alexa How Harambee House gang stole Sh2.8bn from taxpayers - Daily Nation

How Harambee House gang stole Sh2.8bn from taxpayers

Thursday December 4 2014

Defence Principal Secretary Mr Mutea Iringo. PHOTO | DIANA NGILA | NATION MEDIA GROUP

Defence Principal Secretary Mr Mutea Iringo. Mr Iringo Monday told the Powers and Privileges Committee that he did not bribe any MP as alleged. PHOTO | DIANA NGILA | NATION MEDIA GROUP 

By HERBLING DAVID

Senior Internal Security ministry officials used a secret account at National Bank of Kenya to siphon billions in taxpayers’ money from public coffers in the run-up to last year’s General Election, we can reveal.

The money disappeared into a slush fund whose purpose remains unknown.

A report on government spending for the year 2012 says auditors unearthed the existence of a secret account at National Bank where Sh2.8 billion was wired and spent on items marked as "confidential".

It points an accusing finger at former accounting officers in the security docket at the Office of the President.

“The parliamentary Public Accounts Committee (PAC), which is chaired by Budalang’i MP Ababu Namwamba, reckons that officials who have previously served as permanent secretaries in the Internal Security ministry should be held responsible for presiding over the scandal.

Mr Francis Kimemia, later the Head of Civil Service, and Mr Mutea Iringo were the accounting officers in the Internal Security ministry in the year ended June 2013 covered by PAC’s audit report.”

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UNDOCUMENTED EXPENDITURE

PAC, which is chaired by Budalang’i MP Ababu Namwamba, reckons that both Mr Kimemia, the Secretary to the Cabinet, and Mr Iringo, the Defence PS, both of whom previously served in the Internal Security ministry in the same capacity, should be held responsible for presiding over the scandal.

The NBK slush fund was masked as a general account and was used to withdraw huge sums of money whose expenditure is not documented, says the PAC report tabled in Parliament on Wednesday.

“To circumvent the established regulations, the ministry operates an account at National Bank of Kenya (NBK) that is parallel to the regular account at the Central Bank of Kenya (CBK),” the committee says in the report, adding that the account, though referred to as Police Account (P.Com), is operated as a general account at the Office of the President (OP).

“It seems customised to irregularly facilitate unlimited cash withdrawals beyond the set limits,” the committee says before concluding that the Sh2.85 billion expenditure “was so opaque and smacks of loss, wastage, misapplication and pilferage.”

INTEGRITY QUESTIONS

The multibillion-shilling scandal raises fresh integrity questions about the management of public resources at the Office of the President, which is directly in charge of the key security docket that has been under pressure with the continuing rise in terrorist activities in the country.

President Uhuru Kenyatta has personally admitted the existence of powerful cartels in government, including his office, which he accuses of working at the behest of shadowy investors to fleece the taxpayer.

The PAC report reckons that all the fraudulent dealings at the defunct Ministry of Internal Security and Provincial Administration were executed by one officer named Ben Kihia, a senior accountant at OP.

The report singles out 48 cash withdrawals from the secret account between July 2012 and March 2013 totalling Sh1.1 billion.

The 27-member committee noted that Mr Kihia had served in the position for almost a decade and had resisted his transfer to the Ministry of Industrialisation and Enterprise Development.

WELL-ORCHESTRATED PLUNDER

“He recently refused to honour his transfer to (the) Ministry of Industrialisation. Months after the notice of transfer, Mr Kihia continues to serve at OP, and no action has been taken,” says the report.

PAC has now directed the Ethics and Anti-Corruption Commission (EACC) to investigate the conduct of Mr Kihia and take appropriate action.

The voluminous PAC report paints a picture of a well-orchestrated plunder scheme at the Office of the President coordinated by Mr Kimemia and Mr Iringo where cash withdrawals of up to five times a day were made from the slush fund.

The OP operatives, for instance, withdrew a total of Sh130 million on February 26, 2013 — barely five days to the General Election.

“The committee expressed grave concern that indeed the so-called confidential expenditure involved huge cash withdrawals with neither explanation nor any logical rationale,” Mr Namwamba said.

The Internal Security ministry is in charge of the Police Service, Directorate of Criminal Investigation, Immigration, Government Printer and National Authority for Campaign against Alcohol and Drug Abuse (Nacada).

NO TITLE DEEDS

The report shows that the ministry also made irregular spending during the procurement of 300 residential units on Nairobi’s Kangundo Road for police officers.

PAC says that the ministry paid single-sourced East Gate Apartments Ltd to develop the houses at a cost of Sh1.3 billion.

MPs made a visit to the apartments and established that it lacked a title deed, that the houses’ plinth area was smaller than indicated, that some units were sold to civilians and that the construction smacked of poor workmanship.

“There is no evidence in (the) form of title deeds that the land and 300 units purchased have been transferred to the ministry,” PAC says in the report.

Besides, the directors of East Gate Apartments Ltd could not be identified and the committee fears that it may have been backed by powerful OP operatives.

GHOST PROJECTS

“There is (a) need to lift the corporate veil to determine the real faces behind East Gate Apartments,” PAC says as it recommends EACC to investigate the matter further.

The Police secret account at NBK is the highlight of the PAC report, which shows that the Kibaki government could not account for more than Sh60 billion spent by publicly funded bodies during its last year in office.

The Independent Electoral and Boundaries Commission (IEBC) tops the list of big spenders who were unable to explain their runaway expenditure having failed to account for Sh35.1 billion it spent on BVR kits and the printing of ballot papers.

It is followed by Ministry of Medical Services, which failed to account for Sh13.2 billion, Roads (Sh6.3 billion), the Judiciary (Sh2 billion), State House (Sh105 million), and the Sh1.5 billion lost in ghost projects funded by Constituency Development Funds (CDF).

SPOTLIGHT ON ACCOUNTING OFFICERS

The report spotlight now turns on the accounting officers in the identified departments who were the PSs meaning that Mr Kimemia and Mr Iringo have a tough job of shedding light on the NBK slush fund.

“The accounting officers and all officers involved must face the full force of the law for violating the letter and spirit of the constitution, statutes and regulations,” says PAC in its recommendations.

Article 226(5) of the Constitution demands that accounting officers such as PSs, State House comptroller, the IEBC chief executive and the Judiciary registrar bear direct personal liability for any public funds lost, wasted or misapplied under their watch.

“If the holder of a public office, including a political office, directs or approves the use of public funds contrary to the law, the person is liable for any loss arising from that use and shall make good the loss, whether the person remains the holder of the office or not,” the law says.

CORRUPTION INDEX

Revelations that public officers colluded to swindle taxpayers of billions of shillings comes a day after Kenya was ranked poorly at position 145 out of 174 countries with a score of 25 per cent in this year’s Corruption Perceptions Index.

“Poorly equipped schools, counterfeit medicine and elections decided by money are just some of the consequences of public sector corruption,” said José Ugaz, chairman of Transparency International.

“Bribes and backroom deals don’t just steal resources from the most vulnerable they undermine justice and economic development, and destroy public trust in government and leaders.”

This article was first published in theBusiness Daily.