trouble for the four seems to have started with the fire that gutted a section of the airport in August 2013.

Shortly after the fire, the authority, in a bid to fast-track the construction of Terminal Four (now renamed Terminal 1A), issued a tender for development and management of a duty free retail.

The tender would be issued under a new policy agreed by government in 2010, where a single firm would be handed the whole terminal to operate under what is known as master concessionaire.

The tender was closed on October 25, 2013 with 10 firms responding. On evaluation, Nuance Group was picked as the winner but the matter was challenged before the Public Procurement Administrative Board.

The board cancelled the award in December 2013 and directed the authority to re-tender the contract.

MOVED TO COURT

A new tender was advertised, with five firms responding. On August 15, 2014, Dufry International AG was named the winner. The other four companies then challenged the award before the PPARB but were dismissed.

Just when the authority was to award the contract, Suzan Duty Free, which did not participate in the second-round tendering, moved to court to block the signing.

Suzan is associated with controversial businessman Kamlesh Pattni.

The case would later be dismissed, giving the authority the go-ahead to sign the contract with Dufry. It is here that the current problems stalking the team started.

While drafting the contract, the KAA team is said to have imported some of the clauses that have seen the authority engage in endless fights with Mr Pattni’s other company, World Duty Free Company.

The clauses gave Dufry exclusivity in running duty free shops at JKIA and other airports in the country. 

The contract was signed by both the authority and Dufry International and a copy sent to the Ministry of Transport as required by law.

On perusing the document, the team at the ministry raised the exclusivity issue with Transport Cabinet Secretary Michael Kamau who summoned the authority team.

After discussions, the board was informed that the CS had directed management to rectify the anomalies. The meeting took place in December 19, last year.

Five weeks later, on January 22, 2015, the the authority finalised and executed the second agreement with Dufry, excluding the offending clauses.

In the meantime, Mr Muli sent a letter to the authority and copied the board chair demanding an official explanation and asking the board to take action.

The board ordered the matter placed before the finance committee which, by Wednesday, is said not to have met.

Come February 3, Mr Pattni’s company, World Duty Free, moved to court challenging the Dufry contract on grounds that it (Dufry) has been awarded a contract with similar terms as the one World Duty Free holds.

'SOLE AND EXCLUSIVE' RIGHTS

In the court papers, Mr Pattni claims to have “sole and exclusive” rights to construct, furnish and commercially operate Duty Free Shops at the airport by virtue of an agreement made on April 27, 1989, which was later amended on May 11, 1990.

In its defence filed on Thursday, the authority says Mr Pattni is relying on a wrong document.

“The 2nd Concession Agreement was entered into when, upon review, it became apparent that the 1st Concession Agreement contained an exclusivity provision, which the authority could not grant,” an affidavit signed by Ms Kisila points out.

The law suit by Mr Pattni would unsettle the government because Kenyans thought the matter had been dealt with and settled with a finality.

In 2013, the Transport ministry led by Mr Kamau brokered a deal where Mr Pattni would drop all claims against the authority and in return the authority would give his new company Suzan five shops — four at Jomo Kenyatta airport and one in Mombasa — and a bonded warehouse at Jomo Kenyatta airport.

A press conference was held where Mr Pattni agreed to drop the claims.

However, efforts to get Mr Pattni and his companies to execute the settlement deed and file it in court to clear the matter never bore fruit.

Documents seen by the Sunday Nation show that the matter was handed to Mr Fred Ngatia to represent the authority in the settlement.

Despite no consent being filed, Mr Ngatia’s law firm is said to have raised a fee note of Sh290 million being a bill for repossession of duty free shops and lounges from World Duty Free. Payment of the bill is still pending.

Back at the board meeting, after Mr Muli circulated the Dufry contract, the board objected, saying the document had since been rectified and a new one without the “offending clauses” executed.

Those in attendance say his response was short and swift: The debate must proceed on the basis of “what if” Dufry had refused to execute the new contract.

The board reminded him that the matter was pending before the Finance Committee, which would meet and make recommendations to the board. The board asked for time to deal with the matter and report to the ministry.

At this point, the chairman, Mr Kimaiyo, interjected and said they were taking too much time debating the issue.

The management team was asked to leave and after an hour Mr Kimaiyo alerted them that a decision to investigate them had been reached — which would mean that they go home for a month.

The four were directed to fill in 30 days’ annual leave, a departure from procedure that would have seen them sent on compulsory leave. 

Reached for comment, Mr Muli declined to talk to the Sunday Nation on grounds that doing so would interfere with ongoing investigations.

According to sources familiar with the intrigues, the management team was also accused of having varied terms of contract for the new Greenfield Terminal to the advantage of the contractor.

Documents said to have been tabled during the board meeting show that a letter of notification of the award of the contract written in December 2011 to Anhui Construction Engineering Group reveals that the figure agreed on was $653 million — inclusive of 10 per cent contingencies for the works, five per cent for employer’s supervision consultant and all taxes.

The letter was written by the then Managing Director Stephen Gichuki. These facts are also captured in exact terms by Anhui’s letter sent on December 19, 2011 acknowledging receipt of tender award notification and accepting the terms of the contract.

The contract documents signed by the authority on November 2013, however, show the same figure but excludes 16 per cent taxes, which adds almost Sh9 billion to the contract.