Niko Insurance has paid to the Commercial Court $489,650 (sh1.1b) as a guarantee to defend its case over the botched LCs bicycle procurement in which the Government incurred a loss of sh4.3b.

Niko said the deposit is to show willingness and ability to put security for the claim. The firm is challenging the Attorney General over allegations of fraud and irregularities in the process of insuring 70,000 bicycles that were meant for local councillors.

The Government released sh4.3b as part payment for the bicycles in 2011. The suppliers took the money but did not deliver the bicycles.

Justice Christopher Madrama of the Commercial Court recently directed that before Niko starts defending its case, it should deposit the money in court as guarantee.

The company's lawyer, Moses Adriko, noted that the process of insuring the performance bond was deliberately defrauded by the local government officials involved in the scam.

John Muhanguzi, the interdicted Permanent Secretary, Henry Bamatura, the assistant commissioner, Sam Emorut, the principal procurement officer and Robert Mwebaza, the internal auditor, are facing charges of abuse of office, causing financial loss, neglect of duty and uttering false documents.

The company said the performance of bond was marred by fraud perpetuated by the officials who initiated and supervised the faulted procurement process with intention to defraud the Government.