Economy

Safaricom cancels Sh1bn-plus tender in staff bribery claim

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Kenya’s top telecommunications firm Safaricom is locked in a legal dispute with the Lebanese company Mobinets over the cancellation of a Sh1 billion tender. PHOTO | FILE

Summary

  • Safaricom says in papers filed at the Milimani Law Courts that Mobinets colluded with its employees to ensure the tender went to the Lebanese firm.
  • The firm had in June last year contracted Mobinets to supply, instal and maintain a system to manage network planning, configuration tools, inventory and work flow but the telecoms operator cancelled the deal on September 1, sparking a court battle.

Safaricom cancelled a multi-million dollar tender it had awarded to Mobinets SAL Limited after it found out that the Lebanese firm had bribed its employees to secure the lucrative contract, a Nairobi court has been told.

The telecoms operator says in papers filed at the Milimani Law Courts that the Lebanese firm colluded with several of its employees to ensure the tender went to them.

Safaricom had in June last year contracted Mobinets to supply, instal and maintain a system to manage network planning, configuration tools, inventory and work flow but the telecoms operator cancelled the deal on September 1, sparking a court battle.

Mobinets went to court seeking orders compelling Safaricom to seek arbitration on the matter as provided for in the contract documents.

Safaricom has, however, maintained that the agreement it signed with Mobinets in June last year provided for immediate termination of the deal in the event that either party was found to have engaged in any acts of corruption.

“Safaricom was under obligation to terminate the agreement with immediate effect upon determination at any time that Mobinets representatives engaged in corrupt practices during the procurement or execution of the agreement,” said James Maitai, Safaricom’s head of quality and service assurance.

Mobinets claims Safaricom has refused to provide it with the names of staff who were bribed, times, dates and places and full details of the alleged collusion.

READ: Lebanese firm sues to stop Safaricom cancelling deal

The Lebanese firm also insists that the matter should be tabled before an independent arbitrator to salvage the Sh1 billion it has invested in the project.

The Tripoli-based firm has denied engaging in any act of corruption with any of Safaricom’s employees.

Safaricom has not indicated how many employees were involved in the alleged bribery scam or whether they have been sent packing.

The telecoms operator has, however, sacked 159 employees over their involvement in unethical activities in the past three years, according to fraud statistics the firm releases at the end of its financial year.

READ: Safaricom fires 56 employees in graft related cases

The telecoms operator is expected to release its fraud statistics for the year ending March 2015 in the next few weeks as part of a campaign against corruption.

Safaricom reckons that the provision on arbitration only applied to resolving disputes that have taken more than 30 days without an amicable settlement.

Safaricom faults Mobinets for filing the suit, as it claims the two parties were in the process of concluding talks over a possible settlement where it was to offer the details the Lebanese firm was asking for.

“Safaricom and Mobinets commenced the process of amicably settling the matter. The parties had agreed on the protocols and individuals responsible for ensuring the process of disclosure but Mobinets filed this suit before that process was concluded,” Mr Maitai adds.

Justice Farah Amin on Tuesday directed the two parties to file their respective responses to claims made in the suit so far, and to appear before her on March 18.

The Lebanese firm claims to have completed the functional specifications of the software system to Safaricom’s preference, which it says required equipment worth $6.2 million (Sh558 million).

It also claims to have sealed deals with other hardware and software firms worth $5 million for the completion of its contractual obligations as per the agreement with Safaricom.

Mobinets therefore argues that termination of the deal will interrupt its other businesses around the world that will be associated with Safaricom’s claim of corruption.

“The allegations of corrupt practices by Safaricom pose a grave reputational risk to Mobinets. For instance, Vodafone Limited has on the basis of the allegations terminated all future business with Mobinets,” said Labib Shalak, Mobinets’ CEO.

But Safaricom argues that the contract has already been terminated, and that quashing the decision amount to changing terms of an agreement that has already outlived its purpose.

The telecoms giant argues that quashing the cancellation would also violate its rights, as it had the green light from the agreement to pull the plug on the deal in the event it discovered corrupt practices in its award.

“Grant of the orders sought by Mobinets would amount to re-writing the agreement in denying Safaricom its right, as freely negotiated between the parties to terminate the deal with immediate effect in the circumstances envisaged,” Safaricom says.

The Lebanese firm says it was forced to move to court over fears that Safaricom would offer another firm the contract while the dispute was pending between the two firms.

Safaricom insists that calls for arbitration are futile as the agreement was terminated with immediate effect. Besides, Safaricom argues it is for the Arbitration Tribunal and not the High Court to determine whether a dispute is ripe for arbitration in any event.

“There is no subject matter of the arbitration under threat to warrant issuance of an interim measure of protection by this court. Mobinets has failed to show evidence or threat whatsoever to the subject matter of the arbitration,” Safaricom adds.

The suit comes just months after Kenya’s private sector was listed as one of the most corrupt in the world in a report by international audit firm Ernst & Young last November.

Another report published by PriceWaterhouseCoopers found that tender fraud is the number one economic crime in Kenya.