Court orders arrest of ex-KPC boss Tanui over Sh661m fraud - Daily Nation

Court orders arrest of ex-KPC boss Tanui over Sh661m fraud

Tuesday December 11 2018

Former Kenya Pipeline Company Managing Director Charles Tanui

Former Kenya Pipeline Company Managing Director Charles Tanui as pictured in Nairobi on July 8, 2014. PHOTO | SALATON NJAU | NATION MEDIA GROUP 

By RICHARD MUNGUTI
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By DAVID MWERE
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Warrants have been issued for the arrests of former Kenya Pipeline Company Managing Director Charles Kiprotich Tanui and 10 other people in a case of conspiracy to commit fraud.

A total of 18 suspects were to appear at the Anti-Corruption Court on Tuesday to answer to charges of conspiracy to steal $6,441,700 (Sh661,498,173) from the company.

NO-SHOWS

Only seven of the 18 people turned up in court. Eleven, including Mr Tanui, did not show up.

The group is also charged with abuse of office, engaging in fraudulent procurement, unlawful acquisition of public property and willful failure to comply with laws on procurement.

The seven denied the charges and were released on cash bails of Sh2 million each in the case that will be mentioned on January 22.

Chief Magistrate Douglas Ogoti directed that Mr Tanui be produced in court on or before January 22 to answer several counts of fraud while at the helm of the KPC.

PRECEDENT

Fourteen defence lawyers, led by Michael Muchemi, Ham Lagat , Kiprop Mairmoi, Felix Kiprono and Muthomi Thiankolu, had asked the magistrate for reasonable release terms.

“[They] are presumed innocent until proven otherwise,” Mr Muchemi noted.

Mr Lagat pointed out that former employees who were charged on Monday, among them former MD Mr Joe Kimutai Sang, were released on cash bails of Sh2 million each.

The others are Francis Githaiga Muraya, Samuel Odoyo Mikwa, Nicholas Gatobu, Peter Gaitho Machua, Jane Jensai Nakodony, Charles Nderitu Maitai and Emilio Mwai Nderitu.

They denied a charge of conspiring to defraud the company of that amount of money between October 2014 and July 2015.

This was with regard to Tender No.SU/QT/3264F/14 for the supply of hydrant valves, complete with two-year maintenance spare parts.

A State prosecutor had told the court that the suspects could be released but with strict conditions.

THE CASE

The case concerns the October 2014 procurement of 58 hydrant pit valves that were to replace faulty ones at the Jomo Kenyatta International Airport (JKIA) in Nairobi.

In 2014, the KPC board passed a resolution that, given the urgency of the matter, the company would go for direct single sourcing from US manufacturer Cla-Val Company Limited of Costa Mesa, USA.

The project was to cost Sh59 million and Sh22 million in taxes.

The KPC, however, never contacted Cla-Val. It instead, KPC approached a Canadian company, Ms Allied Inspection and Testing Inc, which was charging Sh660 million for the contract, 814 percent of the cost that had been approved by the board.

By the time the Ethics and Anti-Corruption Commission (EACC) noticed suspicious activities and stopped further payments, the KPC had already paid, upfront, Sh254 million ($2.5 million).

Allied Inspection and Testing then approached Cla-Val seeking to purchase the valves on behalf of the KPC.

SEPARATE CASES

Magistrate Ogoti heard that the case against Mr Tanui and the 17 is different from the one of Mr Sang and several others.

Mr Sang was charged alongside Ms Gloria Rabai Khafafa (Company Secretary), Vincent Korir Cheruiyot (General Manager, Supply Chain), Billy Letunya Aseka (General Manager, Infrastructure) and Mr Nicholas Gitobu (Procurent Manager) over the Kisumu Oil Jetty.

They denied charges of abuse of office, willful failure to follow procedures and engaging in the Sh1.9 billion project without prior planning.

Earlier, seven senior managers of the KPC were arrested in a second wave that targeted current and former managers in the case of the procurement of the valves.

They include finance general manager Samuel Odoyo and procurement manager Nicholas Gitobu, who were earlier charged alongside outgoing managing director Joe Sang for graft arising from the Sh1.9 billion Kisumu Oil Jetty.

21 MILLION LITRES

Others in custody are business development officer Peter Gaitho Machua, administration manager Jane Jesanai Nakodony, senior electrical engineer Charles Nderitu Maitai, procurement officer Fredrick Kagosh Ogenga and Francis Omondi Obure, a director of Aero Dispenser Valve Ltd.

Meanwhile in Parliament, Petroleum and Mining Cabinet Secretary John Munyes said claims that 21 million litres of oil valued at Sh2.5 billion were lost through spillage and theft would be verified by an independent forensic audit.

Appearing before the Senate Committee on Energy on Tuesday, Mr Munyes, however, confirmed that at least 11,643 litres of oil was lost through accidents and pilferage from March 2017 to April 2018. Taxpayers would be required to pay oil-marketing companies about Sh1.1 billion in compensation once the loss is verified.

DETECTION SYSTEM

Under international best practice, the government compensates distributors for losses above 0.25 per cent of oil lost through evaporation and leakages during transmission.

Mr Munyes blamed sluggish reform at Kenya Pipeline for the losses, pointing at an incident in Koru where a rogue merchant siphoned 4,000 litres of oil from the pipeline for four months without detection. “There is one thing that KPC has not done: the installation of the theft intrusion system to ensure it deters wanton theft. Those are the reforms we are putting in place at the moment," Mr Munyes said.

Committee Chairman Ephraim Maina had asked why the pipeline does not have a leak detection system that would help conserve the environment and spare taxpayers billions of shillings in compensation to oil marketers.

According to Energy Regulatory Commission Director-General Pavel Oimeke, the maximum oil leakage along the pipeline is now 0.1 per cent, down from 0.7 per cent a decade ago.