British firm inflated prices of electoral materials ‘to raise bribe cash for bosses’

Contract 5: Referendum ballot papers

83. This was a substantial contract to supply approximately 14.6 million ballot papers and associated forms for a referendum. The items were dispatched in July 2010. The total contract value was £431,161.15 (Sh60.6 million). Trevy’s fee for this contract was £11,872.05 (Sh1.7 million).

The prosecution case is that bribes intended for officials at the IIEC and the Kenyan Bureau of Standards (Kebs) totalled £108,203.82 (Sh15.2 millin), which was reduced to £105,193.82 (Sh14.6 million) to take account of “hotel” costs paid by S&O during a visit (three to four days) of IIEC officials to S&O’s factory on July 14, 20103.

84. In a series of emails dated May 1-3, 2010, between Trevy and Christopher Smith, copied to Nicholas Smith, the question of proposed corrupt payments was addressed explicitly. (AFM 0237, AFM 0236)

Trevy was upbeat about S&O’s prospects of landing this lucrative contract. He reported that S&O were popular by this time with the IIEC because of previous corrupt payments which had by this time been paid or were agreed and awaiting payment and because S&O managed to combine the corrupt payments with a reliable quality of product. He sought to persuade Christopher and Nicholas Smith that bribes should be offered.

The figures are taken from the updated spreadsheet to be served as AFM 0407, rather than the original exhibit AFM 0214.

Christopher Smith took the lead on setting the bid price, and although he thought it was tight, he replied that he could accommodate both Trevy’s commission and payment for the “guys” within the bid price.

85. Trevy reported that the officials at the IIEC were due to leave the commission at the end of 2010. The email on 1/5/10 May 1, 2010 (AFM 0237) was to Christopher Smith and Nicholas Smith, but was apparently directed to Christopher, (“Nik will fill you in on how we worked out on their demands”)

Trevy explained that the officials wanted to take the opportunity while they were at the IIEC to make money. “Please, also be advised that these guys are also here to make money … These people are only in the IIEC till the end of the year, so they are after making money and they will play game with whoever puts what they want. They’ve reiterated that its better to make money with us coz we don’t compromise on quality but at the same time they want to make money”.

Trevy added that he had spoken to the CEO (James Oswago) on the telephone and he explained how a figure of KSh0.92 (as part of the bid price) was split between bribes for public officials at Kebs, commissioners at the IIEC, Oswago and Dena.

Trevy stated that Oswago told him he did not want to work with one of S&O’s competitors, Lithotech. By contrast, Oswago had assured Trevy that he would continue to work with S&O, who had paid him bribes in the past and would continue to pay him bribes in the future.

“He believes in S&O and that’s what is important and we’ve given him money for the voters’ card and after payment for balance and pouches we are set to give him £21,000 (Sh2.9 million). So he knows we can deliver both materially and money and I think this good will is important”.

86. Trevy reported to Christopher Smith that he had discussed with Oswago the level of the bribes for the IIEC officials (Sh0.55 per ballot paper). The level of uplift for the bribe was reduced because of the size of the proposed order. “He says they can only shelve small and he thinks Sh0.55 is good for all of them. Nik (Nick Smith) will fill you in on how we worked out on their demands. CEO (Oswago) has also said the quantities may be between 10 million and 11 million, so that’s why they can’t go beyond Sh0.55. Let me know what you think about it.”

87. Trevy went on to discuss the level of bribes for officials at Kebs, which, at Sh0.20 per ballot paper, was lower than that proposed by the officials at IIEC (Sh0.20 per ballot paper) and Trevy’s own fee (Sh0.10 per ballot paper), which would all be added to S&O’s price: “Kebs (Kenya Bureau of Standards) are key guys, so let’s shelve theirs to Sh0.20.

88. In their interviews, Christopher Smith and Nicholas Smith both admitted that the above email suggested IIEC officials were susceptible to bribes. However, they both said they did not believe that was true and they suspected Dena was responsible for the wording in the email.

Chris Smith said that initially S&O did factor in those pricing suggestions into their prices because they suspected Dena would pass those prices on to their competitor. Therefore, they did not want to give Dena the correct prices. Nick Smith said they ignored the remarks in Trevy’s email and did not factor payments to third parties into their bid submission.

89. In the emails of May 2-3, 2010, Trevy, Chris Smith and Nick Smith continued to discuss the levels of bribes they would pay for this contract (AFM 0236). Chris Smith said S&O would find it difficult to pay the levels of bribes that were being suggested. “I want to print this (job), but these men are very demanding”.

Initially, Chris Smith said he would allow Sh0.77 per ballot paper for “guys”, and a further Sh0.05 per ballot paper for “extras” (i.e. Sh0.82 in total commission per ballot paper). Chris Smith calculated the commission to be an additional 34 per cent on top of the cost of each ballot paper and he asked Trevy: “Will they go for this?”

In response, Trevy wrote: “My guys are after money, yes, but this should not make us not win the tender”.

Trevy suggested that they might be able to bargain with the officials after they secured the contract. He proposed adding Sh0.75 to the price to pay bribes. Trevy made it clear that his own fee was a separate consideration. “As for me, you will see what to do”.

90. Christopher Smith agreed with Trevy’s proposal to add Sh0.75 to pay for bribes and he suggested adding another KSh 0.08 for Trevy’s fee, which increased the total price to Sh3.13.
“Ok, Trevy. I can just do that. Bid Sh3.13. Guys Sh0.75 + you Sh0.08. S+O 2.30. We will send it all to bid bond tomorrow.” Christopher Smith had factored in Sh0.75 bribes per ballot paper into the bid price.

91. On May 12, 2010, S&O produced their bid submission for the tender. The prices had been converted into sterling. The total price for 18 million ballot papers was £448,200 (Sh62.9 million). (AFM 0163, admission 48).

92. In an email on June 1, 2010 (AFM 0226), Trevy reported to Nick Smith that he had spoken to the CEO (Oswago) and informed him that the “chicken” for contracts 2 and 3 would be ready for distribution on Friday or Saturday.

Trevy then went on to report that the IIEC would pay S&O in advance for the referendum ballot papers because it suited them to pay before the close of their financial year. “IIEC will pay us in advance for referendum ballot papers because of the close of financial year in June.”

93. In his reply, Nicholas Smith, having confirmed that he was sending Trevy the money for contracts 2 and 3 the following day, referred to the possibility of an advance payment for the referendum contract and he confirmed that if S&O received an advance payment, they would pay immediately. “If it is a straight advance payment, then, of course, we are happy, and the chickens will fly straight away”. (i.e. the bribes would be paid straight away).

94. On June 7, 2010, Nick Smith informed Trevy that S&O wanted to start printing the referendum ballot papers on Monday June 14 in order to deliver them by July 10 (AFM 0224). Four batches of referendum ballot papers (totalling 14.51 million) were dispatched between June 20 and July 28, 2010. The shipping invoices show the total value of those papers was £361,299.01 (Sh50.7 million). (AFM 0218, AFM 0217, AFM 0199 and AFM 0203).

95. On July 14, 2010, S&O hosted a 3-4 day visit from five officials from the IIEC, namely Hassan, Nyaundi, Oswago, Tororey and Sang (AFM 0172). Nick Smith directed other staff to make arrangements for this visit, which included booking hotel accommodation for the officials.

Hotel costs of £3,010 (Sh423,085) were later deducted from the bribes paid to the officials, which appear to relate to this visit (Originally AFM0214, updated spreadsheet is AFM 0407).

96. On July 26, 2010, Nick Smith and Trevy exchanged emails in which they agreed to increase the price for the shipment of 10,000 referendum ballot papers. The earlier shipping invoice indicated these papers were priced at £249 (AFM 0203). Trevy and Nick Smith agreed to invoice the IIEC for £7,550 (Sh1 million) for these papers. Trevy reported that he had told the IIEC the cost would be between “£5,000 ( and £8,000”. Nick Smith then suggested the invoice be made out for £7,400 to “subsidise the hassle-factor for the packing lists as there is a lot of time being spent on this” (AFM 0216). The eventual invoice gave a price of £7,550 (AFM 0309).

Nick Smith told Trevy: “I have included the usual commission in this, plus some extra special Trevy consultancy fee …”

97. Nick Smith then sent Gladys Boss of the IIEC an email with an explanation for the price increase (AFM 0178). “For the ‘shipping invoice’, we just used the standard price. But I believe that Trevy has explained to you that we had to stop printing another job, completely break the printing press down to be able to print this extra requirement, and then perform another press make ready to start printing the other job again. This has cost quite a bit more unfortunately.”

98. S&O’s statement of account to the IIEC, dated August 8, 2010, shows there were two further shipments for which shipping invoices have not been found. The invoices for those shipments were attached to the statement of account. They show those shipments were for 339,300 copies of Form 6, and 2,100 copies of Form 7 (AFM 0180).

The total contract price for the referendum ballot papers was £431,193.82.

99. The “summary of orders” spreadsheet, details the invoices relating to the referendum ballot papers (WT6450.01, WT6450.02, and WT6450.03) [Originally AFM 0214, now AFM 0407].
The spreadsheet shows that of the total price of £431,161.15, Trevy’s fee was £11,872.05. The commission column totalled £108,203.82.

The prosecution contends that this last figure was for the “guys” as Christopher Smith had put it, i.e. the officials at IIEC and Kebs.

100. The spreadsheet also shows that the ‘commission’ was reduced by £3,010 to £105,193.82 to take account of hotel costs. That is, inferentially, payment of expenses to the IIEC officials who came on the visit to S&O’s factory on July 14, 2010. The fact that those costs were deducted from the total “commission” figure is significant: it is evidence that the amount in the ‘commission’ column represented money that was intended to benefit public officials.

101. On August 18, September 28, and December 8, 2010, S&O received payments for this contract [AFM 0014]. The receipt of the first payment prompted an email enquiry on August 2010 from Trevy to Nicholas Smith (AFM 0213): “Let me know once you send the commission for the referendum. These guys are already on the table waiting to be served.” In interview, Nicholas Smith said he did not know what Trevy was referring to when he said “these guys are already on the table waiting to be served”. He denied that it was a reference to onward payment to officials.
102. S&O made the payments on August 25 and October 7, 2010, sending Trevy payments totalling £172,837.27. The prosecution case that this included £117,065.87 to cover Trevy’s fee (£11,872.05) and the bribes to be distributed to officials in respect of this contract (£108,203.82 minus £3,010 “hotel” costs) [AFM 0014, AFM 0212 and AFM 0214].

103. This began as a contract to supply 1.5 million OMR correction forms and 1,000 nomination forms. In the end, S&O supplied 5 million OMR correction forms (plus an extra 23,000 OMR forms free of charge) and 1,000 nomination forms. The forms were dispatched between May and July 2010. The contract was worth £206,230. Trevy’s fee was £4,600. (See ‘summary of orders’ spreadsheet, Exhibit AFM 0407). The commission payments on the summary of orders spreadsheet was £24,250. The prosecution case is that this sum was intended for bribing public officials. (S&O references on spreadsheet: WT 6310.01, WT6311.01, WT6446.01 and WT6494.01).

104. On May 26, 2010, Oswago wrote to S&O requesting them to print 1.5 million OMR forms for correction of the voter register and 1,000 nomination forms [AFM 0228].

105. On June 4, 2010, Nick Smith asked Trevy to obtain a local purchase order (LPO) for the OMR forms contract (AFM 0224). SFO investigators have been able to locate shipping invoices for seven shipments totalling 4,584,000 forms (AFM 0225, AFM 0167, AFM 0223, AFM 0169, AFM 0168, AFM 0221, and AFM 0220)]. Those shipments were dispatched between 26th May 26 and July 8, 2010. One shipment on June 24, 2010, was said to include an extra 23,000 OMR forms free of charge. The total value of those shipments was £188,268.80.

106. S&O produced a statement of account, dated August 8, 2010, which suggests there must have been a further shipment of 440,000 OMR forms valued at £17,960.80, taking the total to 5 million OMR correction forms (plus an additional 23,000 OMR forms free of charge) and 1,000 nomination forms (AFM 0180).

107. The S&O spreadsheet indicates that Trevy’s fee for this contract was £4,600. The column headed “commission” amounts to £24,250. For reasons already given, the prosecution says that this sum was intended for the payment of bribes.

108. On September 10 and 28, 2010, S&O received payments totalling £422,007, which included £206,230 from the IIEC in respect of this contract (AFM 0014). On September 20 and October 7, 2010, S&O transferred payments totalling £95,675.20 to Trevy, which included £28,850 to cover Trevy’s fee and the bribes to be distributed to officials in respect of this contract (AFM 0014, AFM 0212 and AFM 0214)].

ULTRA VIOLET DETECTION LIGHTS

109. S&O supplied the IIEC with 34,000 ultra violet detection lights, which are referred to in the statement of account produced for the IIEC. They appear to have been delivered in July 2010.
The total value of this contract was £88,400. The spreadsheet of payments shows that Trevy’s fee was £1,530 and the ‘commission’ payment, which the prosecution allege was for the payment of bribes, was £27,200. (S&O ref WT 6842.01)

110. On September 28 and December 8, 2010, S&O received payments totalling £369,728.91, which included payment for these items and other contracts [AFM 0014]. On October 7, 2010, S&O transferred £78,739.92 to Trevy, which included £28,730 to cover Trevy’s fee for these items (£1,530) and the further payment of £27,200 [AFM 0014, AFM 0212 and AFM 0214]. (For full details regarding these payments, see paragraphs 238 to 246 of Edwin Harvey’s statement of October 30, 2013).

111. S&O also supplied the IIEC with 490,300 parliamentary ballot papers and 19,000 civic ballot papers. These items were dispatched in September 2010. S&O redrafted their pricing summary four times for these items, increasing the total price on each occasion. The final price was £69,631.466. Trevy’s fee was £2,216.47.

112. Between August 31 and September 6, 2010, S&O produced four separate versions of a pricing summary for the parliamentary and civic ballot papers [AFM 0211, AFM 0210, AFM 0209, and AFM 0208]. The pricing summaries set out both Trevy’s fee (described as “commission”).

113. Between the first and the last versions of the pricing summary, S&O increased the total price from £50,879.20 to £61,859.26. The payment retained by S&O increased from £44,284 to £49,102.42. Trevy’s fee increased from £1,076.78 to £2,054.82. The ‘commission’ figure increased from £5,518.16 to £10,702.02. The prosecution case is that the bribery figure was being increased, to the benefit of the corrupt public officials at the IIEC, with the increase in the price.

114. On September 13, 2010, S&O dispatched the parliamentary and civic ballot papers and associated forms. The shipping invoice reflected the final pricing summary, and gave a price of £61,859.26 [AFM 0207]. S&O produced a summary of orders, dated 9th December 2010, which indicates there was a further order for 25,750 by-election ballot papers and associated forms priced at £7,772.20.

115. On September 28 and December 8, 2010, S&O received payments totalling £385,051, which included payment for these items and other contracts [AFM 0014]. On December 15, 2010, S&O transferred £13,261.61 to Trevy, which was part payment of Trevy’s own commission and the bribery payment for this contract [AFM 0014].

Outline of the interviews of Christopher Smith and Nicholas Smith on the Kenyan Transaction

116. Some answers given by Christopher Smith and Nicholas Smith in interview are set out above.

The following is an outline only.

117. Christopher Smith stated that he was the chairman of the company and had played less of a frontline role in recent years and for the last five or six years. He had also suffered from some ill health.

He denied that the IIEC had been paid bribes. He stated that Trevy had been paid such a high level of commission, which he said had been authorised by Nicholas Smith, because Trevy worked so hard to get the contracts. He said that a 35 per cent commission was a standard level for the electoral commission. He said that all of the commission money was meant for Trevy. He said that ‘chicken’ was a reference to a payment but not to a bribe. It was just an ordinary payment which he would make to Trevy in good faith. Christopher Smith thought that Trevy’s offer to give Karani the ‘chicken’ sounded like waffle.

Christopher Smith thought that it looked like Karani was asking for money, but he (Christopher Smith) did not deal directly with him and did not know if Nicholas Smith did. S&O would not, he said, deal directly with people like that. Chicken could mean money to an agent, but it could mean several things such as a CD, money for transport or medical treatment. Christopher Smith’s father used to give out actual chickens. The money to Karani could be money for transport. Christopher Smith was not aware of any bribes.

118. Nicholas Smith said that Trevy earned his commission because he had done a lot of running around to secure the contracts. The commission payments, which Nicholas Smith calculated, were for Trevy alone. “Chicken” is, he said, a loose term. It can mean money, cash, payment, facilitation payments, but S&O do not pay bribes. In relation to the 2009 by-election deal (Contract 1), he said that Trevy’s reference to the demands of Nyaundi and Dena to know their percentage had to be seen in the context of other emails where Trevy made it clear that S&O do not pay kickbacks. Nicholas Smith stated that he did not know what the email meant when it referred to Nyaundi (an IIEC official) knowing what is involved in the chicken and communicating this with the chairperson [AFM 0307]. Regarding the email of September 23, 2009 [AFM 0259]

Nicholas Smith did not remember what was specifically being referred to when Trevy stated that they were “desperate for the chicken”. He also stated that where he used “chicken” in an email he was referring to a subsistence payment. He denied that S&O made any payment to Karani and did not know why Karani was said by Trevy to be after chicken or why Trevy would pay him anything. Karani works at the IIEC.

119. The meaning of ‘chicken’: Both defendants and Trevy used the word chicken in emails. In December 2008, Trevy emailed Christopher Smith about business which Trevy was trying to develop for S&O with the National Registration Bureau in Kenya. Trevy described a meeting he had with a procurement officer called Dixon Lugonzo: “Well, i was successful on the mission.
“i had 2 hours of his time and we spoke at length. he was so surprised i know a lot of procurement regulations and the loopholes until i told em im a procurement officer with the former ECK now to be known as IIEC…. 1st he asked me if you are a nice guy and if you give chicken and yes I told em that is why i was there …. he is very comfortable working with me …”