Curse of the CBK corner office stalks Ndung’u

The impending arrest and prosecution of Central Bank of Kenya (CBK) governor Njuguna Ndung’u has cast a dark cloud over his tenure putting him on the path to a raucous exit that has dogged his predecessors.

Director of Public Prosecution (DPP) Keriako Tobiko’s directive that Prof Ndung’u be charged with corruption means he will immediately vacate his position at the helm of Kenya’s monetary policy, making him the third governor in a row to unceremoniously exit the bank.

Abuse of office is a criminal charge for which the law demands that one must vacate public office until the matter is concluded.

According to the Anti-Corruption and Economic Crimes Act “a public officer who is charged with corruption or economic crime shall be suspended, at half pay, with effect from the date of the charge”.

If the governor is convicted of fraud, dishonesty or moral turpitude the President can fire him as provided for in the CBK Act.

Mr Tobiko on Monday wrote to the Ethics and Anti-Corruption Commission stating that he had ordered the arrest and prosecution of Prof Ndung’u over his alleged role in the award of a Sh1.2 billion tender to a private company and in which the Kenyan public lost Sh400 million.

READ: Central bank governor faces charges over security tender

Four out of Prof Ndung’u’s six predecessors have had their tenures cut short by alleged abuse of office charges or intense political pressure in the wake of a change of government — making the central bank governorship one of the most volatile public service jobs.

CBK governors have security of tenure.

If charged with corruption, Prof Ndung’u will follow in the footsteps of his predecessor Andrew Mullei who left the position in a cloud of dust — entangled in the web of controversy involving procurement of forensic services to investigate alleged crimes at Charterhouse Bank.

Dr Mullei had appointed Melville Smith, a forensic auditor, Terry Ryan, a member of CBK’s monetary policy committee, his son Sila Mullei, a computer expert who had worked for a Wall Street investment bank, and Titus Mwirigi to investigate alleged tax evasion and money laundering at Charterhouse.

He was accused of failing to follow proper procedure in hiring the four. The High Court dismissed the case in March 2007 but the then President Mwai Kibaki appointed Prof Ndung’u the new governor effectively ending Dr Mullei’s tenure at the bank.

“Two reasons led me to believe that the decision to charge me in court with an offence under the Anti-Corruption and Economic Crimes Act … was not motivated by a genuine desire to pursue alleged wrong-doing but to facilitate my removal from office,” Dr Mullei said in a personal statement, adding that the prosecutors chose not to charge him under the CBK Act and other laws since these don’t require the immediate suspension of the governor pending judgment.

Dr Mullei’s predecessors Philip Ndegwa, Eric Kotut, Nahashon Nyagah also left office in controversial circumstances that appear to have defined the method of exit for future governors.

Mr Ndegwa, who served from December 1982 to January 1988, stepped down after he was accused of foreign exchange abuses and tribalism in the hiring of the CBK staff while Mr Nyagah, who served from April 2001 to March 2003, came under sharp criticism for failing to prevent the loss of Sh1.4 billion that parastatals and pension funds had deposited in the collapsed Euro Bank.

Mr Kotut, who served between January 1988 and July 1993, had the most controversial tenure having presided over the CBK at the time it got embroiled in one of Kenya’s biggest financial scandals Goldenberg.

A commission of inquiry formed to investigate the Goldenberg scam found Mr Kotut had failed to prevent the payment of billions of shillings in export compensation to Goldenberg International for fictitious gold exports between 1991 and 1993. The taxpayers are estimated to have lost more than Sh50 billion in the scam.

Mr Kotut admitted that the crimes were committed at the CBK but refused to take responsibility as the bank’s head.

He was forced out of the CBK and replaced by Micah Cheserem but was cleared of the charges in 2006 after the courts quashed the report of the Bosire commission.

Prof Ndung’u has landed in similar trouble exercising executive powers he wields as central bank governor.

Though he does not sit on the CBK’s tender committee, Prof Ndung’u has been embroiled in the procurement controversy due to the protracted battles he fought with the tender committee before the security systems job was awarded to Horsebridge Networks Systems East Africa Limited.

The governor is accused of rejecting unanimous advice from internal and external legal teams to appeal the Public Procurement and Administrative Review Board’s decision to award Horsebridge Networks the contract.

On Tuesday, Prof Ndung’u defended himself against allegations of corruption in a Sh1.2 billion tender insisting that the award was above board.

In an email seen by the Business Daily, the embattled governor appears to accuse the CBK tender committee of sabotage in rooting for losing bidders.

Prof Ndung’u maintains that the crux of the matter is a tussle pitting the CBK’s tender committee against the evaluation committee, and accuses the former of ordering the inclusion of two firms that had been disqualified from the process.

In a private memo sent to senior CBK staff, Prof Ndung’u says Horsebridge Networks Systems East Africa Limited — which won the tender — was the lowest evaluated bidder, making it difficult to seek to reverse the decision even in the wake of intense pressure.

“The tender dispute went to the Public Procurement and Oversight Authority (PPOA) which awarded the contract to Horsebridge as the “lowest evaluated bidder”, Prof Ndung’u says.

“A reading of the two decisions made by the PPOA tribunal clearly shows that the tussle is between the bank evaluation and tender committees.” 

Prof Ndung’u has since come under intense pressure to challenge the PPOA’s decision in court but he insists that the legal opinion on which the advice was founded did not capture all the tender’s intrigues.

“An opinion was written. But we knew someone was going to try and change that opinion. So we waited. Just like night follows the day, the opinion changed. This I will deal with administratively,” the governor says in a memo to senior CBK staff without naming the saboteurs.

Prof Ndung’u further reveals that senior CBK staff withheld crucial information was withheld during the first PPOA hearing including the fact that the tender had been terminated on September 26.

Minutes were also presented showing that CBK signed a declaration the tender was not terminated, dealing a blow to credibility of the bank’s records, he says. Prof Ndug’u’s second term and final term at the CBK is due to end next year — but that now seems to hang on the outcome of the impending court action.