How Lugari MP earned Sh1bn from State firms

Lugari MP Ayub Savula earned a total of Sh1 billion from contracts signed with various State agencies in five years through his company, Sunday Publishers Limited, the Kenya Revenue Authority (KRA) has revealed in court filings.

Mr Savula’s Sunday Publishers is said to have received the cash between 2013 and 2017 from government agencies among them the National Hospital Insurance Fund (NHIF), Ministry of Energy and Petroleum, the Nairobi County government, Migori County, Mombasa County and the National Land Commission.

The lucrative deals are now the subject of an ongoing tax evasion investigation by KRA and the Directorate of Criminal Investigations (DCI).

During the five-year period, Sunday Publishers which Mr Savula co-owns with his wife, Hellen Kemboi, filed nil tax returns, despite receiving huge sums of cash.

The investigations by KRA have seen the legislator slapped with Sh473.8 million tax arrears demand, which comprises interest and penalties.

But even as he continues to contest the tax assessment, the DCI has initiated parallel investigations into the deals prompting him and his wife to move to court seeking to bar their arrests and prosecution.

Mr Savula and his wife have asked the court to order “a declaration that the respondents impending and imminent arrest, detention and prosecution of the applicants amount to a gross violation of the petitioners’ fundamental rights and freedoms under the Constitution and under the relevant tax laws.”

Tax assessments sent to Mr Savula’s Sunday Publishers Limited paint a picture of a company that was involved in mega deals.

KRA commenced investigations in February 2018. The taxman’s investigators analysed the firm’s bank statements and documents obtained from the company.

The taxman also obtained records of transactions from the known clients of Mr Savula’s company, the invoices and Local Purchase Orders, which it used to piece together the deals.

KRA was forced to adopt this method because the firm had filed Nil tax returns for 2015, 2016 and 2017, while no tax returns were filed in 2013 and 2014 despite Sunday Publishers having earned income in those years.

The taxman claims that Mr Savula, through his auditor, kept on promising to produce documents to support himself but never produced them, in the process slowing down investigations. The company maintained three bank accounts during this period. It had a bank account at Standard Chartered, NIC Bank and Co-operative Bank of Kenya.

The company received Sh84.7 million in 2013, Sh174.3 million in 2014, Sh397 million in 2015, Sh150.8 million in 2016 and Sh207.9 million in 2017, adding up to Sh1 billion.

KRA says the firm failed to produce any supportive documents despite being given an opportunity to present documentation to support any expenses it incurred.

KRA calculated the firm’s profit at a margin of 45 percent, which it claims is the industry average for firms engaging in advertising and publishing.

KRA on October 29, 2018 slapped Mr Savula’s firm with a claim for Sh230.2 million tax, penalties totalling Sh172.7 million and interest of Sh70.9 million, bringing the total to Sh473.8 million. Mr Savula is already facing another criminal charge alongside other suspects in relation to conspiring to steal Sh122 million from the Ministry of Information and Communication Technology three years ago.

He was charged in October alongside former Broadcasting and Telecommunication PS Sammy Itemere, former head of Government Advertising Agency (GAA) Dennis Kuko Chebitwey and his two wives — Gatwiri Ringera and Hellen Kemboi.

Mr Savula and his wives were freed on a bond of Sh1 million or a cash bail of Sh500,000 each while Mr Itemere and the 15 other co-accused were released on a bond of Sh2 million or a cash bail of Sh1 million each.

They are accused of stealing Sh122,335,500 at GAA being public officers in the Ministry of ICT using seven companies. They denied the charges.

But Mr Savula says the DCI is after him and his wife, yet again, and he wants the court to restrain their impending arrest.

He claims that DCI officers are planning to arrest him and Hellen when they appear before the Chief Magistrate’s Milimani law courts for the mention of their ongoing criminal case.

The criminal case was scheduled for mention yesterday.

The lawmaker says the tax matter should be left to be resolved through existing tax laws, noting that he has appealed against the tax assessment and also as a law abiding citizen initiated alternative dispute resolution (ADR) with the taxman.

According to the MP, he has continued to meet his tax obligations, noting that in June 2018 he paid Sh3 million tax to KRA after self-assessment.

It’s during one of this ADR meeting with KRA officials held on February 14 that he claims to have learnt that the DCI was investigating him. He says he has commenced the appeal process which allows him to litigate his case up to Court of Appeal, noting that DCI taking up the matter will frustrate his pursuit of this route.