An MP could have been paid more than Sh300 million to facilitate a troubled Italian construction firm to win a lucrative Sh29 billion tender to build a dam at the centre of criminal investigations, a confidential document seen by the Sunday Nation shows.
Lamu West MP Stanley Muiruri Muthama, a director of Stansha Ltd, is believed to have pocketed nearly Sh330 million as “consultancy fee” for enabling the cash-strapped Italian construction conglomerate CMC di Ravenna to win the tender to build the stalled Itare Dam in Kuresoi, Nakuru County.
The company also won tenders to build the Arror and Kimwarer dams in Elgeyo-Marakwet County, which have been mired in controversy, thus leading to the arrest and prosecution of senior government officials, among them former Treasury Cabinet Secretary Henry Rotich.
Kenyan authorities also want the overall CEO of CMC di Ravenna Group, Mr Paolo Porcelli, extradited to the country to face charges related to the Arror and Kimwarer dam scandals.
In July, police officers from the Directorate of Criminal Investigations (DCI) arrested Mr Muthama at the Jomo Kenyatta International Airport and transported him to Eldoret, where he was charged with 13 counts of tax fraud amounting to Sh487 million.
Investigators told the court Mr Muthama knowingly under-declared his company’s income, thereby evading payment of Sh488 million in corporation tax and Value Added Tax from 2013 to 2017, before he became an MP.
According to the charge sheet, the tax in question was derived from income from Stansha Ltd’s business activities within Kericho, Kajiado and Nakuru counties.
The first-time MP pleaded not guilty to all the counts and was released on a bond of Sh3 million and one surety or a cash bail of Sh500,000.
Mr Muthama, through his company, could have earned much of the money through what appears to be a case of influence peddling secured by detailed contracts, one of which the Sunday Nation has seen.
The Maendeleo Chap Chap Party MP declined our numerous requests for comment. He neither picked our calls nor did he reply to the questions we raised to him via SMS and WhatsApp on his two mobile phone lines.
In November 2013, his company signed an agreement with CMC di Ravenna, Southern Africa branch, to provide “consultancy services” to the Italian firm as it prepared to bid for tenders for construction of Itare Dam, which is under the Rift Valley Water Services Board, and Ruiru II Dam under the Athi Water Service Board.
According to the 10-page agreement dated November 26, 2013, and titled “Consulting Service Agreement”, Stansha Ltd was to use its best endeavours to ensure that CMC di Ravenna won the tender.
The consultancy fee was to be paid every two months on pro-rata basis as the payments came in from the Rift Valley Water Services Board. The fee included taxes and other government duties and levies.
The agreement was signed by Mr Muthama and a Ms Lili Rono, as the CEO and the director of Stansha Ltd, respectively. Mr Porcelli signed as the CEO of CMC di Ravenna, Southern Africa branch.
In July last year, Mr Porcelli was promoted to be the overall CEO of the giant Italian firm whose headquarters is in Ravenna, Italy, but which has branches across the globe.
While he was the CEO of the company’s Southern Africa operations, Mr Porcelli signed on projects in Sub-Saharan Africa, including Kenya, where his signature appeared on the contracts of not only the Itare, but also the Kimwarer and Arror dam projects.
In July, Director of Public Prosecutions Noordin Haji issued a warrant of arrest for Mr Porcelli after he failed to appear in court to enter a plea on corruption charges in relation to Kimwarer and Arror dams.
“Porcelli is a fugitive,” DPP Special Prosecutor Taib Ali Taib told a Nairobi court. “The Italians think they can break the law and get away with it, contemptuously. Don’t allow it, your honour.”
In February 2014, two months after Stansha Ltd and CMC di Ravenna signed the consultancy agreement, the Rift Valley Water Service Board advertised for bids for the construction of Itare Dam, which was eventually awarded to the Italian firm at a cost of Sh28.9 billion.
Water and Sanitation Cabinet Secretary Simon Chelugui has told detectives investigating the matter that the actual payments to the contractor made until December 2018 amounted to Sh11 billion.
According to our calculations, Mr Muthama’s firm ought to have received an estimated Sh332 million from the Italian firm, being the three per cent of contract sum, as stipulated in the consultancy agreement.
As per the contract between CMC di Ravenna and Stansha Ltd, the MP’s firm would have received about Sh840 million, being three per cent of the total contract sum, which is nearly Sh29 billion.
However, the party was cut short after the company filed for bankruptcy in a court in Ravenna in December last year, which automatically triggered the termination clause in the contract.
According to the agreement, the contract is deemed cancelled if “either of the parties has become insolvent or bankrupt or has a receiver appointed for its undertaking or assets or goes into liquidation”.
Mr Muthama was headed for another big payday had he delivered the Ruiru II Dam project to the Italian firm, but in August 2014 the Athi Water Services Board awarded the project to a consortium of French firms at a cost of Sh21 billion.
Had he delivered the Ruiru II project, Mr Muthama would have made a cool Sh700 million. In total, he would have earned in excess of Sh1.5 billion in less than five years by simply facilitating CMC di Ravenna to clinch the two tenders.
The rare contract has exposed the murky world of wheeler-dealers and how they rake in millions of shillings for acting as brokers, middlemen, contract negotiators — or simply for being at the negotiating table.
In Africa, where corruption is a challenge, American and European firms have lost business to Chinese companies, which are often accused by the West of doing anything to clinch tenders in the continent.
But Italian firms are now robustly challenging the Chinese dominance, as illustrated by the State visit to Kenya by former Italian Prime Minister Mateo Renzi in mid-July 2015.
What most Kenyans remember from that meeting is a picture of Mr Renzi, appearing to be wearing a bulging bulletproof vest underneath his suit, during a meeting with President Uhuru Kenyatta at State House, Nairobi.
But it was during the two-day state visit that President Kenyatta and Mr Renzi witnessed the signing of a Sh29 billion deal with Italy’s BNP Paribas and Intesa Sanpaolo banks for construction of Itare Dam.
Daly and Inadmar Advocates partner and cross-border commercial contract specialist Shitul Shah said such consultancy contracts as the one between Mr Muthama and CMC di Ravenna are common where foreign companies are seeking contracts in countries where they don’t have a firm footing.
“Naturally, they scout for local partners who often happen to be individuals who are well-connected to the system,” he said. On the face of it, he added, it is difficult to conclude whether such deals constitute bribery.
“For that, you would have to dig deeper into the real motive of the contract,” said the lawyer.