E-Clips:- Business Pictorial - Report Blames Government Officials Over Sh2.7b Passports Scam

The Sh2.7 billion passports scandal appears to have been the result of a plot by people in Government circles who might have leaked details of the scheme to one company, MPs were told yesterday. The massive project to issue secure passports was both conceived and procured through a series of short-cuts, according to a report tabled in Parliament by Finance minister David Mwiraria.

It details steps in the scandal that saw a Sh936 million plan to upgrade the system for issuing passports massively upgraded to one of Sh2.7 billion and then awarded without open tendering to just one company. The report, by Controller and Auditor General Mr E.N. Mwai, states the firm - Anglo Leasing and Finance Ltd. - gave an unsolicited technical proposal to supply and instal a system to provide secure immigration documents.

In its proposal, it suggested another company - Francois-Charles Obether Fiduciare (FCOF) - should be sub-contracted to supply materials needed for the scheme, in itself irregular, the report states. It also doubts if either Anglo Leasing or FCOF were capable of handling such a huge project.

Mr Mwai also raises questions which confirm earlier fears that Anglo Leasing might only be a briefcase, or figurehead, company and not able to carry out any work by itself. Attorney General Amos Wako was asked to check if the firm was reputable and to see what similar work it had undertaken, as well as its credit rating, but, states Mr Mwai: "Records so far made available however do not show any such test as having been performed and no explanation for the omission has been provided."

The report does not show either how the Ministry of Home Affairs, responsible for immigration, assessed the authenticity, capacity, experience and track record of FCOF. Mr Mwai goes on to point out the irregularities that led to two PSs and two Government experts being suspended shortly after the affair was raised in Parliament last April 20 by Kanu MP Maoka Maore.

Those sent home after the scandal broke were Home Affairs PS Silvester Mwaliko, Treasury PS Joseph Magari, Ms Dorcas Achapa, the chief litigation counsel in the AGs office, and Dr Wilson Sitonic, director of the Government Information Technology Services. In a key passage of his report, Mr Mwai states: "From the sequence of events, it will appear that the proposal by Anglo Leasing and Finance was made with fore knowledge of the recommendation by Government Information Technology Services (GITS) that the system was to be enhanced and expanded (and) it has not however been clarified how the firm obtained the fore knowledge."

How the Daily Nation broke the story The firm also submitted alongside the proposal a financial agreement explaining the contract and financing terms and conditions. The offer in the agreement proposed a loan of around Sh2.67 billion for the system, payable at five per cent interest, later changed to four per cent a year quarterly, starting three months after the first payment, and lasting for 62 months.

The contract was subsequently signed on December 4 last year between the Government and Anglo Leasing with the Government represented by both the PSs who have since been suspended: Mr Mwaliko and Mr Magari. In addition to the repayments with interest, the report notes, around Sh91 million was paid to Anglo Leasing last February 6 as three per cent of the borrowings owed as arrangement, commitment and administration fees.

It was not clear as to what "commitment, arrangement, and administrative" fees represented and whether or not the amount was included in the total financing package of Sh2.67 billion, says the report. Further, there was no bank guarantee for returning the advance to the Government in case the supplier failed to deliver. The Government was disadvantaged further when the agreement states that the supplier was "entitled to demand the immediate payment of the total sum of agreement and the repayment of all sums outstanding arising from the agreement in the event of the default by the buyer."

Questions raised about the tendering by Mr Mwai include a failure by the Department of Immigration to prepare terms of reference for the system. He states: "Clearly and arising from lack of specifications or terms of reference for the system, Government evidently stood disadvantaged in the entire project negotiation and in particular in determining whether or not the price of Sh2.67 billion for the project represented a fair and competitive value for the money."

The request for direct procurement by the Office of the Vice President and its approval by the Treasury arose as a result of getting the proposal from Anglo Leasing and was therefore meant to ensure that the contract was awarded to the firm, the report states. Although it is required by law that the minister tables a report on such a commitment before Parliament, it was indicated in records that such a report was being prepared and would later be tabled in the House. In Parliament yesterday Mr Mwiraria was put on the spot over the suspensions of the four civil servants.

Ford-People leader Simeon Nyachae said government procedures did not allow civil servants to sign international agreements of such financial magnitude. "We do not want civil servants to be victims of a much wider network," Mr Nyachae said to applause from MPs soon after Mr Mwiraria tabled the eagerly awaited special report. Mr Nyachae's comments supported feelings that the focus on the passport deal was slowly shifting to the role Mr Mwiraria played as Finance minister in committing the Government to the contract.

While commenting about the issue over the weekend, Mr Mwiraria confirmed that he had signed the agreement, but added that he had been misled by civil servants. Mr Nyachae, a former Finance minister, said it was not enough to table the report without delving into what exactly had happened.

Four civil servants had been suspended because of the contract and their families were suffering as a result. But Mr Nyachae was cut short by the Speaker, Mr Francis Kaparo, who said it was not yet time for MPs to discuss the special report. Mr Kaparo said it was Parliament, through him, that requested the Controller and Auditor-General to carry out a special audit on the project.

Parliament's Public Accounts Committee would then go through the report, and hear all people mentioned before tabling the report for discussion by MPs, Mr Kaparo said.

Mr Kaparo said the committee was competent to discuss the issue and to report to the House as soon as possible, amid shouts from MPs that the report be debated immediately. Earlier, while tabling the report, Mr Mwiraria confirmed that Anglo-Leasing had already returned the Sh91 million in fees.