Panic as auditors probe fuel fraud at Kenya Pipeline

Wednesday March 18 2020

The start of a stock audit at Kenya Pipeline Company is said to have triggered panic across the oil industry, as some marketers are likely to fall victim to the same thing they had pushed for.

Before the December purge at Kenya Pipeline that saw several managers charged in court on corruption allegations, sleuths have been pursuing oil-marketing companies said to have benefited from illegal allocation of fuel from the firm, according to multiple sources within KPC.

Sources also say some staff who have been receiving multiple assurances from acting managing director Hudson Andambi that all was settled have a reason to worry as the audit got underway.

The Directorate of Criminal Investigations is said to have trained guns on four firms said to have benefited from an irregular allocation in millions of litres of fuel said to have been an overdrawing “due to irregular advances by an employee”.

A KPC brief to the board paints a picture of impunity by the fuel dealers who had engaged in fraud, with most of them repeatedly failing to respond to demand letters from the company for close to two years.

“Demand letters were issued on 13th March 2017, but no responses were forthcoming. The Directorate of Criminal Investigations (DCI) is also assisting to trace the whereabouts of the company directors and their assets to enable KPC file suits for recovery,” said the brief for the board in December, at the height of the rage over the pipeline losses scam.

Directors sought

Ironically, it is the oil marketers who raised concern over the unusually high losses, which they refused to pay for as it emerged that insurance would not be sufficient to cover for it.

The four firms on the DCI radar are Ameken Minewest Company Ltd, Esse Ltd, Oilpoint Kenya Ltd and Oil City Ltd.

KPC is said to have been trying to trace the directors of the briefcase companies, some of which have been wound up or sold to new investors planning to make a comeback into the industry.

The Nation has seen letters written by Ameken Minewest asking to withdraw its line fill from the pipeline system. This is the equivalent of a tenant taking away rental deposit in readiness to exit a property. Such schemes are said to be part of the means through which fuel fraud occurred.

The firm, according to a former employee, exited the business with over five million litres under unclear circumstances. The DCI is also pursuing a separate irregular allocation of 17,000 litres to the firm, fuel said to have been sold to a different investor to operate a similar venture with a fresh line fill.

“We got summoned by the DCI and we clarified on the allegations. I am not a director of that company, I was an employee. We got all approvals to withdraw our line fill from KPC,” the former employee said, asking for anonymity so as to speak freely about his former employer.

The three other firms did not respond to email messages and calls to their numbers displayed online.

When former KPC managing director Joe Sang told the board he was not going to seek a second term in 2019, the oil marketers who had fallen out with him over losses had been granted their request to audit stocks at the KPC depots.

The firms, through their joint company Supplycor Kenya Ltd, were given up to December 31 to conduct a forensic audit of stock positions but took longer to settle on the company that was to carry it out.

Allegations that they were also beneficiaries of irregular advances now complicate the audit, which is expected to unravel the mystery of the fuel losses at KPC systems.

Six other firms are said to be holding close to one million litres in negative balances that KPC management has been investigating.

In 2008, at least 10 top managers at KPC were laid off after Triton Oil Company was allowed by the firm to collect oil valued at Sh7.6 billion and sell it without the permission of the financiers.


Editor's Note: This story has been updated to remove an erroneous reference to Dalbit Petroleum Ltd.