E-Clips:- Business Pictorial - How Efforts Were Made To Slow Down Rip-Off Probe

On May 4, 2004, a lunch meeting was held at the Lavington home of Vice-President Moody Awori. Present to enjoy the lamb, chapati, vegetable stew and chicken were ministers Chris Murungaru and Kiraitu Murungi and anti-corruption czar John Githongo.

Though relaxed and holding a drink at the beginning, the VP tensed up as the meal progressed, according to sources at the table. "Now whats all this about?" he demanded, in reference to the investigation into Anglo Leasing. The belief around the table was that he felt he had explained everything to Parliament, and therefore there was no need to pursue the matter further.

Later that evening, according to confidential sources, the head of the Public Service, Mr Francis Muthaura, had a meeting with President Kibaki at which the scandal was expected to have been raised. At about 7.30pm, records show, Mr Muthaura called senior echelons of the Government with news of what he is said to have considered a great success: Anglo Leasing had been in touch and had agreed to pay back all the money the Government had given it.

From that point on, the Governments language changed: as far as it was concerned, there was no scandal and there was no fraud since Anglo Leasing had repaid the Sh465 million it had received: Sh95 million from the passports deal and a further Sh370 million for forensic science laboratories for the CID.

In the privacy of the corridors of power, efforts were made to "slow down" investigations since it was "our people" who were involved.

The investigations show Finance minister David Mwiraria claiming on June 11, 2004, that he had spoken to the President and they had agreed that since the money had been repaid, there was a need to "go easy" on the investigation. Both Mr Murungi and Mr Mwiraria, records show, advised easing off the investigation since "many of our people are involved" lest the government fell.

The arrest by anti-corruption detectives of top lawyer Fred Ojiambo after he refused to name the clients who had instructed him to place advertisements in the Press about an Anglo Leasing-linked company caused widespread panic in the Cabinet. There was fear that his arrest, according to confidential sources, could cause the Government to fall.

That incident became typical of the Governments handling of Anglo Leasing: in public, Mr Murungi would confidently dismiss it as the "scandal that never was," but in private there was widespread disquiet that any little thing – even the arrest of a lawyer whose conduct was in any case governed by confidentiality rules – might trigger the collapse of the administration.

The reason for jitters over Anglo Leasing was clearly that the scandal was merely the tip of the iceberg. By August 2004, the Narc Government had signed off Anglo Leasing type contracts worth $277.7 million (Sh19.7 bn) It was estimated by people in the Government at that time, that contracts in the grey security area worth $1billion (Sh71bn) were in the works.

In the government procurement system, things move slowly. For example, since June 2000, the Immigration Department had been trying to buy new-generation passports and passport issuing equipment. By 2003, they were still trying. There were many approvals to be obtained: from the parent ministrys tender committee, the Treasury, the Government Information Technology Service which had to prepare specifications, and the Attorney-General who had to clear all contracts. All these approvals could normally take months, often years.

Yet in the case of the Anglo Leasing passports scandal, the non-existent firm presented its proposal on August 1, 2003. And in just three months, on December 3, it signed its contract with the Government. The Kanu government had never dealt with Anglo Leasing on the passports project. The tender it awarded in 2001 was to a British firm, AIT International, for Sh622 million.

Events leading to the signing of the deal – the disqualification of earlier bids by GITS, the directive by the Treasury to all accounting officers to refer IT procurement to GITS, the proposal by the Treasury to expand the project beyond the needs of the Immigration Department, the takeover by the Treasury of fundraising to override the protests of Immigration, the "unsolicited" approaches by Anglo Leasing – all point to the possibility that the scheme may have been hatched as early as December 2002.

And it provided the template for subsequent scandals.

The seed of the Anglo Leasing passports scandal was planted in June 2000. It started with a hyped crisis. Investigations reveal that in that month, the Immigration Department reviewed its passport and visa issuing equipment and systems and discovered, unsurprisingly given the long waits for passports, they were inefficient, led to revenue losses and passports and visas were easy to forge. It also discovered its equipment was "obsolete" and subject to frequent breakdowns. As a matter of fact, the supplier was no longer servicing it, the department said.

The equipment had been installed in 1994 and Immigration decided to buy a more modern, secure and efficient computer-based system, called Immigration Management System, and asked for permission to float a secret tender, since in its view, this was a security issue.

Approvals were granted by the Ministerial Tender Committee and the Treasury and specifications were approved by the Government Information Technology Service (GITS). Bids were invited and AIT International PLC of the UK won at Sh622,039,944. That was in late 2001.

Almost a year later, in October 2002, the tender was cancelled. It had been realised that no money was set aside in the Budget for the project. Neither government auditors nor corruption investigators have found an explanation as to why the Government approved a tender for a project for which there was no money.

Fresh efforts were made to restart the project, this time to be phased over three years because of the money problems, and culminated in bids by three companies, Face Technologies (SA) GET Group (USA) and De La Rue (UK) in November 2002. The bids were substantially higher than the earlier ones, with the lowest being Faces Sh799 million.

On February 6, 2003, GITS evaluated the three bids and rejected them because, its technical committee said, the suppliers had not indicated the brand or model of the equipment to be supplied, nor included proof of permission for the Government to test the equipment, among other reasons. The report of the outcome of GITS technical evaluation was not provided until three months later.

On issuing its report, GITS proposed a vastly expanded system, one which Immigration clearly had not considered necessary or suitable, since, in its view, there didnt seem to be a country in the world with one like it. Besides, there was no money for such a system.

From that point on, there seemed to have been an unusual reversal of roles. The practice is for departments to define their needs and go to the Treasury for funds. Usually, the Treasury would require them to scale down their expectations. But in this case the Treasury, of which GITS is a part, proposed a vast expansion of a project, far beyond what Immigration the user department had envisaged.

The Treasury also agreed, at a meeting three months later, to look for donor money for the expanded project. GITS was ordered to prepare technical specifications for the expanded system and report back within three weeks.

Immigration, amid dire warnings of the country running out of passports, immediately asked for permission to cancel the existing tender to pave way for the new one. From that point on, Immigration, which was the user department and therefore expected to provide the lead in the procurement, seems to have played no role.

On December 4, a day after a contract to supply the equipment was signed with Anglo Leasing, the department was writing to the Treasury, pleading an imminent passport crisis. It is likely that the department was in the dark until a voucher was presented with orders to clear the payment of Sh91 million to Anglo Leasing.

According to investigations, it is highly unlikely that the department ever saw the contract. They reveal that the Principal Immigration Officer, having refused to sign the voucher without seeing the contract, was called to the Home Affairs ministry and allowed to read the contract in a conference room. Even as panicked Immigration officials were contemplating their diminishing stock of blank passports, another secret process was in motion, also targeting the supply of passport equipment.

A day before the GITS technical committee sat to reject the three bids for the passport system in February 2003, the ministry of Home Affairs, seemingly out of the blue, received a letter from Francois Charles Oberthur Fiduciaire, introducing itself as a leader in security printing, with particular expertise in passports, visas, currency and security documents.

The ministry replied a little over two months later, asking whether the firm had the capacity to supply the kit and systems for the modernisation that was being planned for the Immigration Department.

The firm replied with a proposal to supply an advanced passports system at euro 6 million (Sh516 million) and advised at length on ways of dealing with "forgery, fraud, security and fighting terrorism," the exact concerns of the Government at that time. It is not clear what transpired in the intervening three months, but on August 1, Anglo Leasing made an entry with a proposal to Home Affairs for an Immigration Security and Document Control System. Its proposal fitted the expansion of the project proposed by Treasury.

Attached to it was a financial agreement. The price tag for the project was Sh2.7 billion, exempt of tax, income tax, duties or any other deductions. Home Affairs sent the proposal and the contract to Treasury, with a request for the project to be considered a security one. A copy was also sent the Attorney-General.

The AG office gave its opinion and cleared the contract, although later the Government blamed the decision on a lawyer in the AGs office, a Ms Dorcas Achapa, and dismissed her together with the permanent secretaries they found culpable.

On December 1, 2003, Home Affairs sent three copies of the contract to the Treasury for signature. Two days later, the Narc government entered into a contract with a fictitious company with no fixed abode, and no known directors at a vastly inflated cost of Sh2.7 billion.

The Governments own audit concluded that the project was unusually disadvantageous to the country. Anglo Leasing was supposed to have lent money to the Government to buy the kit from Francois Oberthur. But it was the Government which gave Anglo Leasing money, even before a paper-clip had been procured. There was the euro 956,000 (Sh82.2 million) "arrangement," "commitment" and "administrative" fee which was to be paid on signing the contract.

Then there was the Euro3.75 million (Sh322.5 million) which was to be paid on or before 45 days after the signing of the contract. After a six-month grace period, the Government was to pay the first instalment of Euro1.876 million (Sh161.3 million), not to mention the four per cent interest on the credit, which was to be paid quarterly, starting three months after the first payment.

In the first three months, the Government would have paid more than euro 5 million (Sh430 million), only euro 1 million (Sh86 million) less than Francois Oberthur asked for the same system in their letter to Home Affairs in mid-2003.

Investigations concluded that the project broke all the rules. Not only had the Government entered into a contract with a non-existent company, but it did so without asking for protection of its money in case the other party defaulted. The user department – in this case Immigration – had been shunted to the side and the contractor had not satisfied such basics as presenting a bid.

Besides, since the Government had not established the bona fides of the other party and its directors, its background, expertise and resources were not recorded anywhere. The Government was, at least on paper, entering into a Sh2.7 billion contract with people it did not even know.