Sh537m stolen from Kemri pension fund

The entire pension fund of the Kenya Medical Research Institute has gone missing, according to a government investigation.

The fund consisting of more than half a billion shillings is suspected to have been wired out of a trust account into a separate account.

Of the Sh537 million which should be in the trust account, only Sh242 remains in the separate account, the Sunday Nation has learnt.

The Kenya Anti-Corruption Commission has started an investigation into what may turn out to be one of the biggest pension scandals ever.

Replace or recover

The Sunday Nation understands that the ministry of Public Heath and Sanitation is trying to figure out how to replace or recover the workers’ savings.

Sources privy to the investigation said they believed the money was wired to a separate account from the proper trust account by former Kemri officials.

Once in the second account, the funds were withdrawn and stolen, investigators believe. One source told the Sunday Nation that the employees’ savings were siphoned out as soon as they were wired into the proper trust account.

The money was banked one day and withdrawn the following day.

Investigators from the Retirement Benefits Authority traced the second account but found only Sh242 in it. They also found what they said was a suspicious dollar account, which they suspected was used to divert donor funds.

They said they suspected that although the account was made to look like one of Kemri’s official accounts, it was not. Special auditors have examined pension transactions going back to 1996 in an attempt to understand where the money went.

Audit reports

Audit reports showing the pension fund to be in a sound condition were routinely filed, according to the investigating team.

An external auditor who verified the accounts was at one time paid Sh19 million, the team said.

Also in the records is the name of a lawyer who was paid Sh9 million for performing unspecified duties for the research institution.

It is understood that the RBA has written to Public Health and Sanitation minister Beth Mugo, Attorney-General Amos Wako, KACC director Aaron Ringera and Finance permanent secretary Joseph Kinyua over the issue.

The retirements fund regulator wants the government to ensure that those responsible for the theft are punished and the employees’ pensions recovered.

Kemri started managing its own pension fund after the collapse of the Kenya National Assurance Company in 1996. And the investigators established that Sh110 million recently paid by KNAC was part of the Sh537 million missing.

Strangely, there have been few complaints by Kemri retirees.

A source familiar with the institute said the management was always generous to retiring staff, with some allowed to continue working on contract past retirement and others awarded tenders to supply goods and services to the institute.

The children of retirees have also been offered employment at the institution, the source said.

In the opinion of the source, “this was an elaborate scheme to steal from the workers but at the same time pretend to be helping them.”

Kemri is a government institution but receivesd donor funding. It is charged with carrying out health science research.  It has been involved in trying to find the cure for HIV/Aids and malaria among other diseases.

Scientists from other countries and international institutions are also based at the institution established in 1979.

On Saturday, KACC spokesman Nicholas Simani said the commission’s investigators had been sent to the institution.

Donor funds

He said KACC was also investigating claims that donor funds meant for the institution were being diverted to private accounts.

“There are allegations that donor funds have been diverted into personal accounts … we have been at the institution for a month but we cannot disclose details until the investigations have been completed.”

However, he said some cases have been concluded.  

Kemri’s long serving director Davy Koech was suspended in August last year over investigations into the disappearance of Sh19.3 million.

The money, in an account jointly operated by Kemri and the Centres for Disease Control (CDC) in Kisumu, was alleged to have been transferred irregularly.

In a letter dated September 12, 2008, the inspector-general (corporations) Peter Ondieki directed government inspectors, led by Ms T. Gichana, to investigate the disappearance of the money.

RBA, whose investigators have been on the case for six months, is understood to have requested KACC to seize the assets of any official found to have had a part in the disappearance of the pension fund.