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Duo fined Sh14m for defrauding Kenya Re

Monday May 13 2019

Kenya Re fraud

Former Heritage Insurance Manager Charles Gichane (left) and ex-Kenya Reinsurance Finance Director John Faustin Kinyua at the Milimani Law Courts on May 13, 2019. They were fined Sh7.3m each for defrauding Kenya Re of a house in Embakasi’s Villa Franca. PHOTO | DENNIS ONSONGO | NATION MEDIA GROUP 

BRIAN WASUNA
By BRIAN WASUNA
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Thirteen years ago, John Faustin Kinyua, then Kenya Reinsurance Corporation finance director, tricked taxpayers into buying a house at Embakasi’s Villa Franca Estate for one Charles Gichane.

Now, the duo could spend three years in jail if they each fail to pay a Sh7.3 million fine.

CONSULTANT

On Monday, chief magistrate Lawrence Mugambi ruled that the two hatched and executed the scheme.

He ordered that each should pay Sh1 million for the fraudulent acquisition of public property, alongside a fine double the value of the house at the time of the crime.

In the scam, Kinyua engaged Gichane as a fake whistle-blower and consultant, whose ‘payment’ was used to purchase the house.

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The two were initially tried between 2008 and 2014 but High Court judge Lydia Achode ordered a retrial owing to a hitch in their initial prosecution — the Ethics and Anti-Corruption Commission had not reported findings of its investigations to the Attorney-General before pursuing criminal charges against them.

RETRIAL

The retrial began in 2014 and ended Monday.

Perhaps, in hindsight, the duo would have preferred their initial conviction in 2010 when they were only ordered to pay Sh1 million or face three years in jail.

The duo cost Kenya Re Sh3.196 million hence they were each ordered to pay Sh6.3 million. This brought the total fine to Sh7.3 million each.

In August 2003, Gichane was a reinsurance manager at Heritage Insurance, and wanted to add the title homeowner to his list of personal achievements. By October 2003, Kenya Re had received a Heritage Insurance cheque for Sh3.196 million, which would be logged into records as payment from Gichane for the house.

It would later turn out that the cheque was actually from Heritage Insurance to Kenya Re and was intended to pay a bill for insurance premiums payable to the latter.

PRIME PROPERTY

The scam however dates back to the turn of the millennium, when Kinyua wrote to Gichane asking him to provide consultancy services for Kenya Re.

Gichane accepted the offer on the same day — April 28, 2000. Three months after the deal was signed, Gichane asked that part of his commissions be committed to buying the house. After all, Kenya Re had put the prime property up for sale.

On August 12, 2003, Kinyua wrote to Heritage Insurance demanding that the company settle premiums due to Kenya Re for the period between January and March, 1999.

One of the cheques Heritage issued to Kenya Re — number 026937 — for Sh3.196 million for fire insurance premiums would then get logged in as payment for Gichane’s consultancy services.

As Gichane wanted part of his payment to be used to purchase the house, Kinyua obliged.

Aside from the fact that a cheque from Heritage was being used to buy a house for Gichane, there was another problem with the dealings — Kenya Re’s board policy did not allow Kinyua to engage anyone as a whistle-blower or consultant.

REWARD

Yet, Kenyans had just purchased a house for Gichane as a reward for his consultancy/whistle-blowing services. Mr Mugambi disregarded mitigation pleas by the duo and gave them 14 days to appeal.

Kinyua cited ill-health and argued that a severe punishment could jeopardise his ability to pay fees for his daughter in the UK.

Gichane, 68, held that he lost money in upgrading the house, and five grandchildren under his care would suffer in the event of a heavy sentence.

Magistrate Mugambi has given the duo 14 days to appeal against their conviction.