Top CBK officials face court action over irregular tenders

Top Central Bank of Kenya (CBK) officials were on Tuesday facing the prospect of court action over irregularities in the institution’s multi-billion-shilling procurement deals. 

Anti-corruption agency EACC said it had written to the Director of Public Prosecutions Keriako Tobiko asking him to charge the officials with graft.

It was not immediately possible to establish who and how many of the Central Bank officials would face action, but the Ethics and Anti-Corruption Commission said it had forwarded the relevant file to Mr Tobiko’s office.

“We have forwarded the file to DPP to prosecute a group of CBK officials for irregularities in procurement,” said Mumo Matemu, who chairs the EACC.

The bank, which acts as the government’s agent in monetary matters, has in recent years been embroiled in currency printing contract disputes involving UK security printer De La Rue.

The CBK officials have been accused of awarding De La Rue exclusive currency printing contracts in opaque and non-competitive terms, costing taxpayers billions of shillings.

If Mr Tobiko acts on EACC’s advice, it would be the first time that high ranking CBK officials are arraigned in court over the controversial currency deals that were executed during former president Kibaki’s term in office.

Parliament’s Public Accounts Committee last year found that the CBK had irregularly awarded De La Rue a several currency printing contracts.

The committee cited the December 2002 contract that was awarded to De La Rue following the expiry of a 10-year contract between CBK and the UK printer.

The PAC found that the bank had entered into another 10-year currency printing contract with De La Rue without any competitive tendering as required by law.

“The contract was cancelled in 2003 on orders from the then Finance minister David Mwiraria, who called for a competitive procurement process,” said the report.

An internal Kenyan dispute over the nature of the contract saw De La Rue win successive temporary contracts that remain the means of currency printing to date.

Detailing how the cost of printing fell when De La Rue was forced into a formal tendering process, the committee said it was “satisfied that De La Rue had overcharged (the) Central Bank of Kenya on the interim orders.

The bulk of the blame for loss of money arising from the irregular contracts have so far landed at the feet of Prof Njuguna Ndung’u, the CBK governor, and former Finance minister Amos Kimunya.

The committee found that the two were “responsible for the loss of Sh1.83 billion on account of cancellation of the contract for printing 1.71 billion pieces of bank notes and should be held accountable.”

Mr Kimunya was found to have directed the CBK to cancel a cheaper printing contract even though the ministry was not party to the deal.

“… all the reasons he gave for the cancellation of the contract were found to have been invalid,” the committee said in its report.

Prof Ndung’u was found to have failed to resist the Kimunya directive to cancel the contract.

“In so doing, he failed to protect the bank’s independence and taxpayers’ interest. This was even notwithstanding the fact that since the Procurement and Disposal Act of 2005 came into force, the Treasury had no business directing the Central Bank of Kenya on procurement issues.” 

Mr Kimunya and Prof Ndung’u were found to have acted contrary to the Constitution of Kenya, the Public Officer Ethics Act and the Public Procurement and Disposal Act.

Parliament concluded that “they are not fit to hold public office” and asked EACC to investigate the governor and the former minister “with a view to taking appropriate legal action against them and recovering lost funds.”

READ: De La Rue to shut plant unless CBK gives it 10-year deal

In his defence, Prof Ndung’u  had told Parliament that the CBK had “strongly opposed” the Treasury and De La Rue’s joint venture agreement under which the bank would be tied to signing a 10-year banknote printing contract with the UK firm.

“This would contravene government procurement regulations and procedures as the bank would not be guaranteed a fair market price during the 10 years,” he said.

The damning report saw a censure motion proffered against Mr Kimunya and Prof Ndung’u in September last year, but the two survived after winning support of a section of MPs.

De La Rue recently climbed down from its earlier demand for an exclusive 10-year currency printing contract, choosing instead to focus on the regional market.

The Kenya Government plans to buy a 40 per cent per cent stake in the British firm’s local subsidiary in a deal whose negotiation has dragged on since 2006.