Anglo Leasing: Uhuru had carried out heroic probe

In a few short years, the wheel has turned full circle and President Uhuru Kenyatta, once the foremost opponent of the Anglo Leasing scandal, now heads a government that is trying to cajole a reluctant Legislature into approving the expenditure of large sums of public funds on corruptly-procured contracts that he once opposed.

Things came to a head last week when the normally loyal Jubilee brigade in the National Assembly rebelled against plans that would have had the Legislature approve payments to the Anglo Leasing contracts.

In 2006, as Leader of the Official Opposition, Mr Kenyatta chaired the Public Accounts Committee which carried out a heroic investigation of the Anglo Leasing contracts, including interviews with Mr John Githongo, the former governance adviser in the Kibaki government, and the chief whistle blower on the scandal, who was then in exile in London.

To date, Mr Kenyatta’s report remains the most authoritative public investigation on the Anglo Leasing scandal, and the force of its findings was such that it was unanimously adopted by the National Assembly.

As the country struggles to deal with a resurrection of the scandal, it is useful to go back to the main findings of the Kenyatta report on the Anglo Leasing scandal.

The committee accepted the evidence of Mr Githongo, the gist of which was that the Anglo Leasing contract was a prototype in a series of contracts entered into initially by the Kanu government, and subsequently inherited by the Narc government, with shadowy business persons, to supply what were claimed to be security-related equipment and services to the government.

The contracts were entered into in great secrecy and were not open to competitive bidding because of the claim that they were for the supply of security equipment and services.

All the companies were interrelated and were controlled by an international wheeler-dealer of Sri Lankan nationality, Annure Pereira, with a reputation for questionable dealings with the Kanu government.

The Kanu government first entered into these contracts in 1997 and, by the time it was voted out of power in 2002, had entered into 12 multi-currency contracts worth $355 million and a further 67 million euros.

The Narc government entered into its own contracts and, by the time the Anglo Leasing scandal broke out, the new government had entered into six contracts worth $42 million and a further 242 million euros.

In total, 18 prototype contracts were entered into by the government, worth 309 million euros and a further $397 million, which today amounts to Sh66 billion.

Evidence of the interconnectedness of the contracting companies consisted, firstly, of shared addresses; secondly, shared directorships; thirdly, the fact that the contracts were similarly structured, and fourthly some of the companies would play the role of financier to one another in different contracts.

TWO COMPANIES

Each of the 18 contracts was structured so as to have a company that would lend the Kenya Government money that would enable it to pay for the contract, and a second company that would perform the actual contractual obligations.

Mr Kenyatta’s committee made a finding that this arrangement was highly significant.

The introduction of a lending arrangement was a deliberate ruse to create public debt as a means of financing the contracts. This would remove the contracts from financing through annual parliamentary appropriations, which had two problems.

First, the amount of money provided through parliamentary votes would be up to the Treasury officials who prepare the budget. They may not provide enough to go round. Indeed, the initial passports contract, which was the first of these questionable contracts, had been cancelled because the money voted for it by Parliament was inadequate.

Secondly, whereas voted funds are subject to direct parliamentary scrutiny, through the Controller and Auditor General, public debt was wholly controlled by the Finance Minister and attracted little public scrutiny. The contracts would, thus, be paid for over a number of years directly from the Consolidated Fund.

In reality, however, no financing was ever provided other than what the Kenya Government paid. In the words of the committee, “the government paid money to the financing company, which then paid the supplier, using that money, who then supplied the goods or services. The government then paid interest to the financing company on its own money.”

The committee found that the so-called security contracts were cleverly designed scams involving actors at three levels: politicians, civil servants and business people.

Collusion among the three groups made the scams possible. The committee recommended the prosecution of several senior political leaders over the scandal.

The Anglo Leasing contracts contained strong secrecy features. For example, the Nedemar contract incorporated clauses prohibiting both the government and Nedemar from disclosing any part of its contents to third parties.

In a case in the Kenyan High Court, Nedemar successfully invoked the secrecy clauses to defeat a KACC investigation of allegations that the contract was the subject of corruption.

The Nedemar officials were even granted orders barring media coverage of the case, and preventing police from arresting them and to return their passports.

They had used Kenya’s court process to procure both secrecy and impunity. Similarly, the Spacenet contract, with the Kenya Postal Corporation, was negotiated and signed outside the corporation’s structures.

Anglo Leasing, once declared “the scandal that never was,” is alive and well. It seems fair to expect an explanation from the President why his government is now courting Anglo Leasing, which he once so strongly condemned.

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