Outgoing Kenya Pipeline Managing Director Joe Sang has been arrested in the ongoing investigation into loss of funds during construction of Sh1.9-billion Kisumu oil jetty.
Mr Sang and four other officials of the state corporation were arrested on Friday morning in the capital Nairobi.
The other suspects locked up are company secretary Gloria Khafafa, head of procurement Vincent Cheruiyot, procurement manager Nicholas Gitobu and general manager in charge of infrastructure Billy Aseka.
Hours after the arrests, Petroleum Principal Secretary Andrew Kamau announced the replacement of Mr Sang with Mr Hudson Andambi as the acting MD.
Until his appointment, Mr Andambi was the ministry's senior principal superintending geologist in charge of petroleum.
"This is to ensure that operations continue without interference for purposes of ensuring security of supply of petroleum products," Mr Kamau said on Friday in a statement.
The KPC arrested officials will be charged with seven counts, including theft of Sh528.5 million during the construction of the Kisumu oil jetty.
Last week, Mr Sang told the KPC board that he will not wish to get a second term once his current contract expires in Apr 2019.
The announcement came as the board invited crime busters to investigate the disappearance of more than 21 million litres of fuel, which KPC claimed to have either spilt or was stolen by vandals.
Mr Sang said he was leaving “due to personal reasons”.
Already, KPC chairman John Ngumi has invited oil marketing companies (OMCs) to conduct forensic audit of stock positions, which will essentially be examining Mr Sang’s management.
Ten leading oil marketers had written a joint letter dated October 26, 2018 in which they demanded to conduct their own forensic audit to check the accuracy of stock statements issued by KPC and get to the bottom of what was turning to be bogus records of loss.
The arrest of Mr Sang and his managers will add to the troubles at KPC and will lead to a managerial shake-up in coming days.
Mr Sang and his senior managers will also be charged with abuse of office for “improperly awarding tender number KPC/PU/006-047” to Southern Engineering Company at a cost of Sh1.9 billion against Sh1.4 billion, which had been approved.
The court will also be told that the top managers, together with others not in court, conspired to commit an economic crime and steal Sh1.9 billion.
They will also be charged with failing to comply with the procurement laws and failing to follow applicable procedures and guidelines relating to procurement in the award of Kisumu oil jetty tender.
The Director of Criminal Investigations George Kinoti has been investigating how the project was conceived and how money allocated to it was spent.
Those who had previously been summoned to shed light on the project included Major Neepe Itasayon (Chair, Board Technical Committee), Faith Boinett (Former Chair, Board Finance Committee), Jerry Simu (Former Chair, Board Audit), as well as the managers of the Infrastructure and Finance departments.
The Kisumu oil jetty cannot function without a similar jetty in Uganda and Tanzania – and as of now, it is considered as a white elephant.
For an oil jetty to function, there must be counterpart jetties in good condition at various lake ports ready to safely receive and discharge products into bulk oil terminals at those ports.
Uganda was to build a jetty on its side but this has been delayed by lack of funding – leaving Kenya with a dead-in-the-water project.
The genesis of the project was after Energy Cabinet Secretary Charles Keter wrote to the National Treasury requesting for an approval of supplementary budget of Sh1.4 billion for the Kisumu oil jetty, which had been approved by the Cabinet as part of Jubilee’s flagship projects.
While approving the budget, National Treasury Cabinet Secretary Henry Rotich wrote:
“The managing director is reminded that it is the responsibility of the accounting officer…to ensure the prudent management of financial and non-financial resources of the entity… and strict adherence to the Public Finance Management Act.”
Kenya Pipeline has been dogged by procurement and management scandals that ran into billions of shillings.
Additional report by Stella Cherono.