Former Treasury Cabinet Secretary Henry Rotich allegedly aided a Sh11 billion irregular offshore payment to an Italian insurance firm entangled in a suspect loan deal to finance the construction of Arror and Kimwarer dams, triggering concerns about kickbacks to officials involved in the projects.
Court filings by Director of Public Prosecutions Noordin Haji show that Mr Rotich facilitated direct payment of the amount to Italy’s SACE Insurance contrary to the law, which requires that all payments are processed through the consolidated account in Kenya.
The Sh11 billion was borrowed from BNP Paribas Forties S.A. /N.V, Itesa Sanpaolo S.P.A., Unicredit S.P.A. and Unicredit Bank AG in April 2017.
Section 50 (7) of the Public Finance Management Act (PFMA) says all public debt has to be paid into the consolidated fund at the Central Bank of Kenya (CBK) and any subsequent expenditure mandatorily approved by the Controller of Budget (CoB) for accountability and transparency.
The State reckons that the push to bypass wiring the cash to the consolidated fund was engineered to facilitate payment of bribes and kickbacks.
“SACE collected the Sh11 billion from the four private commercial Italian banks and lenders (of what is falsely alleged to be a Government-to-Government loan) posed as having loaned the GOK the said money but instead of releasing the funds to GOK as required by our Constitution and our law, the applicant as Cabinet Secretary for Finance allowed and assisted SACE to pay themselves. The funds never saw a Kenya government bank account or the Consolidated Account,” Gilbert Kitalia, an officer with the Directorate of Criminal Investigations, said in court filings.
The DPP said Mr Rotich disregarded the requirements of the PMFA and ‘willingly turned a blind eye’ to the irregular pay deal with the Italian insurer— raising the red flag on his intentions.
The government made advance payments of Sh19 billion, including the Sh11 billion in unnecessary debt insurance, which prosecutors say was shared out in accounts belonging to the conspirators and their agents.
“This is an express and very serious breach of the law. It is also a necessary component of the conspiracy and the crimes alleged and gives life to the same since by bypassing the consolidated fund, payment of all kickbacks and the distribution of all proceeds of the crimes was made exponentially easy,” Mr Kitalia said in court filings.
Similar concerns about Treasury allegedly running mysterious offshore accounts were raised by the CoB in 2015. Some Sh53.2 billion from the controversial Eurobond was deposited into one of the accounts and used to pay off a loan without approval.
Mr Rotich is accused of hiding behind government- to- government procurement to single source the privately-owned SACE and craft an exorbitant Sh11 billion cover for the dams’ project which had hardly taken off because designs had not been drawn while the Kenya Forest Service had declined to provide land.
There were also concerns that the contractor CMC Di Ravenna- Itinera JV had gone bankrupt even after receiving Sh7.2 billion in advance pay for the project.
Evidence presented in court showed that CMC Di Ravenna- Itinera JV was paid Sh4.3 billion on September 27, 2018 as advance payment for Arror dam and for Kimwarer, an advanced payment of Sh3.5 billion was approved on July 2, 2018.
The money paid in two tranches for both Kimwarer and Arror dams’ was made to a web of associated companies in Kenya, South Africa and Italy that were not in tender documents.
Mr Kitalia, the investigator, said Mr Rotich acted outside the law because the party contracted in the commercial contracts and those mentioned in the facilities agreements -- CMC Di Ravenna Itenera JV -- were not the ones that were recipients of the letter of acceptance nor those who bid for the tenders.
The bidder, according to court documents, was Cooperativa Muratori & Cementisi CMC Ravenna-Societa Cooperativa.
They declared a joint venture company known as Aecom South Africa PTY Ltd but the firm that was issued with the letter of award was CMC Di Ravenna South Africa.
Payments were made to CMC Di Ravena/Itinera JV Kenya Branch. Mr Kitalia said the contracts for the projects were entered into with an entity that was alien to the tenders and strangers who had never participated at any stage of the proceedings.
He said Mr Rotich unlawful oversaw the removal of Aecom South Africa PTY ltd from the tender process and ensured it was awarded to a different entity. The officer said Mr Rotich allegedly ignored offers for financing by Indian and Iranian governments both of whom had expressed interest.
Mr Rotich has challenged his prosecution and questioned why former Environment Cabinet Secretary Judi Wakhungu and experts from the ministry were left out.
He said Ms Wakhungu and officials from her ministry provided the necessary opinion before writing to the Treasury requesting for funding of the two dams. Mr Rotich said he signed the agreements at the tail end as part of his statutory responsibilities.
“It is absurd that the respondents chose to charge me while the Attorney-General is not charged in this respect. This is an indication of selective prosecution that cannot stand the test of objectivity and fair administrative action,” he said in an affidavit.