How Anglo Leasing scandal soiled Kibaki legacy, anti-graft campaign

David Mwiraria

Former Finance minister David Mwiraria. Mwiraria died in April 2017.

Photo credit: File | Nation Media Group

Before the late President Daniel Moi left power, some Kanu mandarins signed a Sh10 billion Kenya currency printing tender. But as soon as President Mwai Kibaki took over, he cancelled the 10-year De la Rue tender in his first meeting with Finance Minister David Mwiraria and Central Bank governor Andrew Mullei, triggering a series of events that would soil his relationship with London.

Kibaki had hoped that his administration would be free of scandals and that under-the-table deals would be over. He was wrong. Behind the scenes, his officers were signing more deals to a phantom company – Anglo Leasing. It would be much worse than the currency tender.

When British High Commissioner Edward Clay complained that “they are vomiting on our shoes”, it was an attack on the Kibaki presidency, and its insiders who had perfected the art of sleeze from Kanu. For a man who had been elected into office with a promise to fight corruption and clean up the system, the scandals that trailed his presidency came as a surprise, though not a shock.

While Kibaki has been celebrated as Kenya’s “best president” , the Anglo Leasing scandals soiled his legacy, although he was not directly involved. More so, cancelling of the De la Rue tender had opened some tender wars within his Cabinet as various egos clashed – and as the jostling for a cut came to the fore.

Commercial war

The matter also became a commercial war with Britain taking sides, thus the anger exhibited by Edward Clay. Britain had also lost a navy ship contract to the Anglo Leasing cartels, and the delivery of police vehicles had now been taken by Toyota. For the first time since 1950s, the face of the ubiquitous government Land Rover was to change.

But how did the De la Rue saga evolve? In a letter dated March 14, 2003, signed by Mwiraria, the Finance minister dismissed the currency contract as “fishy” and “single-sourced”. He told CBK governor Mullei: “The contract became effective when the Narc government was in power and we should, therefore, have been consulted. There was, therefore, no reason for the former government to award the contract as early as they did unless there was something fishy.”

It was this letter that ultimately cancelled the De la Rue tender – and CBK was asked to open the tender to other players. It was the first time that De la Rue was facing a challenge in Kenya. The only other time that the Kenyan currency was printed by another firm was when President Moi granted Tony Rowland’s defunct company, Harrison and Sons, a tender to print Sh20 and Sh50 notes in addition to the second generation identity cards in 1989 and 1990. But some of the notes became controversial – some people claimed there was a snake motif – and they were essentially withdrawn. The agreement signed by Central Bank on Nahashon Nyagah’s watch had given – through single-sourcing – a 10-year multibillion-shilling contract to the currency printer.

Kibaki found himself in a greater mess after he tried to have his team navigate the intricate currency printing jungle – where money talks and cartels reign. When the first tender was floated, the bids came from Giesecke & Devrient of Germany for $142 million compared to De la Rue’s $139 million. A French company that was linked to the Anglo-Leasing passport printing saga, Francois Charles Oberthur Fiduciaire (FCOF), had bid for $99 million, while the lowest bidder was Orell Fussli of Switzerland that had offered $96 million.

A Canadian firm that had been approached to make presentations had also been dropped because it did not specialise in cotton substrate notes.

Interestingly, in what started to smell like Narc’s first scandal, the two lowest bidders were knocked out on technicalities, leaving De la Rue and the German company in the race. After building a factory in Ruaraka, De la Rue was enjoying some favours from the Kanu government: a 10-year tax holiday, EPZ status and could import equipment duty free. Minus a contract, all that investment was now in limbo – and most of its contacts within government had gone with the fall of Kanu.

Radical change platform

Kibaki’s presidential victory was on a platform for radical change, but the same problems of the Kenyatta and Moi regimes, when big sharks lined up behind multibillion-shilling tenders, continued. While the Anglo Leasing projects had been consummated by Kanu insiders, just like the currency tender, they approached the new barons in the Kibaki government for assistance and payments. The result was a scandal that would taint Kibaki’s efforts to fight graft as his most trusted politicos were caught deeply into it.

In May 2004, Kanu MP Maoka Maore exposed the first fraud – a Sh3.4 billion passports printing deal between the Ministry of Home Affairs - headed by Moody Awori - and a British lease finance company, Anglo Leasing. The deal had not only violated the procurement laws but was also overpriced. More so, the firm that had been awarded the tender had no known history of printing passports but was a briefcase company.

And before Kenyans had processed the passports saga, it was also discovered that the same tenderpreneurs had been given another Sh4 billion contract to build a forensics laboratory for the CID (now DCI) – and that payments for that tender, which had started during the Kanu regime, continued with the Narc administration even though there was nothing to show on the ground.

When investigations started, some anonymous people wired back Sh1 billion as enquiries by John Githongo, who had been appointed Permanent Secretary in charge of ethics, started prodding for answers. He would also claim later that he had been asked by a Cabinet minister to go easy on the investigations.

Those close to the President, including Kiraitu Murungi, dismissed Anglo-Leasing as “the scandal that never was.” But other questionable deals emerged as another Sh4 billion tender for the building of a navy ship emerged. Many other questionable tenders had been signed off by the Office of the President, especially under Dr Chris Murungaru’s security docket, and signed off by Mwiraria. To evade parliamentary scrutiny, these tenders were based on the principle of debt financing, which had the effect of disconnecting them from House approval. More so, they were all overpriced and there was talk of corruption.

It was during this period that Githongo, after handing his file to the anti-graft commission, came under pressure and this forced him to go to exile and abandon his State House job. He had realised that the contracts were designed to steal taxpayers’ money.

With Githongo’s departure, Britain slapped a visa ban on Dr Murungaru, citing information linking him to corruption. He later sued and won a defamation case against Githongo, who was ordered to pay him Sh27 million in damages. Kibaki reacted by removing Dr Murungaru from the security docket and appointed John Michuki. He also sacked three permanent secretaries and had them charged in court. None was jailed.

Case terminated

When the Law Society of Kenya tried to privately prosecute Awori, Attorney General Amos Wako and Mwiraria over the passports and forensic lab deals, Wako took over the case and terminated it, thus putting Kibaki in yet another quandary. Essentially, it seemed Kibaki was unable to quiet Anglo-Leasing, which was now eating into his popularity.

When the Nation published the details, the evidence suggested that Awori, Murungaru, Muthaura, Murungi and Mwiraria had all tried to stop probes into the Sh50 billion Anglo-Leasing contracts because of the involvement of Kibaki insiders in the deals. While Kibaki reaffirmed his commitment to fighting corruption, the intrigues and division within his government, thanks to a broken MoU between NAK and Raila Odinga’s LDP, continued to be the source of acrimony.

However, Kibaki introduced a new ministerial code of conduct, banning ministers from doing business with the departments they headed. The government also suspended payments for the 18 security contracts until the issue was resolved. In February 2006, Mwiraria, Saitoti and Murungi all ‘resigned’, because of evidence associating them with graft. Saitoti had been linked to the Goldenberg scandal and the Bosire Judicial Commission had recommended his prosecution.

In total, as Parliament would be told later, 18 suspect contracts with a value of Sh54 billion were issued between 1997 and 2004. While the government was forced to pay some of the debts, it still owes the companies some Sh20 billion, though they did not make any supplies.

The debts on the registers include five companies—LBA Systems, Sound Day Corporation, Apex Finance, Ciara Systems and Midland Finance—for security contracts. In 2014, the Treasury reached a negotiated settlement of the long-running legal dispute with one of the 13 Anglo Leasing companies, clearing the main hurdle that had delayed plans to issue Kenya’s first Eurobond.