EXCLUSIVE: The Anglo Leasing Truth

Anglo Leasing-type deals in which Sh16 billion of public money could have been lost were perpetrated by President Mwai Kibaki's inner circle to raise money to counter the opposition at Bomas, and fund the Yes referendum campaigns and next year's General Election, the Sunday Nation can reveal today.

Investigations have established that Energy minister Kiraitu Murungi expressed shock at "how high" in Government  the Anglo Leasing web of corruption went. And Mr Murungi - who then headed the Justice and Constitutional Affairs ministry with an oversight role in ant-corruption efforts  - frankly admitted that some of the proceeds were intended for political projects. 

Inquiries have also unearthed concerted efforts by key figures in the Narc Government to head off corruption investigations into suspect projects, in order to limit political damage and protect the careers of those involved. 

Just before last year's referendum on the proposed Constitution, Mr Murungi vowed publicly that the Yes side would put in place a campaign mechanism that would "shake this country". 

He later clarified, in the face of criticism that the Government intended to use public funds to campaign, that the Yes supporters would use "our own wealth". 

But now the Sunday Nation has established that the minister and two of his colleagues were part of a Narc insiders' group which pushed for payment of a questionable Sh4 billion defence contract from which the party hoped to receive a campaign donation. 

An audit of security contracts in the Office of the President last year discovered that the bill for Anglo Leasing-type projects was $200 million (Sh14.8 billion at current exchange rates). 

Anglo Leasing has been shown by investigators to be an entirely fictitious company whose only business was to receive funds from lucrative government contracts, then channel them back to those who dreamt up the scheme. At least five companies were set up to perpetuate such swindles.

These contracts included Sh2.7 billion to produce tamper-proof passports for the Immigration Department, and Sh4.3 billion to supply and equip forensic science laboratories for the CID. Other schemes involved the purchase of four refitted Navy ships for Sh4.1 billion and a Sh6 billion new computer and surveillance system for the police, known as E-Cop.

Among other close Kibaki aides named by investigators as having some knowledge of the scandal, Vice-President Moody Awori - despite promising Parliament that there was "no impropriety" in the passports project - is shown to have hosted a meeting which questioned why the matter was being looked into after he had explained it to Parliament. 

Inquiries also reveal cover-up attempts in 2004 by Mr Murungi, then in charge of Justice and Constitutional Affairs. Sources said he seemed to think he was protecting Finance minister David Mwiraria, then National Security minister Chris Murungaru and the President's personal assistant, Mr Alfred Getonga, when he pushed for slowing down of investigations.

Mr Murungi was quoted as describing Mr Mwiraria, Dr Murungaru and Mr Getonga as "political pillars" whom "we can't afford to lose". He was reacting to the removal of Permanent Secretary Joseph Magari and four other top civil servants after the Sh2.7 billion passports deal was condemned by auditors. 

The Government signed an agreement with a fictitious company to buy a Sh700 million passport-making kit for Sh2.7 billion. Analysts fear that contracts in the security sector (mainly dealt with by the Office of the President) estimated to be worth $700 million, or Sh50.47 billion, could contain more Anglo Leasing-type projects. 

Investigations show the President's inner circle said they relied on contracts from questionable contracts to carry out political activities. Records of a private meeting in 2004 have a senior Cabinet minister saying he believed that proceeds from Anglo-Leasing were being used for political work. 

In another conversation on May 20, a senior minister is reported to have said President Kibaki "is above money", and "does not touch money". 

The people the minister spoke to at another meeting on September 2, 2004, said he confessed there was a lot of pressure for money because they were sent to do "political work" but not given the money. He is said to have expressed fear that there was "another Goldenberg ahead".

Those who were present at the May 20 discussion recall this minister joking that President Kibaki's own men could be the first victims of the war on corruption they had themselves started. 

One source recalled a conversation in 2004 at Sheria House during which Mr Murungi said providing money for political projects was "left to the chairman of the Resource Mobilisation Committee Chris Murungaru". 

In 2004, the "political work" related to the power struggle between the President's National Alliance (Party) of Kenya and the Liberal Democratic Party. 

Other ministers had suggested at earlier meetings that money was needed to counter the opposition at the Bomas constitution talks. 

To consolidate power, NAK wanted the National Rainbow Coalition (Narc) to become a party and to hold nationwide elections which were to cost Sh200 million, according to an estimate reportedly prepared by Prof Nick Wanjohi. 

Formation of the Government of National Unity, which included opposition MPs some of whom were said to "understand only one language - cash" also contributed to the cash crunch. There was no proper legal channel to provide funds for such initiatives as the Consensus Group, chaired by East African Cooperation minister John Koech, causing Mr Kibaki's inner circle to resort to informal methods of financing.

Recollections of a meeting that year have Mr Murungi saying: "Like now these guys need Sh200,000 so I'll go to Alfred and ask for Sh200,000 to give akina Koech so they can organise their people."

However, within Narc, investigations show, there were fears that "resource mobilisation" was being used to enrich individuals.

One of the projects from which money was to be raised for politics was the Navy ship being built by Astilleros Gondan of Spain at a cost of Sh4.1 billion. The shipyard was contracted by Euromarine, which was awarded the tender in a process that has been criticised as irregular. 

Financing was organised by Euromarine, Impressa de Financas and Navigia Capital Corporation. Ministers believed Euromarine was associated with businessman Anula Pereira. They also expected him to donate some of the proceeds from the project to be used for "political work". 

Mr Pereira, a Sri Lankan with Cypriot origins, came to Kenya in the 1980s and was a defence contractor during the Kanu regime. Investigations indicate ministers believed the Navy project was given to a company associated with Mr Pereira as a reward for "helping" Narc in 2002. 

Records from a January 17, 2005, meeting show Mr Murungi saying the project was being carried out by Mr Pereira in the expectation that he would "give something" for Narc's political work.

Defence analysts say the ship, which should have been delivered last year, could have been built for less than half of the Sh4.1 billion Kenya undertook to pay. 

There was quiet fury in the Government when former Ethics PS John Githongo stopped payments to Euromarine in 2004.