Government may have sunk more money into navy ship

The government may have paid out more money to a Spanish firm contracted to build a naval ship for the Department of Defence (DoD), according to sources at the Treasury.

The report of the additional payment comes at a time when there is a tug-of-war between the Attorney-General’s office and the ministry of Justice and Constitutional affairs over whether funds for Anglo Leasing-type projects should be released.

It also coincides with the return of John Githongo, the man who blew the whistle on the deals, from a three-year self-imposed exile.

While the AG’s office reportedly wants the money paid out, top officials at the Justice ministry are said to be questioning the validity of some of the projects whose total value stands at Sh54 billion.

Derogatory remarks

In one meeting where the projects were discussed, two Cabinet ministers are reported to have come close to blows after they exchanged derogatory remarks regarding each other’s understanding of law.

The ship, one of the 18 Anglo Leasing-type contracts the government awarded between November 2002 and April 2004, is yet to be delivered three years after the delivery date passed.

Last month, Universal Satspace, another company that had taken the government to a Nairobi court, withdrew its case to pursue arbitration in London.

A delegation of officials from the DoD, the AG’s office and Euromarine Industries, who was awarded the contract, are reported to have visited the Spanish shipyard to assess the progress of work and the amount to be paid.

Efforts to get comment from Treasury permanent secretary Joseph Kinyua failed as he was said to be out of the country while the Financial secretary Mutua Kilaka did not return our calls.

Neither did Nancy Kirui, the PS in the Defence ministry, or the Chief of the General Staff Jeremiah Kianga, answer our calls.

Lands PS Dorothy Angote, who chaired the interministerial committee on the 18 projects, said she was not aware of any payments, adding that the committee had not met for a long time.

The Kenya Anti-Corruption Commission, which was investigating the 18 contracts, was also tight-lipped on the matter.

“The officer with the file on the naval ship is out of office till Monday (tomorrow),” KACC spokesman Nicholas Simani told the Sunday Nation.

But our source said the payments were made in accordance with the recommendations of last year’s Parliamentary Committee on Defence and Foreign Relations led by then Laikipia West MP GG Kariuki.

Although the committee did not reveal how much money the government had paid to Euromarine Industries, independent sources put the figure at Sh1.3 billion.

The company is also reported to be demanding another Sh1.8 billion as of June last year for the same ship.

“The committee is convinced that the oceanographic survey vessel, a frigate, is still urgently needed by the Kenya Navy,” the report notes.

Euromarine Industries was awarded the contract to construct the ship for a staggering Sh4.1 billion (51,997,000 euros). The firm is said to have proposed a medium-term financial package that was to ease the budgetary burden on the government.

The firm also proposed financing the project through a consortium of financial institutions over a period of seven years.

Although the DoD maintains that the ship was acquired for Sh4.1 billion, the authoritative military publication, Janes Defense Weekly has put the price at Sh1.8 billion (18 million euros).

The inquiry followed similar investigations by KACC and Parliament’s watchdog Public Accounts Committee in 2006.

One of the former committee members, Gen Joseph Nkaissery, is now an assistant minister for defence.

Not only the Defence ministry has made payments. Treasury sources told the Sunday Nation the ministry of Information was under pressure to settle the Universal Satspace contract worth Sh3 billion.

Project audit

But the ministry, which hired Nairobi law firm, Wambugu, Motende and Company advocates, has vigorously defended its decision to pull out of the contract in which Postal Corporation of Kenya was believed to be paying Sh70 million a month to the fictious company for satellite services that fetched the corporation a mere Sh5 million a month.

Last year, the government hired Pricewaterhouse Coopers for Sh93 million to conduct an audit of the projects to determine which would be renegotiated and which would be cancelled.

The report, given to the government 20 months ago, is yet to be made public.