Three Cabinet Secretaries are among senior government officials lined up for questioning and possible prosecution over the Sh29 billion Itare Dam scandal as investigations enter the homestretch, the Sunday Nation has established.
Water CS Simon Chelugui has already gone through the first round of questioning, while others who are expected to shed more light on the saga are Agriculture CS Mwangi Kiunjuri and his Devolution counterpart Eugene Wamalwa. Police sources said former Treasury CS Henry Rotich, his principal secretary Kamau Thugge, and Water PS Joseph Irungu are also expected to provide detectives with evidence on the scam.
Director of Criminal Investigations George Kinoti said summons have been issued to some of those who are lined up for questioning. "They are expected to come for questioning next week," he said. "Those who we will determine played a part in the stealing of money borrowed by taxpayers for what was supposed to be a good project will be taken to court." He did not divulge their identities.
Taxpayers have already paid out Sh11 billion for a project that died when it had barely started. In a shocking revelation, some of the money was used as kickbacks for persons who pushed for the deal to be awarded to an Italian company that was at the time on the verge of bankruptcy.
Although the deal to construct the dam was signed on July 15, 2015, the Sunday Nation has obtained documents that suggest the plan to swindle taxpayers may have begun two years earlier, in 2013, just two months after the tender for the dam was announced.
While inviting bids for the tender, Rift Valley Water Services Board (RVWSB) asked interested parties to lodge their documents before October 4, 2013. Two months later, on December 4, 2013, CMC Di Ravenna of South Africa entered into a confidential consultancy contract with a local company, Stansha Limited.
In the 'Consultancy Service Agreement for Itare and Ruiru Two Dams', Stansha asked for a three per cent fixed fee of the total contract sum if CMC Di Ravenna signed a deal for either of the projects.
According to the contract, Stansha was supposed to "advise on strategies and tactics of CMC Di Ravenna South Africa's participation in the public tendering process or selected invitation for contract negotiation" to enable the Italian firm to develop a competitive and viable tender for the project.
The firm was also supposed to "promote CMC Di Ravenna" among government authorities as well as local engineering and construction communities to gain the bidding company "a favourable and positive position to pursue the contract for the project".
"The total consulting service fee is equivalent to three per cent of the contract, excluding VAT variation subsequent to the signing date of the contract, which may lead to the change of contract price," reads the contract.
Lamu West MP Stanley Muthama, who is a director of Stansha, was arrested in July and charged with tax evasion amounting to Sh400 million. Part of the money under question is believed to have been kickbacks given to the MP for assisting CMC Di Ravenna to clinch the contract.
Such kickbacks, according to investigators, could be part of the reason CMC Di Ravenna was paid colossal amounts of money in advance for the Itare Dam, even when it was clear that the company was facing difficulties in completing the Kimwarer and Arror projects, which have since collapsed. At the time it clinched the Itare Dam deal, CMC di Ravenna was categorised by Standard & Poor's as 'CC', meaning it was highly vulnerable.
But, despite this poor rating, the company went ahead and won the tenders for construction of Radat Dam in Marigat at a cost of Sh20 billion, and the Kithinu Dam in Meru County, which will cost Sh26 billion.
Detectives are also wondering why, while Mr Muthama had pushed for CMC di Ravenna South Africa to get the Itare contract, invoices for the advance payments were made to CMC di Ravenna Itinera JV Kenya branch and paid to a bank in London.
Some of the money was then rerouted to a bank in Westlands, Nairobi, from where it was withdrawn in cash running into hundreds of millions of shillings.
However, that is not the only anomaly in the contract that is under investigation; Treasury mandarins and officials from the ministries of Water and Devolution as well as RVWSB, curiously decided midway to change the financing model of the project after the tender had been floated and won by CMC Di Ravenna.
When the project was floated in 2013, the contractor was also supposed to seek financing and then bill the government after finishing construction within four years.
The tender announcement asked interested contractors to provide information "demonstrating that they have the required financial capabilities or backing, technical qualifications and relevant experience to perform the services and works".
In essence, the Engineering, Procurement, Construction and Financing (EPCF) scheme meant that the contractor was not only responsible to engineer, procure and construct the project, but also finance it. This would have cushioned taxpayers in case the contractor failed to deliver the project. However, the government suddenly made an about-turn on the financing model and decided to seek money for the dam on its own, despite having already granted CMC Di Ravenna a contract. That is how, in July 2015, two years after the tender was awarded, Treasury signed a Sh34 billion commercial loan agreement with BNP Paribas and Intesa San Paolo banks for construction of the dam.
According to investigators, the scheme was a carbon copy of the Kimwarer and Arror scandal, which early this year sunk the careers of Mr Rotich and Mr Thugge at Treasury. The former Treasury chiefs are currently facing corruption charges alongside 27 other government officials over the Kimwarer and Arror scandal.
For Itare, although the construction contract was worth Sh29 billion, the government signed a Sh34 billion commercial loan for the project. Why an extra Sh5 billion was added to the taxpayer burden, and who benefited from this added cost, is a question investigations will be seeking answers to when they start the second round of questioning this week.
The signing of the deal was witnessed on July 15, 2015, by President Uhuru Kenyatta and former Italian Prime Minister Matteo Renzi, who had arrived in Nairobi the previous night and driven straight to State House for talks aimed at closing the contract.
Also at State House on that day were Italy's Deputy Foreign Affairs Minister Mario Giro, International Economic Affairs Adviser Prof Marco Simoni, ENI chief executive officer Claudio Descalzi, and ENEL Green Power chief executive Francesco Venturi.
From the Kenyan side were then Treasury CS Rotich, Foreign Affairs PS Amina Mohamed, and Mr Wamalwa, who had just a week earlier been sworn in as Water Cabinet Secretary.
Mr Wamalwa's appointment to the Water and Irrigation Ministry in April 2015, following President Kenyatta's reorganisation of the government after some Cabinet Secretaries were suspended on corruption allegations, created a lot of infighting within the Jubilee government.
For three months Mr Wamalwa remained a minister on the streets as the URP wing of Jubilee was unwilling to cede the irrigation department, which President Kenyatta wanted to hive off from the Agriculture department after suspending Mr Felix Koskei.
To create the Ministry of Water and Irrigation, the President had also taken the water docket from the Environment docket, which was at that time under Prof Judy Wakhungu.
On Friday, Mr Chelugui, the current Water CS, appeared to throw Mr Wamalwa under the bus when he said most of the controversial payments for Itare Dam were done when Mr Wamalwa was the Water minister. He said by the time he assumed office the contract had already been signed and awarded.
Payments of Sh4.3 billion, Sh3 billion and Sh2 billion were made before 2017, and the final payments of Sh400 million and Sh200 million were done in June 2018, said Mr Chelugui. The Sunday Nation has seen documents indicating that a total of Sh11 billion has been paid to CMC Di Ravenna to date for what has turned out to be a ghost project.
"There was a last payment of Sh300 million which, after consultation, we stopped. Treasury was almost paying when the contractor suspended works," said Mr Chelugui.
The government, according to the CS, has limited options in unlocking the stalemate surrounding construction of the multi-billion-shilling project. Construction work stopped in August last year when employees at the site were asked to go home.
According to Mr Chelugui, the best approach to unlock the deadlock would be to re-advertise the works or subcontract on the same arrangement, if financing is secured and available, and if the contractor is willing to terminate the current contract.
"If we terminated the contract, we were going to lose the money, and if we assigned or subcontracted we required approvals from Treasury and not from the Ministry. We had to communicate to Treasury to engage the financiers to find a solution on the financing part because, even if we advertise afresh and we do not have the funds, it is futile," he said.
Additional reporting by Benardine Mutanu.