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EACC wants Auditor General charged over Sh100m tender

Sunday January 8 2017

Auditor-General Edward Ouko. Anti-graft detectives want  Auditor General charged over loss of funds. PHOTO | EVANS HABIL | NATION MEDIA GROUP

Auditor-General Edward Ouko. Anti-graft detectives want Auditor General charged over loss of funds. PHOTO | FILE | NATION MEDIA GROUP 

PETER LEFTIE
By PETER LEFTIE
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Auditor General Edward Ouko and his former deputy Stephen Kinuthia are on the spot over the irregular award of a Sh100 million software contract reportedly in exchange for kickbacks running into millions of shillings.

The Ethics and Anti-Corruption Commission (EACC) has recommended the arrest and prosecution of Mr Ouko and Mr Kinuthia for their role in what it terms irregular procurement of the Audit Vault software for the Office of the Auditor General.

The anti-graft watchdog wants Mr Ouko charged with abuse of office and wilful failure to comply with procurement laws while Mr Kinuthia is to face several counts including abuse of office, wilful failure to comply with procurement laws, dealing with suspect property and acquisition of proceeds of crime.

The final decision now rests with the Director of Public Prosecutions who according to the law can either decide to prosecute the duo, recommend further investigations or order the file closed due to lack of sufficient evidence to sustain prosecutions. Mr Tobiko did not respond to our calls even though documents show that he received the EACC report on January 3.

In a detailed brief to Keriako Tobiko dated December 16, last year, the EACC says it has sufficient proof that the duo alongside others engaged in corruption, abuse of office and committed economic crimes in the procurement of the system and should be charged.

The EACC investigations, if proved, are bound to damage the credibility of one of the institutions specially established under the constitution to eliminate corruption and wastage in the use of public resources.

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“After careful evaluation of the evidence obtained in the investigations, it is the considered opinion of the Commission that various officers in the OAG were culpable for the many infractions in this particular procurement and therefore should be charged. There is also evidence to prove that there was a conspiracy between OSI Kenya (the company that was awarded) and officials of the OAG to fraudulently acquire public funds,” says the brief.

The investigations were initiated following a letter from Treasury Principal Secretary Kamau Thugge complaining about corruption in the Auditor General’s office.

Mr Thugge attached a letter from a whistleblower raising several allegations touching on the procurement of the Audit Vault software at an exaggerated cost of Sh100 million against Sh18 million which is the market price for such software.

DIRECT PROCUREMENT

“It was further alleged that the software was purchased through direct procurement and the software supplier was paid without adequate documentation,” the brief states.

Investigations by the anti-graft body unearthed shocking details of how top officers at the Auditor General’s office conspired to overlook tendering procedures and literally handpicked the software supplier awarded the tender and paid the entire contract sum of Sh100 million.

On Mr Ouko the brief states: “On diverse dates between June 18 2013 and October 2013, at the office of the Auditor General headquarters Nairobi City county in the Republic of Kenya being the Auditor General and the accounting officer thereof, an officer whose functions concerned the management of public funds wilfully failed to comply with the law relating to procurement by failing to ensure that the Public Procurement and Disposal Act an d Regulations were complied with in regard to the procurement for the supply, delivery and installation of an Audit Vault software in the Office of the Auditor General.”

The main architect of the scandal, according to the brief is the former Deputy Auditor General, Corporate Services, Mr Kinuthia.
As deputy Auditor General, Corporate Services, Mr Kinuthia was responsible for accounts and finance, human resource management and management of procurement and administration.

Reads the brief, referring to Mr Kinuthia as E2; “There is reasonable cause to infer and prove that E2 benefitted from the said payment and this was the basis upon which he participated in the breach of the procurement laws and procedures, favoured OSI Kenya, and being the head of procurement affairs at the OAG ensured that OSI Kenya was single sourced to avoid any competition.

D35 aided in the layering and distribution of the money that was wired to his account by OSI Kenya and which ultimately benefitted E2.”

“It is apparent from the evidence obtained that the first person to introduce the issue of the Audit Vault was E2. It is the evidence of E7 of OSI Kenya Limited that sometimes towards the end of the year 2012, he was approached by E2. He has stated that E2 informed him that he had been in touch with OSI Slovenia office and he had been informed by a Mr Miha that OSI had a representative in Kenya and that KENAO was seeking a solution for Audi Vault. It is also the evidence of E6 of Oracle Systems Kenya that he was also approached by E2 in regard to the Audit Vault software for OAG,” the brief goes on. In the brief, E7 refers to one Maina Shem Kamau Patrick, the Managing Director of OSI Kenya Ltd.

EACC however states that it did not establish any suspicious transactions after investigating the bank account of Mr Ouko, whom it refers to as E1 in the brief. “Upon scrutiny of the account held by E1, no suspicious transactions were noted in relation to this particular procurement. However, the investigating officer will endeavour to obtain any other bank statement operated by E1,” the brief notes.  

It, however, details how immediately after receiving the Sh100 million contract sum, OSI Kenya quickly wired Sh36 million to a law firm which in turn transferred it to Mr Kinuthia’s account or bought property on behalf of his sons and daughter.

IDENTIFICATION REPORTS OBTAINED

“In regard to E2, his account held jointly with his wife and others in the names of companies in which he is a director were also searched and bank statements thereof obtained. In regard to an account held with NIC Bank, investigations established that E2 received a sum of Sh446,000. This sum was received from Njuguna and Partners Advocates. D36, the proprietor of the said Advocates firm indicated that it transferred the money to E2 on E2’s instructions. D36 also indicates that he also withdrew cash Sh1 million which he also handed over to E2. E2’s bank statement clearly indicates that he received the said sum of Sh446,000,” it states.

“Investigations also established that OSI Kenya paid for the purchase of a car for E2’s daughter. The payment was made by the firm of Njuguna and Partners Advocates to Car Master from the money the firm had received from OSI Kenya. Investigations of the account statements also revealed that Njuguna and Partners Advocates transacted the purchase of land on behalf of E2’s sons, who were directors of ENKEI Holdings and paid the vendor a total sum of Sh13 million for the said sale,” the brief further states.

“The commission will endeavour to record statements from E2’s sons to explain the same transactions. Identification reports obtained from the Registrar of Persons confirm that the aforementioned were E2’s children. E11 who is E2’s daughter confirms that the payment made for the purchase of the car was made on instructions from her father E2,” it adds.

EACC further states that it established that the same law firm paid another Sh10 million to Faida bank on behalf of a Nanazi company Ltd, a firm in which Mr Kinuthia was a director. The money was to go towards the purchase of shares from Jamii Bora. When it occurred that the shares were not available, the money was wired to the account of Milk Farmers, another of Kinuthia’s companies.

“The evidence obtained showing that E2 received some money from OSI, that companies associated with him benefitted from the proceeds and that his children benefitted from the proceeds of the contract awarded to OSI Kenya will be corroborative evidence that there was conspiracy between E2 and OSI Kenya Limited.

They were awarded a contract irregularly and received a payment of Sh100,675,680 and a substantive amount of this money went to the benefit of E2. E2 used the children as a front to hide the trail of the money layering,” the brief concludes.

Others recommended for prosecution include deputy auditor general Justus Ongera, and several directors of OSI Kenya.