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Power firm caught in Sh14 billion scam




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Taxpayers could have lost as much as Sh14.2 billion through fraudulent payments to landowners by the Kenya Electricity Transmission Company (Ketraco), a Nation investigation shows.

On paper, the money was paid to genuine landowners on whose property Ketraco put up electricity transmission lines, but detectives believe a huge percentage of the money was swindled by officials at the State agency.

Detectives say one case in Kisaju, Kajiado County, where a landowner was paid 10 times more than the value of his land, mirrors hundreds of others during the construction of the Mombasa-Nairobi transmission line.

They propose that some of the officers be charged with failure to comply with the law.

Investigators are combing through land compensation documents related to the 450-kilometre, 1,500-megawatt Mombasa-Nairobi power line — the biggest such project by Ketraco — whose mandate is to build infrastructure for high-voltage electricity transmission.

If the loss of taxpayer billions is confirmed, Ketraco will join an expanding league of state firms accused of swindling Kenyans.

Others are the National Land Commission and the Kenya Railways Corporation, whose senior officials have been charged with manipulating compensation figures and illegally paying millions of shillings to individuals presenting dubious documents during construction of Phase One of the Sh327 billion Standard Gauge Railway line.

While the government had projected to spend Sh3.8 billion on land compensation in the SGR project, the first phase from Miritini to Embakasi consumed Sh30 billion, or 10 times the original budget.

It now appears that the Mombasa-Nairobi power line project took a similar route. Detectives told the Nation that construction of the line was so badly managed that billions of shillings could have been wasted through various fraudulent schemes, including stoppage of works, idling of machinery and staff, and questionable length of the transmission lines.

Ketraco Managing Director Fernandes Barasa did not respond to our queries or answer our calls, but Criminal Investigations Director George Kinoti, confirmed that detectives were investigating various transactions involving the Mombasa-Nairobi line.

An internal audit, by Ketraco, on the project indicated that the Tsavo-Embakasi phase was delayed by four years and six months, and that these delays had “a huge cost impact to Ketraco as the contractors claimed their overheads, idling equipment and manpower, stoppages, acceleration, mobilisation and demobilisation”.

To worse matters, the supply lines and sub-stations were vandalised even before they were completed, and the internal audit found that a transmission line with an installed capacity of 950MW was only evacuating 20MW, a two-per-cent capacity.

Auditors noted that there were no standard compensation rates for limited use of land, thus giving officials a chance to negotiate different payments for similar land.


Documents seen by the Nation show that detectives have zeroed in on a test-case in Kajiado, where a landowner was paid Sh35.6 million for 8.4 acres of land. The market value of the land, detectives note, was Sh4.5 million.

Initially, the then Ketraco managing director, Mr Joel Kiilu, had written to the landowner telling them that the wayleave will traverse only 8.5 acres, and that the value of land in Kisaju was Sh1.8 million.

“The compensation amount will, therefore, be Sh4.59 million, based on the acreage affected by the power line,” Mr Kiilu said in the letter dated February 20, 2013.

But the owner argued that he intended to sell the land to his employees at a cost of Sh500,000 per eighth of an acre. At the time, the land had not been subdivided and the property was still in his name as a single unit.

Investigators say Ketraco allowed the landowner to carry out his own valuation of the property, and that three officials at Ketraco “conspired” to pay the hefty amount.

Ketraco’s then land economist, Ms Salome Munubi, in a letter dated October 28, 2013, told the managing director to pay the amount indicated by a valuation report undertaken “on the instruction of (Ketraco).”

“This was not true as the valuer had been instructed by the owner of the land,” says an investigation brief seen by the Nation.

A Nairobi firm commissioned by Ketraco had put the value at Sh1 million per acre, but the parastatal’s officials allowed the owners of the land to bring in independent valuations, which pushed the prices to between Sh2 million and Sh2.8 million an acre.

Moreover, the Ketraco land economist had told the MD that the plots “had been allocated to members”, but minutes in our possession indicate that the deal had not been sealed between the transport tycoon and his employees.

Auditors had also noted that another company was paid Sh72 million with no paperwork or valuation of its land in Kajiado.

“The payments were not accompanied by a land valuation report, the compensation rate applied, and how the Sh72 million was arrived at,” noted the auditors.

Detectives are studying this payment, which was authorised through an internal memo. The owner is said to have claimed that he wanted to build a golf course on the land, and so demanded Sh80 million for the affected 5.1 acres.

It was expected that, by 2022, some 4,000 kilometres of modern power lines would be switched on to improve reliability of electricity supply, but with the high cost brought about by delays and wanton wastage, the taxpayer will pay more than the value.

Whether Ketraco officials colluded with landowners, who demanded, and got, exorbitant compensations — some as much as 10 times more than the market value — is a matter that the DCI is currently investigating.



Sordid tale of the bank ‘that would bribe God’




Bank of Credit and Commerce International. August 1991. [File, Standard]

“This bank would bribe God.” These words of a former employee of the disgraced Bank of Credit and Commerce International (BCCI) sum up one of the most rotten global financial institutions.
BCCI pitched itself as a top bank for the Third World, but its spectacular collapse would reveal a web of transnational corruption and a playground for dictators, drug lords and terrorists.
It was one of the largest banks cutting across 69 countries and its aftermath would cause despair to innocent depositors, including Kenyans.
BCCI, which had $20 billion (Sh2.1 trillion in today’s exchange rate) assets globally, was revealed to have lost more than its entire capital.
The bank was founded in 1972 by the crafty Pakistani banker Agha Hasan Abedi.
He was loved in his homeland for his charitable acts but would go on to break every rule known to God and man.
In 1991, the Bank of England (BoE) froze its assets, citing large-scale fraud running for several years. This would see the bank cease operations in multiple countries. The Luxembourg-based BCCI was 77 per cent owned by the Gulf Emirate of Abu Dhabi.  
BoE investigations had unearthed laundering of drugs money, terrorism financing and the bank boasted of having high-profile customers such as Panama’s former strongman Manual Noriega as customers.
The Standard, quoting “highly placed” sources reported that Abu Dhabi ruler Sheikh Zayed Sultan would act as guarantor to protect the savings of Kenyan depositors.
The bank had five branches countrywide and panic had gripped depositors on the state of their money.
Central Bank of Kenya (CBK) would then move to appoint a manager to oversee the operations of the BCCI operations in Kenya.
It sent statements assuring depositors that their money was safe.
The Standard reported that the Sheikh would be approaching the Kenyan and other regional subsidiaries of the bank to urge them to maintain operations and assure them of his personal support.
It was said that contact between CBK and Abu Dhabi was “likely.”
This came as the British Ambassador to the UAE Graham Burton implored the gulf state to help compensate Britons, and the Indian government also took similar steps.
The collapse of BCCI was, however, not expect to badly hit the Kenyan banking system. This was during the sleazy 1990s when Kenya’s banking system was badly tested. It was the era of high graft and “political banks,” where the institutions fraudulently lent to firms belonging or connected to politicians, who were sometimes also shareholders.
And even though the impact was expected to be minimal, it was projected that a significant number of depositors would transfer funds from Asian and Arab banks to other local institutions.
“Confidence in Arab banking has taken a serious knock,” the “highly placed” source told The Standard.
BCCI didn’t go down without a fight. It accused the British government of a conspiracy to bring down the Pakistani-run bank.  The Sheikh was said to be furious and would later engage in a protracted legal battle with the British.
“It looks to us like a Western plot to eliminate a successful Muslim-run Third World Bank. We know that it often acted unethically. But that is no excuse for putting it out of business, especially as the Sultan of Abu Dhabi had agreed to a restructuring plan,” said a spokesperson for British Asians.
A CBK statement signed by then-Deputy Governor Wanjohi Murithi said it was keenly monitoring affairs of the mother bank and would go to lengths to protect Kenyan depositors.
“In this respect, the CBK has sought and obtained the assurance of the branch’s management that the interests of depositors are not put at risk by the difficulties facing the parent company and that the bank will meet any withdrawal instructions by depositors in the normal course of business,” said Mr Murithi.
CBK added that it had maintained surveillance of the local branch and was satisfied with its solvency and liquidity.
This was meant to stop Kenyans from making panic withdrawals.
For instance, armed policemen would be deployed at the bank’s Nairobi branch on Koinange Street after the bank had announced it would shut its Kenyan operations.
In Britain, thousands of businesses owned by British Asians were on the verge of financial ruin following the closure of BCCI.
Their firms held almost half of the 120,000 bank accounts registered with BCCI in Britain. 
The African Development Bank was also not spared from this mess, with the bulk of its funds deposited and BCCI and stood to lose every coin.
Criminal culture
In Britain, local authorities from Scotland to the Channel Islands are said to have lost over £100 million (Sh15.2 billion in today’s exchange rate).
The biggest puzzle remained how BCCI was allowed by BoE and other monetary regulation authorities globally to reach such levels of fraudulence.
This was despite the bank being under tight watch owing to the conviction of some of its executives on narcotics laundering charges in the US.
Coast politician, the late Shariff Nassir, would claim that five primary schools in Mombasa lost nearly Sh1 million and appealed to then Education Minister George Saitoti to help recover the savings. Then BoE Governor Robin Leigh-Pemberton condemned it as so deeply immersed in fraud that rescue or recovery – at least in Britain – was out of the question.
“The culture of the bank is criminal,” he said. The bank was revealed to have targeted the Third World and had created several “institutional devices” to promote its operations in developing countries.
These included the Third World Foundation for Social and Economic Studies, a British-registered charity.
“It allowed it to cultivate high-level contacts among international statesmen,” reported The Observer, a British newspaper.
BCCI also arranged an annual Third World lecture and a Third World prize endowment fund of about $10 million (Sh1 billion in today’s exchange rate).
Winners of the annual prize had included Nelson Mandela (1985), sir Bob Geldof (1986) and Archbishop Desmond Tutu (1989).
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Agricultural Development Corporation Chief Accountant Gerald Karuga on the Spot Over Fraud –




Gerald Karuga, the acting chief accountant at the Agricultural Development Corporation (ADC), is on the spot over fraud in land dealings.

ADC was established in 1965 through an Act of Parliament Cap 346 to facilitate the land transfer programme from European settlers to locals after Kenya gained independence.

Karuga is under fire for allegedly aiding a former powerful permanent secretary in the KANU era Benjamin Kipkulei to deprive ADC beneficiaries of their land in Naivasha.

Kahawa Tungu understands that the aggrieved parties continue to protest the injustice and are now asking the Ethics and Anti-corruption Commission (EACC) and the Directorate of Criminal Investigations (DCI) to probe Karuga.

A source who spoke to Weekly Citizen publication revealed that Managing Director Mohammed Dulle is also involved in the mess at ADC.

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Dulle is accused of sidelining a section of staffers in the parastatal.

The sources at ADC intimated that Karuga has been placed strategically at ADC to safeguard interests of many people who acquired the corporations’ land as “donations” from former President Daniel Arap Moi.

Despite working at ADC for many years Karuga has never been transferred, a trend that has raised eyebrows.

“Karuga has worked here for more than 30 years and unlike other senior officers in other parastatals who are transferred after promotion or moved to different ministries, for him, he has stuck here for all these years and we highly suspect that he is aiding people who were dished out with big chunks of land belonging to the corporation in different parts of the country,” said the source.

In the case of Karuga safeguarding Kipkulei’s interests, workers at the parastatals and the victims who claim to have lost their land in Naivasha revealed that during the Moi regime some senior officials used dubious means to register people as beneficiaries of land without their knowledge and later on colluded with rogue land officials at the Ministry of Lands to acquire title deeds in their names instead of those of the benefactors.

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“We have information that Karuga has benefitted much from Kipkulei through helping him and this can be proved by the fact that since the matter of the Naivasha land began, he has been seen changing and buying high-end vehicles that many people of his rank in government can’t afford to buy or maintain,” the source added.

“He is even building a big apartment for rent in Ruiru town.”

The wealthy officer is valued at over Sh1.5 billion in prime properties and real estate.

Last month, more than 100 squatters caused scenes in Naivasha after raiding a private firm owned by Kipkulei.

The squatters, who claimed to have lived on the land for more than 40 years, were protesting take over of the land by a private developer who had allegedly bought the land from the former PS.

They pulled down a three-kilometre fence that the private developed had erected.

The squatters claimed that the former PS had not informed them that he had sold the land and that the developer was spraying harmful chemicals on the grass affecting their livestock and homes built on a section of the land.

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Naivasha Deputy County Commissioner Kisilu Mutua later issued a statement warning the squatters against encroaching on Kipkuleir’s land.

“They are illegally invading private land. We shall not allow the rule of the jungle to take root,” warned Mutua.

Meanwhile, a parliamentary committee recently demanded to know identities of 10 faceless people who grabbed 30,350 acres of land belonging to the parastatal, exposing the rot at the corporation.

ADC Chairman Nick Salat, who doubles up as the KANU party Secretary-General, denied knowledge of the individuals and has asked DCI to probe the matter.

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