Parliaments Public Investment Committee has recommended that the Ethics and Anti Corruption Commission investigate Dubai and I & M banks for their role in a multimillion maize scandal that has crippled the operations of the National Cereals and Produce Board.
The committee in a report tabled in Parliament on Tuesday said the two banks should be investigated for their role "in apparent collusion" with M/s Erad Supplies and General Contracts Limited to defraud the government.
The committee said should the banks found culpable they should compensate NCPB for all losses incurred as a result of the award of a tender to Erad.
PIC has cited loss of funds held by the two banks subject to an attachment proceeding by Erad amounting to Sh314 million, Sh29 million as legal fee, cost of any auctioned property and loss of profits as a result of grounding of NCPB's operations following the case.
"It is worth noting that due to the saga with M/s Erad Supplies and General Contracts Limited NCPB experienced low volumes of trading activities form gross sales of Sh5.2 billion in 2011/2012 to Sh0.5 billion in 2012/2013," PIC has said in the report that awaits debate.
Dubai Bank and I&M have been accused of issuing defective performance and bid bonds to Erad. PIC claims the two banks acted in a reckless manner and wants EACC to establish if they were part of a collusion to defraud the government.
Erad is one of five companies contracted by the NCPB to import 18,000 tones of maize during the 2004 drought.
The company allegedly did not supply a grain of maize and when the NCPB terminated the contract, the company sued claiming the contract had been breached.
Erad has been demanding Sh267 million which is the balance of Sh564 million it was demanding from the cereals board for alleged breach of contract.
The money was awarded to Erad on July 2009 after arbitration which MPs have said was marred with claims of bribery and corruption.
According to the report, I&M Bank issued Erad with a bid bond on condition that it was to become valid and in force on receipt of a stand by letter of credit in favour of the bank issued by an international bank of repute. MPs have said the bank issued the Bid Bond in a reckless manner and that the bond was defective. Dubai Bank on its part issued a performance bond to Erad in 2004 for US$ 932,000 (Sh78.2 million at the current exchange rate)