Acting KBC Managing Director Samuel Maina before the Public Investments Committee on Social Services, Administration and Agriculture at Parliament buildings in Nairobi on October 26. He was sacked on December 19, 2023, over a settlement offer he made.
Did KBC acting Managing Director Samuel Maina commit the national broadcaster to a $5 billion (Sh769.5 billion) arbitration payment that eventually cost him his job?
ICT Cabinet Secretary Eliud Owalo believes that he did so in a letter dated December 18, and yesterday terminated his appointment.
A flurry of letters with conflicting figures exchanged between KBC and the Ministry of ICT emerged late yesterday, adding more confusion to the 13-year arbitration case pitting the state broadcaster against Channel 2 Group Corporation.
By the end of the day, Mr Owalo, in an interview with the Nation, maintained that Mr Maina signed off the hefty settlement claim of $5 billion with the London Court of International Arbitration (LCIA) without seeking the concurrence of the ministry, National Treasury and the office of the Attorney-General and Department of Justice.
“The appointment of Mr Maina as acting managing director is terminated with immediate effect. Mr Maina should proceed on suspension immediately and disciplinary action instituted against him by the Board,”Mr Owalo wrote in a letter addressed to the KBC board chairman Benjamin Maingi.
In a letter that Mr Maina wrote to Mr Owalo, however, the ousted MD conveyed an apology for “not consulting the ministry” and “grievous misrepresentation of the figure quoted in the letter”, adding that he had withdrawn the letter sent to Mr Matthew Vinall of Dentons UK, the law firm representing KBC in the protracted arbitration case.
Sh5 billion
The Dubai-based Channel 2 Group, whose joint venture was terminated by KBC on March 16 2009, took its case to London for arbitration following the cancellation of the contract.
A letter from Solicitor-General Shadrack Mose to ICT Principal Secretary Edward Kisiangani seemed to indicate that the government was considering a final monetary offer of Sh5 billion (not $5 billion) following negotiations charged by the ministry on May 19.
Mr Owalo, however, countered the figure insisting that Mr Maina had committed the country to paying $5 billion, which is more than what the country spends annually on the 47 counties.
On September 22, Auditor-General Nancy Gathungu put the settlement claim from Channel 2 Group at $2.36 billion (Sh363.2 billion).
She noted that the company, which has since been registered in Tortola, British Virgin Island, wanted $481,977,000 (Sh74. 2 billion) for lost profits running KBC 2 as free to air terrestrial TV channel for eight years. It wanted another $241,845,000 (Sh37.2 billion) for lost profits in running the joint venture for 10 years.
The company, which is owned by a Mr Seth Ajay, also wanted another $1.64 billion (Sh251.9 billion) for the sale of the expanded joint venture, bringing the total to $2.36 billion.
It has also emerged that taxpayers have already spent Sh1.2 billion on two law firms in the arbitration case.
An earlier probe by former Auditor-General, Edward Ouko, showed that by May 14, 2018, the cash-strapped KBC had paid a total of Sh1,290,976,849 to London-based advocates and local law firms.
“No documents to show how the law firms were identified and awarded the services and signed contracts between the two parties were availed for audit review,” said Mr Ouko.
“This is contrary to Section 91(1) of the Public Procurement and Assets Disposal Act 2015 which requires that open tendering shall be the preferred procurement method for procurement of goods, works and services.
“Further, section 135(2) requires that, an accounting officer of a procuring entity shall enter into a written contract with the person submitting the successful tender based on the tender documents and any clarifications that emanate from the procurement proceedings,” he added.
Six months
Following termination of the joint venture between KBC and Channel 2 Group, the latter moved to LCIA claiming the $2.36 billion for the breach of contract.
The profits for the joint venture, which would have seen Channel 2 air some programmes and broadcast movies on KBC’s defunct Metro TV, were to be distributed between KBC and Channel 2 in the ratio of 7:3.
The agreement was valid for a period of five years, renewable for a similar period, unless either party gave a written notice of six months expressing a desire not to renew the agreement.
This arbitration case has been ongoing for over 13 years, which means the additional $2.64 billion (406.3 billion) could have accumulated interest and penalties. The case is yet to be concluded.
Disbursements for the arbitration case also seems to have been a source of disagreements between the then Deputy President William Ruto-led faction of the Jubilee administration and those aligned to former President Uhuru Kenyatta in the lead up to the August 2022 elections.
Speaking in the National Assembly, Aden Duale who was Dr Ruto’s ally, flagged the expenditure of Sh280 million as legal fees for the case, stating that some expenditures under Article 223, which allows the government to spend without the approval of the National Assembly, had been rejected by the National Assembly.
“The Chairman of the Public Accounts Committee (PAC) is here. One of the payments that have been made—the Sh280 million LCIA arbitration between Channel 2 Corporation and Kenya Broadcasting Corporation (KBC) is an audit query before us,” said Mr Duale.
