Kenyans could pay up to Sh80 billion to an Italian company at the centre of the Arror and Kimwarer dams project, even though no actual work was done.
The Director of Public Prosecutions (DPP) yesterday informed the Anti-Corruption Court in Milimani, Nairobi, that CMC Di Ravenna- Itinera (JV) Joint Venture had filed a case before the arbitration court in The Hague in pursuit of the payment.
The firm wants the government of Kenya compelled to pay Sh80 billion for the project whose initial budget was Sh65 billion.
Through special prosecutor Taib Ali Taib, the DPP made the revelations at the beginning of the trial of former National Treasury Cabinet Secretary Henry Rotich, who is charged alongside other government officials with corruption.
“We shall demonstrate to this court that it is not only the Sh65 billion the accused persons planned to steal, but the outcry that the government has been exposed to is in excess of Sh80 billion, which contractors are actively pursuing in arbitration in The Hague,” said Mr Taib.
He continued: “They (contractors) seek to collect the money even though no dams exist on the ground.”
He pointed an accusing finger at Mr Rotich, former Kerio Valley Development Authority (KVDA) Managing Director David Kimosop and other government officials accused of conspiring to plunder public funds.
Plundering taxpayers’ funds
“The evidence available leaves no doubt that the Finance CS, with the intention of plundering taxpayers’ funds, abused his fiduciary and legal responsibilities, leading to loss of over Sh21 billion to date and counting,” said Mr Taib.
The Sh21 billion was lost through the Sace Policy of Insurance to secure loans borrowed for the dams project.
While appearing before Chief Magistrate Lawrence Mugambi, Mr Taib said the Cabinet approved construction of only one dam, Arror, and not Kimwarer.
However, Mr Rotich and KVDA officials allegedly added the Kimwarer project and floated tenders in December 2014 for both dams, which they proceeded to award to the Italian firm.
The prosecution said the contract was given to a “ghost” as the firm “did not exist” at the time it was awarded the multibillion-shilling tender and at the signing of the work agreements in April 2017.
“At the time the agreements were signed to pay them the planned billions of shillings, they were not even registered and did not exist in law,” said Mr Taib.
“CMC Di Ravenna Itinera JV never bought or acquired any tender documents. It did not submit any bid for the construction of these dams. It was not one of the companies on the record at the opening of the tenders for these two projects,” said Mr Taib.
“Ridiculous as it may sound, it was not the recipient of the letters of the award of the tender, yet through impunity and corruption, it was awarded the tender worth Sh65 billion out of thin air,” Mr Taib explained.
The court heard that the original tenderer was a company known as CMC Di Ravenna of Italy and not CMC Di Ravenna Itinera JV.
But during the procurement process a new firm, CMC Di Ravenna Itinera JV, was allegedly inserted as a joint venture alongside Aecom South Africa PTY Limited.
“A different company submitted the tender. A different company was qualified by the tender committee. A different company won the acceptance letter and the tender. A different company was contracted to perform the tenders. The impunity with which the tender proceedings were dealt with and the illegal changes and breaches of law led to the ridiculous result,” said Mr Taib.
Mr Taib stated that during the criminal trial, the prosecution would demonstrate the illegalities committed during the procurement process and the conspiracy to defraud the government and the taxpayer.
“We will show how despite the joint venture winning the tender, the bidder was described as CMC Di Ravenna of Italy with no mention of Aecom South Africa. The letter of award for the two projects was issued to another new company known as CMC Di Ravenna of South Africa,” he stated.
The prosecutor added that the former Finance CS acted outside the law and conspired with his co-accused to defraud the government using the projects for purposes of self-enrichment.
Mr Rotich is accused of securing the loans without any competitive bidding, against the interest of the republic of Kenya, at exorbitant interest rates and on terms that were prohibitive.
"We shall show how the Finance Cabinet Secretary breached the law and secured loans from four private commercial banks in Italy for KVDA to construct the dams, even though he had no legal authority to secure any loan for state corporations,” stated the prosecutor, adding that the financing plans were disguised as government-to-government agreements.
The prosecution said the Treasury CS only has the authority to secure loans for the national government, which was not involved in this case.
Mr Taib said the former CS also bought and paid more than Sh8 billion for an insurance policy that took care of the interests of the contractor and not the government of Kenya.
The court heard that the Italian government never signed or negotiated the agreement, nor did any of its entities sign the financing agreements on its behalf.
Mr Rotich is also accused of breaching the law by not bringing the proceeds of the loan to the consolidated fund account of the government of Kenya.
"The money was being disbursed from Italy to an account in the United Kingdom without the involvement of the government of Kenya and later transferred to the Italian contractor without passing through the consolidated fund in Kenya as required by law," said Mr Taib.
He went on: “The CS took the loans without lawful authority. To add salt to the injury, he took them with the knowledge that he was breaking the ceiling for debt set by Parliament. There was no approval by Parliament and he knew the budget did not exist at the national government or at KVDA”.
Further, the DPP said the accused persons borrowed more money than was needed for the two projects and unlawfully inflated the contract amounts.
They allegedly agreed to pay a higher exchange rate and as a result lost billions just from the exchange rates applied.
They paid out the contingency amount of 10 per cent of the value of the total projects in advance, when this is an amount, as the name suggests, for contingencies in case at the tail end of the project additional works would be deemed necessary.
The prosecution further stated that there is ample evidence that the contractor cannot move into the site even today, even if they wished, as no site had been secured.
The prosecution told the court that the land earmarked for the projects had never been secured from the National Forest Service and from private owners.
“The National Forest Service has made it very clear that is shall not release any land for the projects, yet the Finance CS saw it fit not only to source for the loans but paid for the same and disbursed over Sh11 Billion shillings for a project that was incapable of commencing due to the fact that no land had been secured for the sites of the proposed two dam projects,” said the prosecutor. The hearing continues tomorrow.