A suspected multi-million-shilling ticketing fraud has hit the Mombasa-Nairobi train service with detectives investigating a complex web that involves insiders skimming off a significant portion of revenue from each trip, the Nation can reveal.
On Friday, things took a dramatic turn when the Ethics and Anti-Corruption Commission (EACC) detectives in Mombasa arrested three senior Chinese officials and their four Kenyan counterparts working for the China Road and Bridge Corporation (CRBC) -- the operator of the Madaraka Express -- for attempting to bribe investigators. They will be charged in court tomorrow. They are being held at Port Police Station in Mombasa.
The suspected theft, which was uncovered by Kenya Railways Corporation staff monitoring the Chinese operator, is the latest controversy to hit the Standard Gauge Railway (SGR), which is the single largest infrastructure project since independence.
The Chinese operators are reportedly paid at least Sh1 billion per month to operate the service -- besides the loan repayments -- and the latest revelations will turn the spotlight back to SGR, whose Phase 2 is under construction.
The three Chinese were arrested on allegations of attempting to bribe Directorate of Criminal Investigations (DCI) officers with Sh500,000, but investigators told the Sunday Nation more CRBC officials had recorded statements in Nairobi and Mombasa and there could be further arrests.
Mombasa EACC boss George Ojowi told the Nation the Chinese expected to appear in court are the officer in charge of transport at the Mombasa terminal, the security officer and a translator.
"The investigations are ongoing and we expect to take them to court. We have the exhibit with us," Mr Ojowi said, referring to the bribery allegations and the money recovered from the suspects.
The SGR ticket scandal investigation and the arrest has been a closely guarded matter since detectives went on their trail earlier in the week.
DCI boss George Kinoti, who had promised to check and give us feedback on the arrests, did not respond to our follow up texts.
Kenya Railways Police Commander Ayub Gitonga said investigations were still on without giving any further details.
"I am aware of the matter but I cannot divulge more as the issue is still under investigation," said Mr Gitonga.
Multiple sources, who spoke in confidence, confirmed that the ticketing scam, which involves manipulating the complex booking system operated by CRBC staff to split the ticket revenues between the Chinese railway operator and the cartel of insiders, has been going on for a long time.
According to the insider, one aspect of the scheme under investigation involves creating refunds for tickets already issued to passengers on board for each of the four trips and channelling the refunds elsewhere.
Kenya Railways officials are said to have raised the red flag over an unusually high number of refunds, triggering an investigation that is likely to unearth millions of shillings in lost revenue since President Uhuru Kenyatta launched the service on June 1, 2017.
Intense monitoring revealed that the passengers who had allegedly been refunded were indeed inside the train ready to travel.
It is not clear how long the fraud had been run but well-placed sources within the ticketing docket said there are indications of up to Sh1 million per day on all trips having been stolen.
Responding to enquiries by the Nation, CRBC, which sells about 4,000 tickets per day through a subsidiary firm Africa Star Railway Operations Company, admitted to have been alerted about an anomaly on the refunds with some of its officials having been "questioned" over the same.
"There is an average six percent of refunds per day on tickets sold. We have been informed by the Kenya police of a potential discrepancy involving a few refunded tickets. The police have questioned a few of our officials and we are fully co-operating in the investigations," Mr Dai Yunjie, the firm's spokesperson, said.
The trains, which recently celebrated ferrying two million customers, run between 1,200-1,400 passenger capacity with brisk business experienced during festive seasons like December when bookings are made in full a month before.
Sources familiar with the investigations also indicate the advanced booking is another scam in the spotlight.
Insiders within the ticketing office are said to be in collusion with a major travel agent offering bulk booking for tourists who block seats immediately the online system opens and resell them at double or triple the prices to other stranded agents or individuals.
A disgruntled travel agent, who requested anonymity, told us her agency could not secure tickets from December 23 on Friday when they tried to beat the one-month advance booking.
"We had the entire train full in five minutes. After staying late at night and securing clients to take to Mombasa for holidays, we were forced to seek alternative means for them including one way flights which are 10 times more expensive. Later, small shops in downtown Nairobi had bookings for the same date which they were selling at Sh2,000 for economy and Sh5,000 for first class. It's a shame," the agent said.
A popular travel agent with wide publicity on social and mainstream media is said to be the chief ticket pirate in the seat blocking game.
Police sources confirmed the sale of tickets outside the nine designated stations at inflated prices has been an ongoing scam and many suspects have been arrested in the past.
The ticketing scam once again puts CRBC on the spot a few months after it was hit by claims of racial discrimination of Kenyan staff working for it.
The firm, which has been running the show on the multibillion-shilling SGR project from the feasibility study, civil works, supply of coaches and wagons, is expected to provide daily reconciliation of ticket purchase and revenue and it is not clear why the suspected fraud was not discovered earlier.
CRBC, however, told the Nation its information technology system for ticketing which had been sourced and tested in China was "designed to be protected against any unauthorised use".
The saga also points into Kenya's powerlessness and "observer" status after it committed to pay the firm to run the service.
It was not immediately clear if the contract for operating Madaraka Express train service allowed Kenya Railways to take over the ticketing component once investigations over the alleged scam are complete.
Additional reporting by Mohamed Ahmed