The Star (Nairobi)

6 June 2014

Kenya: Anglo Leasing Firm Could Not Be Located - Auditor

Photo: Times of Zambia
Court gavel.

FIRST Mercantile, a company which took most of the Sh1.4 billion paid by the government last month, could not be located at its Switzerland address in 2006 when the deal was audited.

In his report of April 2006, Auditor General E N Mwai listed First Mercantile Securities Corporation among seven Anglo Leasing-type firms which did not exist.

In contract documents, First Mercantile gave its address as 1 Place Des Florentius, 55 Rue Du Rhone 1204, Geneva, Switzerland but it could not be located at that address.

Other firms that could not be located in Switzerland included Anglo Leasing & Finance of UK, Sounday Corporation of England, Infotalent, Midland Finance & Securities, and Apex Finance Corporation.

Anglo Leasing, Infotalent, and Leyland Exports returned Sh1.05 billion when the scandal flared up in June 2006.

"Additional available information indicates that at least seven of the supplier-credit providers do not exist in the countries in which they are purportedly registered and may therefore not be bona fide registered business firms," says the report seen by the Star.

The other firm which shared the recent Sh1.4 billion payout, Universal Satspace, continued to get payments in 2005, even after the dubious contracts had been exposed.

On May 15 President Uhuru Kenyatta said payments to Universal Satspace were suspended on August 12, 2004 before the company filed a suit in July 2006.

However, the audit report shows that Universal Satspace received Sh380 million in four separate payments in 2005.

"The reasons given for continued servicing of the credit up to May 2005 was that the service provider, Universal Satspace (North America) had threatened to sue the government and to disconnect the Postal Corporation of Kenya from the satellite channel which the corporation was providing the public with internet services through VSAT sites installed in 396 post offices," the audit report says.

The Auditor General provided evidence of the dubious nature of the 18 agreements in which contracts worth Sh56 billion were awarded outside the budgetary process and without parliamentary approval.

The audit report states that in the absence of competitive bidding, it was not possible to ascertain how the credit terms and interest rates were arrived at.

"In all the contracts, there was no linkage between payments made to the contractors/suppliers by the Treasury and the level of actual project implementation by the contractors/suppliers on the ground," the audit report said.

According to the report, government was in effect "funding financiers/suppliers to finance the procurement of goods and services due under the contracts while also paying interest and other financing costs to the same financiers/suppliers."

"Even where the project is said to have been completed on the ground, the value received is still questionable in view of the uncompetitive manner in which the supplier/credit provider were identified and contract prices agreed," it states.

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