If you want to know how slowly the wheels of justice move, you just need to look at the just-concluded case involving a managing director-turned-thief who worked at Kenya Re.
Kenya Re, for those who know, has been a citadel of vice – a case study of a once profitable organisation that was brought down by the shenanigans of the Nyayo-era led by their divine patron who acted like the Greek god, Hermes. In the Greek mythology, Hermes was the patron of thieves.
Now, this is the story of Jackson Johnson Githaka, the former managing director of Kenya Re – and now in jail for fraudulently selling public property.
It is a sneak preview of what happens within parastatals, where public property has been turned into a playground; grabbed at will and dished out in boardroom deals. Welcome to the epicentre of corruption that has been Kenya Re.
It has taken more than 10 years for the truth to come to be known.
At the heart of Westlands in Nairobi, there used to be a property known as United Insurance Towers, which was owned by the George Kariuki-led United Insurance. It used to insure matatus, a minefield for insurance companies and a sure way to go under thanks to high claims from the public service vehicles.
With the company going under in 2005, United, as it was well known, was placed under statutory management and a public notice was issued advising owners of vehicles insured by the company that the covers were now invalid. They were asked to get insurance from other companies.
This was the time that Kenya Re was appointed by the Commissioner of Insurance to run the affairs of the company – and if possible turn it around. The money paid, as premiums had to be refunded to the owners or as then Finance Minister David Mwiraria said, they had to find out “who are owed money, what the company is worth and find out how much each of the creditors has”.
It was the second time that the company was being put under statutory management and Parliament was once told that “it was run down so badly” (by the statutory manager) that the Commissioner of Insurance thought it was under better management before (when it was run by its owners). But when the owners were asked to return, they found, according to Mwiraria, “that the problems were too serious and reported to the Commissioner of Insurance” that they needed to be rescued. For the followers of Greek god Hermes, the patron of thieves, this was a golden opportunity.
According to Mwiraria, “Kenya Reinsurance Company was appointed to manage United Insurance Company not because of its reinsurance work, but it is considered as a company that understands insurance matters and has managers who can understand insurance work.”
But the managers turned out to be something else.
On July 15, 2005, Commissioner of Insurance Sammy Makove sent a letter to Mr Githaka appointing him to manage the affairs of United Insurance Company Ltd for a term not exceeding 12 months.
As part of the terms of reference, he had been asked to sell off immovable property and invest the proceeds in government securities to improve the company’s liquidity. The idea was to revive the company, solve its liquidity challenges and hand back the company once it was up and running.
His first target was an easy-to-sell multi-storied property in Westlands, known as United Insurance Towers, which served as the company headquarters.
As the managing director, Mr Githaka had approached Nairobi lawyer, Edward Muriu Kamau of the law firm of Muriu Mungai & Co. Advocates, to help him transact the business. Initially, Mr Kamau had been charged alongside Mr Githaka before the state entered a nolle prosequi and he became a State witness.
The sale of United Insurance Towers was undertaken by Mr Kamau after an advertisement inviting bids was placed in local dailies, two days after Mr Githaka received his letter of appointment. It was as if he was in a hurry. The adverts were signed by a Mr Samuel C. Mweni.
The property was up for grabs and three firms ZEP-RE PTA Reinsurance Company, Fidelity Shield Insurance Company Limited and Uzuri Foods Limited placed bids. The highest bid was by ZEP-RE, with the sum of Sh242 million – which was accepted.
It was this time that the law firm of Muriu Mungai was appointed to handle the transaction while ZEP-RE appointed the firm of Okwach and Company Advocates as its transaction advocates. To start off the process, Zep-Re deposited 10 per cent of the purchase price and an agreement was executed.
Back in Loresho estate, the MD and his wife Eunice Wamaitha were eyeing some choice property and had approached a Ms Grace Nyakianda with an offer of Sh6.7 million. The sale agreement had been entered on September 20, 2005 – which is two months after he was appointed to run the affairs of United Insurance and dispose of some of its properties.
He had agreed to deposit Sh670,000 while the balance was to be paid within seven days of registration of the transfer. A cheque of Sh670,000 drawn by Muriu Mungai & Company Advocates – the same company handling the sale of the United Towers – and dated September 9, 2005 was paid to the owner of the Loresho property.
Later, the same law firm issued instructions to Southern Credit Banking Corporation for the issuance of a banker’s cheque in the sum of Sh6.03 million in favour of Grace Nyakianda. The problem was that the total amount paid – which was Sh7.26 million – was part of the proceeds from the sale of United Towers, meaning that the MD was engaged in a fraudulent transaction. He would later sell the property in 2008 for Sh20.5 million.
To hide his tracks, the MD is said to have gone to the law firm of Muriu Mungai and asked the advocate in a letter dated January 27, 2006 to release a commission of 3 per cent of the sale price to ‘agents’. Also produced in court was another handwritten note which was read in court, thus: “Mr Githaka brought a note dated 27 January 2006, authorising us to pay the agents a 3 per cent commission for procuring a buyer for the UIC Towers.
“I enquired about the names of the agents and he told me he’s the one personally. He advised me that he sits on the board of ZEP-RE. He has been able to convince the board to purchase UIC Towers, which they have. Therefore, he is entitled to a sum of Sh7.26m being the 3 per cent commission.
“He gave us full instructions to transfer the said Sh7.26m to his file Ref No.CU/ENO/073/05 where he and his wife are buying a property.”
It was a careless blunder. Insatiable piece of greed.
As a result, the money was released to the owner of the Loresho property and without breaking a sweat, he would earn Sh20 million in two years’ time.
Actually, and the court was told as much, the balance for the Loresho property was paid before completion of sale of the United Insurance Towers. It later emerged that during the sale of the towers, there was no mention of an agent and Mr Muriu testified that since the initial letter was not clear about the ‘agents’ he enquired from the MD.
“...When I asked of the identity of the agent to be paid, Githaka told me that the agent was himself. Mr Githaka did not show me the agency agreement but he qualified the statement and advised me by virtue that he was the Managing Director of Kenya Re-Insurance and since Kenya Re-Insurance was a major shareholder in PTA Re-Insurance, the purchasers, he was able to convince the board where he sits as a member of PTA Re-Insurance to buy United Insurance Towers and he convinced the board of Kenya Re to sell and he was entitled to 3 per cent commission of the purchase price.
“He told me that he himself was entitled to that commission. Githaka did not show me board meeting minutes making reference to the commission…”
With that, Mr Githaka had been thrown under the bus – but he continued to deny that he had taken any part of the United Towers sale proceeds. “This amount was the commission payable to the transaction agents...” he said. “...We engaged them to market the properties and identify where some of them were located...”
According to him, two of the agents engaged were Muigai Commercial Agencies and Pastel Property Consultants.
But none of the bidders had addressed their offer to any of the agencies – and finally, Senior Principal magistrate Felix Kombo ordered him to pay a fine of Sh750,000 or serve one year in prison and an additional mandatory fine of Sh14.5 million (being two times the amount he received) or serve another year in prison.
After he appealed, the High Court enhanced the ruling and Mr Githaka was sentenced to a two-year jail term for fraud or alternatively pay a fine of Sh15.1 million, which is twice the amount he is alleged to have fraudulently received.
Corruption can be expensive – especially for those who behave like the Greek god Hermes. But this was after a 10-year wait in the corridors of justice. It is a sneak preview of what goes on in the corridors of power.
[email protected]; @johnkamau1