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Anti-graft agency stops payment of Sh800m to firm pending probe

Sunday November 13 2016

Health Cabinet Secretary Dr Cleopa Mailu. PHOTO | FILE | NATION MEDIA GROUP

Health Cabinet Secretary Cleopa Mailu. The Ethics and Anti-Corruption Commission on November 3, 2016 interrogated him on the alleged loss of funds in his docket. FILE PHOTO | NATION MEDIA GROUP 

PETER LEFTIE
By PETER LEFTIE
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The Ethics and Anti-Corruption Commission (EACC) has stopped the ministry of Health from paying more than Sh800 million to a company listed among those whose payments were frozen pending investigation into alleged procurement irregularities.

The huge payment was to be made last week to GE East Africa Services Limited, one of the companies EACC said is listed among those whose dealings with the ministry are being looked into, despite an advisory to freeze all such payments. The inclusion of the company on the EACC list does not, however, imply wrongdoing on its part.

The anti-corruption agency had on October 28 written to the Health ministry directing it to stop any payments to various companies that were still under investigation following allegations in an interim audit that questioned the use of at least Sh5 billion.

The ministry has since disputed the figure and ordered a fresh audit after indicating the spending queries were focused on Sh3.1 billon.

Since the news broke, Health Cabinet Secretary Cleopa Mailu has consistently assured the public that the ministry will not condone corruption under any circumstances and investigation will be carried out to clear various issues raised in the audit.

“We make reference to the ongoing investigations at your ministry in regard to alleged irregular procurements and payments to various companies.

In our letter reference EACC.6/14/VOL.III (83) dated 28th October 2016 requisitioning for documents, we provided you with a list of companies that are subject of the said investigations. We are in receipt of credible information that the ministry is about to make a payment of US dollars 8,061,945 (approximately Sh814 million) to M/s GE East Africa Services Limited,” said the EACC letter to the ministry’s Principal Secretary Nicholas Muraguri dated November 5.

EACC concluded by advising the ministry to “put on hold payments to all the companies listed in our said letter until otherwise advised by the Commission in writing”.

The anti-corruption agency’s decision to stop the payment has not, however, gone down well with Health Cabinet Secretary Dr Mailu.

In a letter to the EACC’s Deputy Chief Executive Officer Michael Mubea dated November 11, Mr Mailu asked that the ministry be allowed to make the payment to avert possible court action by the company for breach of contract.

BREACH OF CONTRACT

“This is further to your letter dated 5th November, 2016 and our telephone conversation this morning on the above subject. As you are aware, the ministry of Health has a valid contract with GE East Africa Services Ltd who are one of the major providers of the Managed Equipment Services. Kindly note, putting on hold payments to the company will entitle GE East Africa Services Ltd to late payment interest and also constitutes a breach of contract which has great financial implications,” he wrote.

The managed equipment service, a key Jubilee government project, involves leasing out medical equipment to hospitals in various counties.

“In the circumstances, we wish to request that the ministry of Health be allowed to process the payment to forestall the consequences of late payments as you proceed with the investigations,” said the Cabinet Secretary.

The standoff comes at a time when the ministry is under pressure to account for the use of funds following the leaking of an interim audit report which was exclusively reported in the Business Daily. The EACC and Parliament are currently investigating the allegations.

The strands of investigation include looking into purported manipulation of the Integrated Financial Management System, diversion of funds, double payment for goods, inflated prices and paying suppliers in advance, among other issues. Some ministry officials were also accused of failing to cooperate with auditors.

The EACC has interrogated scores of top ministry officials, including Dr Mailu and Dr Muraguri over the alleged scandal.