Goodyear to pay Sh1 billion for bribery in Kenya and Angola

Top public officials at the roads and defence ministries, several parastatals and the military were among those who pocketed millions of shillings in bribes to award tenders to an American tyre company that has now been fined Sh1.5 billion in the US.

Goodyear Tyre & Rubber Company, which operates Treadsetters Tyres Limited as its Kenyan subsidiary, has now been ordered by the US Securities and Exchange Commission (SEC) to pay the hefty fine to the US Treasury after it was found liable for bribing public officials and private company bosses to award it tyre supply contracts.

This is the second time this month that a foreign company has been fined for bribing Kenyan public officials. On February 12, two directors of a British printing company, Smith & Ouzman, were jailed for bribing election and education officials to award them printing contracts worth billions of shillings.

According to a document from the SEC, the bribes paid by Goodyear amounted to more than Sh136 million ($1.5 million) and were paid out by the management of Treadsetters between 2007 and 2011.

The report implicates unnamed employees of the Armed Forces Canteen Organisation, the Kenya Ports Authority, Nzoia Sugar Company, the Kenya Air Force, the East African Portland Cement Company, Telkom Kenya, Ministry of Roads and Ministry of State for Defence, in the corruption scandal.

Another Sh1.3 million ($14, 457) is alleged to have been paid irregularly to local government officials, including Nairobi City Council employees, police and building inspectors.

PROMOTIONAL EXPENSES

The bribes were paid in cash and recorded on Treadsetters’ books as expenses for promotional products.
“Goodyear did not detect or prevent these improper payments,” said the US regulator in a statement released yesterday.

The regular said the company had failed to conduct adequate due diligence when it acquired Treadsetters, and also failed to enforce controls after it bought the Kenyan subsidiary.

The tyre firm was accused of falsifying its books of accounts, financial records and internal regulations to make the payments, which contravened the US Foreign Corrupt Practices Act. The tyre firm also bribed officials in Angola, paying them Sh155 million ($1.7 million) to win contracts.

Yesterday, Ethics and Anti-Corruption Commission (EACC) Chairman Mumo Matemu said the commission was aware of the US ruling.

“For now, we cannot say anything on the matter. However, we shall give our statement to the media at the right time,” said Mr Matemu.

Attempts by the Daily Nation to get a comment from the management of Treadsetters were unsuccessful.

Kenya Ports Authority Chairman Danson Mungatana distanced the parastatal’s board from procurement activities and directed any questions relating to the dealings with Treadsetters to the management of the parastatal.

Goodyear has agreed to pay the Sh1.5 billion fine without admitting or denying the bribery allegations. The US firm has also undertaken to divest its ownership interest in Treadsetters Kenya where it has held majority shareholding since 2006.

SEC estimates that at the time the bribes were given out, Treadsetters had annual revenues of about $20 million (Sh1.8 billion by today’s exchange rate).

PAYING BRIBES WAS ROUTINE

“The practice (of paying bribes) was routine and appears to have been in place prior to Goodyear’s acquisition of Treadsetters. Treadsetters’ general manager and finance director approved phoney promotional products and then directed the finance assistant to write-out the cheques to cash. Treadsetters staff then cashed the cheques and used the money to make improper payments to employees of customers,” reads a statement from SEC.

Details of the bribery ring emerge just weeks after a UK court exposed the “chicken” scandal in which Smith & Ouzman directors were found guilty of paying more than Sh50 million to election officials over a two year period.

Although the matter is currently under investigation by the Ethics and Anti-Corruption Commission, no one has been charged or arrested in connection with the scandal. Two executives of the UK company were this month sentenced to four and a half years jail terms for paying the bribes.

Goodyear’s subsidiary in Angola, Trentyre Angola, is also alleged to have paid out bribes amounting to Sh145.6 million ($1.6 million) to employees of government entities and private companies to obtain tyre sales at the same time the Kenyan company is said to have committed the offence.

A majority of the illicit payments is said to have been made to Trentyre’s largest customer at the time, the Catoca Diamond Mine, which is owned by a consortium of mining companies, including Angola’s national mining company.

During the same period, Trentyre is also said to have made about $64,713 in improper payments to local government officials in Angola, including police and tax authorities.

Additional reporting by Samwel Born Maina