Dutch bank seeks Sh1.4bn from Kenya Pipeline

Dutch-based ABN AMRO Bank has taken Kenya Pipeline Company (KPC) to court demanding Sh1.4 billion for unlawfully releasing its petroleum products without approval in the 1998 Triton oil scandal.

The bank becomes the second foreign company to sue the parastatal after UK-based Glencore Energy Ltd, which has separately lodged a claim of Sh3 billion.

Although it is Fortis Bank Netherlands that was involved in the transaction, ABN AMRO through Daly and Figgis Advocates said it acquired the assets and liabilities of Fortis Bank in a July 1, 2010 merger.

ABN AMRO wants the court to order KPC to pay $17,105,970 — the market value of the discharged products — or alternatively, the damages be assessed. The bank says its claim is pursuant to the universal succession in title in accordance with Dutch law.

Fortis Bank had entered into a Collateral Financing Agreement (CFA) with Triton Petroleum Companies—owned by runaway businessman Yagnesh Devani—that none of its products would be released to third parties by KPC without payment.

However, KPC is alleged to have discharged the products without the bank’s consent and “it is liable to ABN AMRO for damages in respect of 12.6 metric tonnes.”

Mr Devani is accused of having masterminded Kenya’s biggest oil sector scam ever, estimated to have cost financiers and oil marketers Sh7.6 billion in 2008.

On its part, Glencore accuses KPC of releasing its products in contravention of the CFA. But the firm’s efforts to persuade the court to consider the production of PricewaterhouseCoopers (PwC) report to show the extent the parastatal abused the agreement was turned down by the court last October.

Forensic audit

Lady Justice Murugi Mugo objected to the production of a forensic audit report by PwC to show that the parastatal discharged oil products without approval.

KPC, through Mohammed Muigai Advocates, had objected to the production of the report arguing that it was a privileged document only meant for the corporation’s legal advice. The corporation’s lawyers argued that its production in court should follow laid down procedure.

The parastatal said because it commissioned PwC to conduct the audit on the oil scam, the report “should not be used by third parties.” Glencore, one of the Triton’s financiers, says KPC unlawfully released its products to oil marketers without authorisation under the CFA.

A forensic audit by PwC released to the Government in June 2009 confirmed Glencore’s claim to be 31.752 metric tonnes.

PwC said in an independent audit that senior KPC employees in the operations and finance departments played a key role in the fraudulent release of the products in its custody to Triton and accused the corporation of acting in breach of CFA.

The PwC report also cites operational lapses at KPC as the major cause of Triton’s ability to draw products that did not belong to it, causing distortions that nearly brought down the petroleum supply chain.