The hearing of an appeal in which Sirisia MP John Waluke and his business partner Grace Wakhungu are fighting against a lower court’s ruling that sent them to a combined 136 years in jail has begun.
The two were sent to jail for theft of Sh297 million from a state Corporation.
In the appeal filed at the High Court in Milimani, Nairobi, the two are also fighting a combined Sh2 billion fine imposed two years ago for alleged ‘supply of air’ to the National Cereals and Produce Board (NCPB).
Mr Waluke’s lawyers admitted that he pocketed Sh50 million from the fraudulent maize supply deal at the NCPB 18 years ago.
Through lawyer Elisha Ongoya, the lawmaker wondered why the trial court ordered him to pay twice the amount lost (Sh297 million) yet he received Sh50 million.
The court heard that Ms Wakhungu pocketed Sh40 million.
The status of the balance of the money is unknown, though it was received by their trading company, Erad Suppliers and General Contractors Limited.
“The money was received by Erad and not Waluke. It is admitted that both Waluke and Wakhungu were directors of Erad. Out of the decretal amount that was received, Wakhungu received Sh40 million while Waluke got Sh50 million,” said lawyer Ongoya.
The other co-director was Jacob Juma, who was killed in May 2016 in Nairobi.
The court heard that the three directors played different roles in their trading with Erad, which they jointly incorporated in 2004.
For instance, Juma was good at legal matters while Mr Waluke was good at sourcing maize locally.
Ms Wakhungu was the managing director and the person in charge of day-to-day running of the company.
Appearing before Justice Esther Maina, Mr Ongoya opened Mr Waluke’s case by giving a chronology of events that started in 2004, following a shortage of maize in the country, which led to the corruption scandal.
Mr Waluke distanced himself from any criminal liability and appeared to pass the blame to Ms Wakhungu for the acts and omissions of the trading company.
Mr Ongoya stated that the evidence adduced in the trial court demonstrated that Mr Waluke neither participated in the maize supply tender, nor did he institute the arbitration proceedings that led to the payment of the disputed money.
“He (Waluke) did not source maize internationally and he did not present invoices. Ms Wakhungu in her defence evidence had explained how the company was working. She said she made the bid to supply maize as a director and prepared the tender documents with the staff,” said Mr Ongoya.
“Waluke, though a director, was not involved in tendering. She (Wakhungu) was the only witness for Erad at the arbitration. She participated in arbitration on behalf of the company. I urge the court to notice the absence of Waluke in the transaction,” the lawyer argued.
The advocate further stated that Erad received payment following a court order dated February 27, 2013 and issued by Justice Francis Mabeya.
He further explained that Justice Mabeya’s order was the culmination of a judicial process that began at an arbitration tribunal.
Mr Waluke’s lawyer referred to prosecution witness David Chang Kwony Terer, who testified that “the money was paid out courtesy of a court order”.
The witness added: “Banks paid the money upon being served with the court order. The order shows the decree holder had a claim of US Dollars 6,140,858, which was supposed to be paid by NCPB.”
Erad was one of five companies that were contracted by the NCPB to supply 180,000 metric tonnes of maize.
“No question has ever arisen at the trial court or any other forum regarding the validity of that procurement process. Of the five companies, NCPB opened letters of credit for four companies and Erad was left out. The problems started there and proceeded to the arbitration tribunal,” said Mr Ongoya.
Erad had a duly signed contract dated August 26, 2004 with the state agency.
69-year jail term
On the 69-year jail term imposed by the trial court, Mr Waluke’s lawyer referred to the testimony of investigator Kipsang Sambai, who had noted that there was no undue influence in signing of the tender document. Ms Wakhungu was sentenced to 67 years in jail.
The appeal court heard that after being denied a letter of credit, Erad lodged a dispute before the arbitration tribunal, in whose resolution the NCPB also participated.
At the conclusion of the hearing, the arbitrator awarded Erad a total of US$3.1 million as damages for loss of profit, cost of storage, costs of litigation and interest.
“Among the limbs of damages, the prosecution has only been fighting the damages for cost of storage. The DPP has never taken issue with the other limbs of award,” said Mr Ongoya.
After the arbitration proceedings, Erad went to the High Court as required by law for confirmation of the award. It later commenced execution proceedings by seeking a garnishee order.
“Pursuant to the garnishee order, Erad attached money owned by NCPB in various banks. At the National Bank of Kenya, Erad attached Sh13.3 million, KCB bank Sh297 million and at Cooperative Bank US$24,032,” said the advocate.
Mr Ongoya argued that the trial court erred by ignoring the fact that the payments were made out of a judicial process.
“Such payment, having been confirmed by a superior court, could not be held by a subordinate court to be fraudulent without an order varying or setting aside the High Court order,” said the lawyer.
The hearing continues.