Muriithi Mutiga
7 November 2009
Nairobi — Attorney-General Amos Wako's office is to blame for the loss of billions of shillings in taxpayer funds paid out to suspect companies under Anglo Leasing type contracts. That is one of the findings of a probe commissioned by the government into deals which could have cost Kenyans up to Sh56 billion.
A report by international consultants says the AG failed to provide sufficient support to lawyers contracted by the government to fight claims for payment by what the experts describe as sham companies which supplied overpriced goods. On one occasion, Mr Wako advised a law firm representing the Kenyan government not to cite corruption as a basis for the dismissal of a claim, advice which the consultants say contributed to the defeat of the government in the case.
The damning report is likely to raise questions about the credibility of claims by Mr Wako that his office has positively contributed to the fight against corruption. The deals examined by the international consultants relate to security-related contracts entered into by the government between 2002 and 2003. The deals were arranged through the Turn-Key method of financing used to facilitate the controversial Anglo Leasing deal.
Promissory notes
Under this arrangement, companies offer to finance the payment for goods upfront while the Kenyan government issues promissory notes undertaking to pay the company supplying the goods over a certain period. A promissory note is a contract where one party makes an unconditional promise to pay an agreed sum of money to the other over a fixed period.
The government halted payment for these contracts following the public outcry that greeted the revelation of the Anglo Leasing scandal, in which the government undertook to pay Sh2.9 billion for supply of a passport upgrade system valued at about Sh600 million.
Investigations by anti-corruption watchdogs and former Ethics PS John Githongo revealed 17 other similar contracts which the government had signed with companies which, it was claimed, had links to a Sri Lankan businessman who is suspected to be the brains behind the Anglo Leasing scam.
Mr Wako's office was one of those expected to fight off claims by the companies which sued the government in international courts for payment. According to the report commissioned by the ministry of Finance in April 2008, the AG's office failed to support efforts to fight these cases.
"We do not understand why the AG's office is unable to provide better support to the lawyers representing GoK (Government of Kenya) on these various cases," the report reads in part.
One of the deals involves a company known as UniversalSatspace (USS), which was contracted in July 2002 to supply a telecommunications network for Kenya's post offices. The government paid Sh1.2 billion to USS yet the market value of the system supplied, according to international consultants, was Sh270 million.
The report says UniversalSatspace should not have got the contract. "Of concern is that UniversalSatspace appears to be a company of little substance. Its website has little information. It was first incorporated in Delaware USA on 10 May 2002 after proposing its services to MOTC (ministry of Transport and Communication) and shortly before entering into the contract with GoK.
The annual tax assessment of USS is only US$ 200 (Sh14,980) and it does not have any authorised shares. If, therefore, GoK were successful in securing a judgment in its favour against this company, would this company have any assets with which to settle any money judgment awarded?"
Mr Wako's critics say the AG should have established these details and advised the government against entering into a contract with USS.Former Law Society of Kenya chairman Ahmednasir Abdullahi says the fact the AG approved the 17 Anglo Leasing type contracts means his office cannot be relied upon to prosecute the cases adequately.
"The AG wrote the legal opinion validating these contracts so a suggestion that his office is credibly fighting to get them overturned is fallacious," he says.
Another controversial deal which the report examined involves the purchase of a naval vessel by the ministry of Defence in July 2003. The government undertook to pay Sh7.2 billion while international consultants placed the value at Sh4.1 billion.
The experts who probed the deal concluded there was "reasonable evidence of fraud and illegality underlying these contracts", a view which contradicted that of the AG who said the government had a low chance of demonstrating that the contract was procured illegally.
The AG offered similar advice in another case in which a company linked to the Sri Lankan Anglo Leasing mastermind was claiming payment, according to the probe report. "The lawyers representing GoK in this case, Lalive, were instructed by the AG not to raise the issue of a possible case of corruption relating to these contracts... we are uncertain as to the likelihood of a successful outcome for GoK as the AG has restricted the lawyers, Lalive, from including in the defence, the evidence of criminality and corruption."
The probe report was also critical of the way Kenyan authorities have pressed their case in a Sh4 billion deal for the construction of a crisis management centre for the ministry of Defence. The findings of the government-sanctioned inquiry into these deals contradict Mr Wako's assertion that his office has done enough to fight corruption.
The AG repeated this line on Wednesday when he issued a statement in reaction to the revocation of his visa by the US government. Mr Wako blamed the slow pace of the fight against corruption on "inadequacy in investigations showing cogent and sufficient evidence to sustain criminal prosecutions, numerous constitutional applications, injunctions by the courts to stop investigations and prosecutions; the slow pace of trials and prosecutions; inadequate professional and support staff; and lack of specialised training and wholly unfavourable terms and conditions of service."
Mr Wako's critics say the AG's failure to adequately pursue repayment of money paid to bogus companies indicates that his office has failed taxpayers. This is the same conclusion reached by the probe report into the Anglo Leasing type contracts, which warns more money is likely to be lost if relevant government agencies do not improve the way in which they are pursuing repayment of the billions of shillings paid under the suspect contracts.
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