Police probe ex-KPC boss Joe Sang in Sh4.4bn scam

Former Kenya Pipeline Company (KPC) Managing Director Joe Sang is set to make a return to the Directorate of Criminal Investigations (DCI) headquarters to answer questions about the Sh4.4 billion pipeline payment scandal even as he defends himself in court over the Sh2 billion Kisumu jetty scam.

This is even as it emerged that the taxman is demanding Sh17 billion from Zakhem International, the Lebanese firm that the KPC contracted to build the new Mombasa-Nairobi pipeline in 2014 but handed it over last year after years of delays.

'MALICIOUS PUBLICITY'

Investigators are narrowing down to possible personalities who might be required to present themselves at the DCI to shed light on the scandal before a decision is made on who to charge. Indications show that some politicians who were pushing for the payments despite not being KPC employees are under investigation and could be summoned.

Among those expected to be questioned are Nyara Consultants that the KPC reportedly paid to vet an initial demand of Sh19 billion made by Zakhem.

It is alleged that it is the consultants who brought down the figure to Sh4.4 billion, which KPC management not only okayed but pressured the Treasury to release the money.

According to documents consolidated by the DCI about the matter, KPC management struck a deal with Zakhem on April 9 last year for payment of $44 million to cover the four-years delay that hit construction of the 450-kilometre pipeline.

Then just a week after the deal was made, the KPC wrote to Petroleum Cabinet Secretary John Munyes pushing for the agreed payments.

KPC argued that it had enough money to pay amounts claimed by Zakhem based on its Sh9.2 billion budget for the financial year 2017/18, which was ending in two months.

“We, therefore, write to advise on the progress made in evaluation, determination and settlement of the claims and seek your guidance on the matter,” said Mr Sang on April 18 in a letter copied to former Treasury minister Henry Rotich, Petroleum PS Andrew Kamau and the Attorney-General.

On Thursday, Zakhem argued that the controversy surrounding the contract was part of a malicious publicity campaign for what was otherwise a good project that was marred by delays. The company instead threw the blame at KPC and the designers of the pipeline for the delays.

WASTED TIME

“The progress of the works suffered from major interruptions that eventually necessitated an extension of the contract period as approved by the KPC board and solely attributed to KPC consultant massive design and engineering errors, variations, corrections, omissions, additions and revisions,” said Zakhem through an advertisement in the dailies.

“Variances between the design and the actual situation on the ground became apparent when the contractor commenced implementation. Several revisions and corrections, all documented had to be made on the design package especially civil and mechanical drawings, which resulted in extensive procurement of additional materials and later revisions in the mechanical installation works,” said the company.

The KPC in 2012 awarded through a joint venture Chinese company Sheng Li Engineering and Consulting Limited and Kenya-based Kurrent Technologies a tender to design the project. The KPC awarded Zakhem the construction tender in 2014. The firm promised to complete the work in 18 months and at Sh48 billion.

Zakhem has also blamed the KPC for the disorganised nature in which it carried out itself in the months after awarding the construction contract, which delayed the contractor from acquiring the site on time. For instance, Zakhem has argued that KPC wasted time in determining the site for each pump station along the route, compensating project affected persons and submission of project designs.

TAX DEMAND

The KPC declined to respond to the claims Zakhem made, saying it would be improper to comment on what is currently an active investigation.

“As a public entity, KPC is duty-bound to ensure that its affairs are conducted in strict adherence to the law, and where applicable to contractual terms, thereby minimising any danger of breaching the law or contractual terms and the attendant risks of penalties through such breaches, which penalties are ultimately borne by the Kenyan public,” said acting managing director Hudson Adambi in a statement sent to newsrooms.

But what could further complicate the pipeline saga, the Kenya Revenue Authority has argued in court that Zakhem, which owes it Sh17 billion, has not been remitting taxes including money deducted from its employees.

“The appellant had a reputation of not honouring its financial obligations and has its bank accounts frozen as the appellant has been unable to pay even conceded taxes despite several commitments from the respondent,” argued KRA in a case in which Zakhem has sued seeking to block the tax demand.

Justice Margaret Waringa Muigai directed the KRA and Zakhem to go to the tax tribunal over the matter.