What you need to know:
- Three directors of Malili Ranch were convicted for aiding the fraud scheme that saw the firm’s members lose at least Sh553 million.
- In his judgment, Justice Mugambi noted that the fraud scheme’s masterminds managed to use the courts to wriggle out of prosecution.
In June 2009, Philip Muli Munyaka hired workers to till his 7.8-acre land within Malili Ranch in Konza, Machakos County, in preparation for the planting season.
At the property, officers from the National Youth Service (NYS) assaulted the workers and kicked them out of the property.
They informed Mr Munyaka that the government had acquired his land, which fell under a 5,000-acre parcel meant for s the Konza technopolis. The NYS officers insisted that the money had already been paid, despite Mr Munyaka not receiving a cent.
On following up with Malili Ranch bosses on why he was to receive Sh1.1 million, which was Sh460,000 short of the actual value, he was rudely turned away by the chairperson.
Mr Munyaka then turned to Law Society of Kenya President Eric Mutua, who represented Malili Ranch in the transaction. Mr Mutua allegedly told him that there was a pending court case that had the potential of seeing him get up to Sh16 million.
To date, Mr Munyaka has never been compensated for the property. His case is one of several detailing the level of fraud that also saw taxpayers lose nearly half a billion shillings.
As President William Ruto’s administration plans to pick up the pace on the Konza Technopolis project, a recent court decision has revealed that Kenya’s flagship tech hub is built on a foundation of fraud that was planned and aided by senior government officials.
The ICT ministry had paid Sh1 billion for the 5,000 acres that the government intends to set up the Ktechnopolis on, but Mr Munyaka and several others who questioned the valuation and process were not paid. Malili Ranch members received just under Sh450 million. The balance ended up in the pockets of a few senior Malili Ranch officials.
On July 4, in a decision that went largely unnoticed, Justice Lawrence Mugambi convicted three directors of Malili Ranch— David Ndolo Ngilai, Leonard Kyania Kitua and Julius Mbao Nzyuko — for aiding the fraud scheme that saw the firm’s members lose at least Sh553 million.
Together with James Kituku Munguti, they were charged in 2014 for the fraud, but Munguti died while the case was going on.
Five other individuals who were initially charged secured court orders barring their prosecution.
In his judgment, Justice Mugambi delivered a stinging indictment of Kenya’s criminal justice system as he noted that the fraud scheme’s masterminds, based on the evidence presented to him during trial, managed to use the courts to wriggle out of prosecution.
The judge was making reference to the five individuals including Kenya’s Ambassador to Belgium Bitange Ndemo, former Machakos Senator Johnstone Muthama, former Commissioner of Lands Zablon Mabea former National Police Service Commission member Leonard Leposo Musengi and Malili Ranch director Julius Maweu Kilonzo.
Mr Ngilai, Mr Kitua and Mr Nzyuko could spend the next two years in prison for their role in tricking taxpayers into paying Sh553.8 million for land that was not required or planned for.
Justice Mugambi wrote the judgement after being permitted to do so by Chief Justice Martha Koome as he had been elevated to the superior court. The fine of Sh5 million for each was imposed by Senior Principal Magistrate Peter Ooko since Justice Mugambi had been promoted to the High Court during the pendency of the case.
The three were unable to raise the fine and started serving the jail term.
The judge convicted the three for conspiracy to defraud, but acquitted them for the offence of stealing Sh553,831,731 being sale proceeds of the 5,000 acres. He also acquitted them on the offence of breach of trust saying they were not public servants.
“As I convict them (Mr Ngilai, Mr Kitua and Mr Nzyuko), I am aware that there were the main players or the principal conspirators who first conceived and executed the conspiracy but somehow, they filtered themselves out of the criminal justice process even after they were arraigned. Their collaborators in the Ministry of ICT and other places also outmanoeuvred the justice process.
“For instance, despite glaring evidence which came out through this trial process that the ministry was made aware by the government valuers that went to the ground that the land was encumbered, as documented in reports submitted by the valuers to the Ministry of ICT and also the initial report by Commissioner of Lands, the ministry pushed on with this transaction without batting an eyelid,” Justice Mugambi said.
The big fish, the judge held, tricked the system into sanitising them.
“It is my hope that in the interest of justice, the relevant State agencies will institute recovery proceedings against those that unlawfully defrauded the peasant shareholders to ameliorate the losses they suffered since some of them did not even receive a single penny despite the sale of their land,” said Justice Mugambi.
In 2009, the ICT ministry advertised that it intended to purchase 3,000 acres of land to set up the Konza Technopolis. But after several violations of procurement and public finance management laws, the government bought 5,000 acres for Sh1 billion.
Ministry officials failed to indicate changes in the tender documents or advertise the increase in acreage to alert the public. The ministry’s budget records were also not amended to indicate the change.
With the Sh200,000 per acre quoted by Malili Ranch during tender evaluation, the government should have paid Sh600 million
For Malili Ranch shareholders, it was a double loss as a small cabal in the boardroom pocketed Sh553 million since they had only consented to the sale of 3,000 acres.
In December, 2008 Prof Ndemo called one of his deputies, Henry Mungasia, and instructed him to start preparing an advertisement in the newspapers indicating that the government intended to acquire 3,000 acres of land. The decision had been reached in a Cabinet meeting, Prof Ndemo explained.
No tender documents were generated, only the advertisement.
Former Judge Kasanga Mulwa and a company identified as Samsure Enterprises responded to the call alongside Malili Ranch Ltd.
Justice Mulwa failed to grant access to his land, while Samsure quoted Sh400,000 per acre. Malili Ranch had the lowest bid of Sh200,000 per acre.
The opportunity brought relief to Malili Ranch, which was considering folding up as its operations were no longer financially viable. Its members had already been allocated land parcels each measuring 7.8 acres as part of the folding up process.
Justice Mugambi noted that the acceptance letter was sent out to Malili Ranch on February 20,2009 before results of an official search were communicated by Mr Mabea, which were received on March 20,2009.
This means that if the official search showed that Malili Ranch did not own the land, the government would still be in a binding contract with the firm. A huge governance gap.
George Obuya Mandanji, the chief procurement officer at the ICT ministry at the time, told the trial court that Prof Ndemo had an advert ready and handed him a hard copy of the same.
During award of the deal to Malili Ranch, Mr Mungasia informed Mr Mandanji that the acreage had been increased. The change had been done verbally and “negotiated at a high level”.
A letter awarding Malili Ranch the tender was delivered two weeks before the tender committee had even signed minutes of its meeting approving the award.
“At the time I was communicating (to Malili Ranch), the minutes had not been signed. Communication was coming from the permanent secretary (Prof Ndemo) himself and is the one saying he was also under pressure from other ministries,” Mr Mandanji told the court.
As the ministry was doing its part, a group of Malili Ranch directors held a secret board meeting. In the meeting, the late Josiah Munuka (chairman), Julius Maweu Kilonzo (secretary), Peter Kanyi, Munguti and Mr Kitua resolved to increase the acreage to 5,000 despite not getting approval from shareholders.
The judge noted that although Malili Ranch responded to the government call for bids, it knew very well that it had no land since in 2006 shareholders had resolved to sub-divide the ranch.
Before the money was paid, Mr Mutua drew an agency agreement with Mr Musengi’s Gateway Logistics dated February 3, 2009 to receive Sh40 million as agency fees upon the government’s execution of the sale agreement.
When the government released a Sh400 million down payment on June 25,2009 to E.K. Mutua & Company Advocates, Mr Mutua disbursed Sh40 million to Gateway, Sh18 million to Mr Munuka, and Sh16 million each to Mr Kanyi and Mr Kilonzo, Justice Mugambi noted.
Gateway was initially issued with post-dated cheques for Sh100 million as agency fees (Sh21,000 for each acre under the land deal). But after the government made a Sh400 million down payment, Mr Mutua instead made an electronic funds transfer of Sh40 million to the firm.
An individual identified as Ann Kimuyu, who allegedly introduced Gateway Logistics to Mr Munuka, was paid Sh6 million while Mr Mutua’s firm allegedly received Sh42.5 million for legal services.
As the sale was proceeding, Mr Kilonzo approached some individual members and bought their parcels of land through at a lower price.
Justice Mugambi found that out of the Sh1,560,000 paid for the 7.8 acres, Malili Ranch officials deducted close to Sh460,000 per member.
Mr Kilonzo and Mr Kanyi were the first to be charged before former chief magistrate Gilbert Mutembei for theft of over Sh100 million from Malili Ranch shareholders but they were acquitted. Later Mr Kilonzo and others were charged with theft of Sh179 million but their trial was quashed.
Fresh investigations led to the prosecution of Mr Ngilai, Mr Kitua and Mr Nzyuko.