How bold move by EACC stopped supplier from pocketing Sh150m

Integrity Centre, the Ethics and Anti-Corruption headquarters in Nairobi. 

Photo credit: File | Nation Media Group

What you need to know:

  • Anti-corruption commission found that Vulcan never supplied the goods.
  • Details of the corruption deal have been exposed by a recent Court of Appeal decision to stop the government from paying the supplier the Sh150 million. 

Were it not for the graft watchdog’s intervention, a government supplier would have pocketed Sh150 million for school laboratory equipment that he never delivered but had secured a court order compelling the State to pay him damages.

Of interest in the supply contract given to Vulcan Lab Equipment Ltd is how the tender was awarded by a hurriedly formed irregular tender committee whose members included a gate man. 

Details of the corruption deal have been exposed by a recent Court of Appeal decision to stop the government from paying the supplier the Sh150 million. 

The contract, which has been subject of a legal fight for nine years, was awarded by the School Equipment Production Unit (Sepu) — a State agency under the Education ministry in 2009.

CORRUPT ADVENTURISM

The tendering that the court described as “corrupt adventurism” began in July 2009 when Sepu approached Vulcan for a quotation for the supply of various science equipment and laboratory chemicals. 

Vulcan, led by its MD, Mr Vishal Kacha, complied and forwarded the requested pro forma invoice of Sh226 million. 

The contract was so vague that there was no detail of how the figure of Sh226 million was arrived at, and neither did it contain in its short body, particulars, specifications or quality of goods to be provided.

Vulcan and Sepu then signed a supply contract on July 16, 2009, and on the same day Sepu issued a cheque for Sh75 million to Vulcan.

But the Ethics and Anti-corruption Commission (EACC) swung into action and froze two of Vulcan’s accounts held at the Southern Credit Commercial Bank-Westlands branch as it considered the payments as a misappropriation of public funds.

SCHEME TO DEFRAUD

According to EACC, there was breach of public procurement requirements and that the contract was characterised as part of a scheme to defraud public funds.

While describing the directly procured tender as invalid, EACC said the tender committee included unqualified members and there was no valid resolution and authority for procurement of the goods.

Among the tender committee members was Mr Edward Makamu who worked with Sepu as a gatekeeper. He was appointed to the committee by the Sepu managing director at the time, Mr Benson Anyona.

The committee had only four members while Regulation 12(2) of the Public Procurement Disposal Regulations (PPDR) sets the quorum at five members, including the chairman.

EACC also questioned how the tender was awarded without a valid resolution and authority contrary to the provision of the Act. 

"The numbers aside, it is ready a distortion of the process in a tragic-comic way, for SEPU officers to have literally assembled a team in a hurry that included its gateman, who was obviously unqualified to sit on the committee," said court of appeal judge Patrick Kiage.

For semi-autonomous government agencies such as Sepu, the judge said, the PPDR required that members of the Tender Committee be heads of departments or persons in equivalent positions.

NEVER SUPPLIED

EACC forensic investigator Pascal Mweru said the goods procured were never supplied and that the procurement procedure was not followed, hence the contract was a nullity from the beginning.

"The minutes which were used to go for a special procurement committee were a forgery. The procurement procedure was not followed and that Vulcan did not supply the goods," said Mr Mweru. 

He said his team of investigators visited the warehouse where the goods were allegedly stored but found nothing. 

After Sepu directors learned that EACC was investigating the tender and circumstances under which it was directly sourced, Sepu cancelled the contract.

Ms Perpetua Sidi, who became Sepu's managing director in 2010, said the agency resolved that it would not proceed with the transaction unless it was cleared by the EACC. The decision caused Vulcan Ltd to move to court seeking compensation for breach of contract. 

In a judgment delivered on December 7, 2017 justice Hedwig Ong'udi ordered the government to compesate the supplier Sh150 million for cancellation of the contract.

Justice Ong'udi had directed Sepu to pay the supplier Sh94 million for the value of the goods the trader had procured, Sh50 milion for breach of contract and Sh5 million for accrued insurance premiums.

When awarding the damages, Justice Ong'udi said Sepu had through the acts of its employees caused all the mess and had put the supplier in an awkward position in the tender. 

But EACC was aggrieved by the order and moved to the court of appeal where justice Kiage overturned the decision saying the High Court ought to have firmly rejected the petition by Vulcan. 

Justice Kiage's colleagues in the bench, William Ouko and Agnes Murgor, concurred with the ruling saying they were puzzled by the High Court ruling as the payment was unjustifiable and erroneous since the claim proceeded from corrupt adventurism.

"The contract having been vitiated by the obvious fraud which the Commission pleaded and particularized, but the learned Judge wrongly held otherwise, and on the strength of the binding provisions of the relevant statutes which were breached by the parties, Vulcan did not deserve any of the monies it was awarded by the court below," justice Kiage said.