Author: Kenya Insights Team

A complaint by a businessman to the Public Procurement Regulatory Authority(PPRA) has brought to light the behind scenes of the multibillion tendering of the smart meters.

Benedict Kabugi Ndungu alleges that the awarding of the tender to four companies for the supply of smart meters was marred with irregularities.

According to the complaint, the tender document issued to interested bidders upon the advertising of the tender, the conditions of tender and the eligibility criteria were initially only for local manufacturing firms.

However, the businessman says all this was substantially, unlawfully and irregularly changed by Kenya Power and Lighting Company Limited who subsequently issued a flurry of irregular Addendum’s and specifically six addendum’s in total in an attempt to custom make the tender for a few preferred bidders who were in collusion with KPLC Senior staff members.

He says in documents seen by Kenya Insights that tenders eligibility criteria was opened up to include local assemblers of meters and not manufacturers via the six addendum’s a fact which substantially changed the original tender document and the eligibility criteria.

”All this was done in a conspiracy meant to make sure that the qualification criteria fits the qualifications of particular bidders. These conspiracy was hatched and executed by a criminal enterprise comprising of corrupt KPLC members of staff led by Dr. John Ngeno, the General Manager, Supply Chain & Logistics in cohorts with his preferred bidders.” The complaint reads.

Ng’eno joined the power utility after being transferred unceremoniously from Kenya Bureau of Standards (KBS) where he tainted his name by flaunting insurance tender. He was also implicated in a tender dispute over cars inspections where the DCI had made recommendations for him to be charged but has never been arrested.

He says the tender’s eligibility criteria were opened up to include local assemblers of meters and not manufacturers. “In furtherance of this blatant criminal scheme, and again to please their partners in crime, the tender items were split into Six Lots each Lot comprising five items with initial quantities but through the Six Addendum’s, the items per lot were reduced to four (4) items with increased quantities than the quantities which were initially provided at the time of the first advertisement.” It reads.

He claims this was a well established scheme by cartels to defraud the public. “The processing of this subject tender is nothing more than a scheme to defraud Kenyan taxpayers through a well calculated conspiracy to defraud and collusion with politically connected individuals.” It reads.

The four companies that were awarded the tender according to documents seen by Kenya Insights include: M/s Inhemeter Africa Company Ltd for Ksh 5,457,227,975 ( firm is linked to William Kabinga Gatheca, M/s Smart Meter Technology Ltd for Ksh 4,655,935,500 (linked to Sam Mburu, husband to Nakuru Governor Susan Kihika), Yocean Group Limited for Ksh 5,481,096,564.20 , and M/s Magnate Ventures Ltd (linked to Stanley Kinyanjui and his brother) for Ksh 5,437,930,052 Including 16%.

Mr. Kabugi says that the companies are unqualified alluding that they are not manufacturers of meters but are tender entrepreneurs and/or assemblers of meters owned by politically well- connected Kenyans which information is in the public domain.

He avers that KPLC violated the procurement laws as section 155 of the Public Procurement and Assets Disposal Act prescribes that preference should only be offered to manufacturers and not assemblers and to companies where Kenyan citizens are shareholders.

“For a company that has been procuring meters for decades, the issuing of six unlawful addendum’s by KPLC in one tender is not only a big red flag that the processing of these tender is fishy but also an indicator that it was meant to loosen the conditions of the tender to accommodate these companies and lock out others while also playing around with the quantities to make the tender lucrative.” the complaint reads.

Mr Kabugi said the criteria was allegedly opened up to include local meter assemblers and not manufacturers through six addenda, a fact which he says substantially changed the original tender document and the eligibility criteria.

Mr. Kabugi claims the tender was bloated, “the awarded amounts surpassed the allocated budget and the excess amounts were never approved by the Board of Directors and neither was the procurement plan amended to accommodate the excess amounts which is a breach of Section 53(2 & 8) of the Act which requires that all procurement transactions must be within approved budgets and that the Accounting Officer shall not commence procurement transactions until it is ascertained that funds have been allocated for the transaction.”

He has forwarded the information to the DCI, ODPP and EACC requesting that a thorough investigation into the matter be done and action taken against those involved in what he terms as ‘daylight theft’ be prosecuted.

On Friday May, 5, there’s a drama at the Jomo Kenyatta International Airport(JKIA) following a botched plan to deport Steward Tom, a Ghanaian national who turned out to be a key witness in a fraud case and was being cleverly deported by suspected schemers of the underworld trade.

All was well, Interior CS Kithure Kindiki had signed the deportation order as per requirements only to realize later that he had made a mistake following a tip-off.

The Ghanaian turned out to be a witness in a Sh130 million fake gold case where an American businessman has been swindled out of cash. The CS hurriedly made the call to stop the deportation as the witness was being hauled to JKIA.

Tom has been accorded state security fearing that his life could be in danger by the planners of his deportation which sources suspect are well connected gold scammers.

An advocate of the High Court and a gold dealer were on March 15, charged in a Nairobi court with defrauding an American businessman of Sh132 million in a fake gold deal.

Lawyer Thomas Otieno Ngoe and businessman Nicholas Otieno Ndolo appeared before Milimani Senior Principal Magistrate Zainab Abdul and denied three charges of conspiracy to commit a felony, conspiracy to defraud USD 1 million equivalent to Sh132,540,000 from American businessman Seth Adams Bernstein and forging of a East Africa Mineral Export permit.

Advocate Ngoe and businessman Ndolo were to sell gold valued at Sh16 billion to the American businessman. It is said that the complainant had paid Sh132 million as customs fees for 3,000 kilograms of gold to be shipped from the country to Dubai.

In the first court, Ngoe and Ndolo denied that on diverse dates between February 3 and 11, 2023, through Equity Bank Yaya Center Branch in Kilimani, Nairobi County jointly with others not before court, conspired to commit an felony namely obtaining money by false pretenses to wit USD 1 million the property of Bernstein.

In the second count, the duo was charged that on February 11 at the same bank with intent to defraud, obtained from Bernstein USD 1 million which was wired to Ndolo’s Equity Bank account by falsely pretending that a firm known as DSI Mining and Minerals company limited was in a position to custom duties for 3,000 kilogrammes of gold to be shipped from Kenya to Dubai, a fact they knew to be false.

Genuine permit

Ndolo was alone charged that on May 16, 2022 at unknown place within the Republic of Kenya with intent to defraud, without lawful authority or excuse made a certain document namely Mineral Export Permit Number EAC/22/92709141705/2022 purporting it to be a genuine permit issued by East African Community Customs.

Nicholas Otieno Ndolo and Thomas Otieno Ngoe appear before a Nairobi court on April 4, 2023.

According to investigations conducted by the DCI detectives, the duo conspired to defraud an American citizen USD 1 million as down payment of part of the Shi6 billion deal. “That after formal introductions, they agreed that the complainant would buy 3,000kg of gold at USD 41,000 per kg totaling USD 123,000,000,” the investigating officer in the case told the court.

After denying the charges, the two accused persons through their lawyers urged the court to grant them reasonable bail terms claiming they have been out on a cash bail of Sh500,000 before Kibera law courts where they had been arraigned last month pending investigations by the police.

They asked the court to maintain the same bond terms since they are not at flight risk.

The magistrate however ordered each of the accused persons to be released on a bond of Shi million or a cash bail of Sh500,000.

How Gold Scammers keep getting away with this fraud

What would’ve befallen Tom is a story of many who’ve been victims of the gold scams. Most of these cases never get fully solved, they die by design.

In 2019, a German national Muhammet Mertoglu told his story how he was hard hit by the criminal enterprise. He was conned was conned Sh23 million by Kenyan scammers led by one Samir Munyinyi.

The case took many turns and hearing was postponed a number of times.

Coincidentally, Mr Thomas Otieno, had been listed as a key witness because he allegedly received money on behalf Mr Munyinyi.

The lack of a key witness appearing in court is part of a ploy to make sure cases fail.

Mr Mertoglou’s predicament mirrors what foreigners who are conned by Kenyan gold scammers go through whenever they try to seek justice after being conned.

By using loopholes in the law and protection from the police and politicians, fake gold cartels harbour some of the untouchable criminals operating on Kenyan soil. With their money and influence, the fraudsters are well represented in government and crucial entities like banks and other financial institutions.

FRAUD UNIT

According to insiders, junior police officers can pocket as much as Sh2 million in order to protect the cartels.

The senior officers who are paid more and on a need basis ensure that the huge amounts of money coming into the fraudsters’ accounts are not flagged as suspicious when banks notify the banking fraud unit.

In order to further guarantee the cartels’ absolute protection, senior police officers make sure the complainants regardless of which station they report the fraud, are directed to particular stations, which have friendly investigating teams. Most files, however, never make it to court.

DOCUMENTS

However, to date, not a single big player in the gold scamming enterprise has been successfully convicted by any court in Kenya. The cases either end up at the police stations they are reported to or at the court where all the big scammers are facing multiple cases but are still in the game.

Mr Jared Otieno, who is suspected to be a key player in the fake gold syndicate, has been arraigned in court on many occasions and there has been no reported conviction.

Nevertheless, it is at the police station that those who have been conned get the first stumbling block in their quest for justice. Since the gold they are purportedly being sold is said to originate from war torn Democratic Republic of Congo (DRC), the victims opt to use tourist visas to evade detection.

The scammers take note of this and pass on this information to the police once a complaint is filed. At the station, the tide turns on those who have been conned for doing business illegally in the country after having arrived on a tourist visa.

GLORIFICATION

Worryingly, in case we ever see a conviction, the culprits are likely to get a three-year sentence regardless of the amount of money they have stolen.

This is courtesy of a 1964 law which classifies gold scamming as part of the demeanours. All gold fraud cases are characterised as “obtaining by false pretence” under that section of the Penal Code.

“Any person who by any false pretence, and with intent to defraud, obtains from any other person anything capable of being stolen, or induces any other person to deliver to any person anything capable of being stolen, is guilty of a misdemeanour and is liable to imprisonment for three years,” says section 313 of the Penal Code.

With such lenient punishments and the societal glorification of those who make wealth fraudulently, it is not difficult to see why Nairobi has been turned into a gold scammers’ paradise. In the unlikely event that they are arrested and taken to court, the scammers bet on the case dragging on for years while they are out on bail.

In April 2018, flamboyant politician Steve Mbogo was let off the hook in a case where he was charged alongside a Cameroonian with defrauding a Dubai-based businessman of $223,000 (Sh22.3million).

The two were accused of pretending they would sell the businessman 56kg of gold. Chief magistrate Mrs Roseline Oganyo dismissed the case against Mr Mbogo after Mr Faizah Ahmed failed to appear in court to testify in the case.

An ambitious project is at stake in the middle of two Japanese companies fighting over a lucrative tender to construct the proposed Sh59 billion Dongo Kundu Special Economic Zone at the Port of Mombasa.

At the heart of the dispute is a faction led by wheeler dealers linked to the Kenyatta regime who influenced the Kenya Ports Authority (KPA) tender committee to favour one company through some specifications made in the last days of Uhuru in power.

Two companies; Toyo Construction Ltd and Toa Construction Ltd emerged as the front runners in the tender which was announced in November last year. Under the terms of agreement, eligible bidders were supposed to be of Japanese nationality in the case of the prime contractor. Kenyan companies were also allowed to apply through a joint venture provided they had a Japanese contractor as the main bidder.

The tender was advertised on November 15 last year. However, intrigues surrounding the deal which have now put the whole project in jeopardy while damaging Kenya’s international reputation began four months before the tender was announced.

This was in June, just two months to the elections when Toyo Construction Limited was handing over Phase 11 of the second container terminal at the port of Mombasa to KPA. The terminal which added an additional 450,000 Twenty-Foot Equivalent Units (TEUs) to the Mombasa port had taken 44 months to be completed at a cost of Sh32 billion also funded by JICA.

It was during the same week that the government announced that JICA had agreed to give it additional funding of Sh39 billion which was supposed to be used for the construction of the Dongo Kundu SEZ project provided that a Japanese company got the tender.

Influential people in the Uhuru regime which was in its dying days but were sure that Azimio la Umoja was going to win decided to strike. Led by former Alego Usonga Mp Edwin Yinda, former Jubilee vice chair David Murathe and former Mombasa governor Ali Hassan Joho, they decided to back Toa Construction Limited to get the tender.

At that time, the KPA administration led by acting managing director, John Mwangemi decided to play along. They even changed the rules of the tender in December after contractors had already applied on December 7.

“Further to our submission to you, vide letter reference PDM/2/4/1 dated 31st August 2022, and your subsequent concurrence letter, vide Ref TC-22- 358™ dated 17th October 2022, and follow-up meetings that have been held in respect to the above subject, we seek your confirmation in amending the eligibility and qualifications subsection,” reads a letter dated December 7, 2022 from then KPA’s acting managing director, John Mwangemi, to JICA Kenya chief representative Iwama Hajime.

At the heart of the request was an extension of the time period for the tender from the current five to 10 years, to up to 15 years, a move observers say was meant to favour some contractors specifically Toa Construction Limited.

The push by Mwangemi’s team which has already been hounded out of office by President William Ruto’s administration is now haunting KPA which is stuck between a rock and a hard place. Dongo Kundu is supposed to be open for investors by July 1 which is just two months away.

In November last year, Ruto promised that the entire Dongo Kundu project would be complete within 24 months.

“I give a commitment that within 24 months, the project that will provide opportunities for the coastal region, must be completed soon so that we can actualise the dreams of many people,” he said.

When complete, Dongo Kundu will comprise an export-processing zone, industrial parks, free trade zones and other auxiliary services such as tourism, meeting, conferencing and exhibitions. It will also have zoned residential areas for workers.

The zone, aimed at attracting a more significant share of foreign direct investment and exports, as well as jobs, is being developed under the Ministry of Industrialisation. The project at the Mombasa port doorstep is intended to enhance export volumes from Kenya, as part of its export promotion programmes.

The SEZ which is Ruto’s first major project has already received its first investor Taifa Gas, whose construction was launched in February by the President. It is now two months, and Taifa Gas which is owned by Tanzanian tycoon Rostam Aziz is unable to fully use its site due to lack of the required infrastructure.

The contractor is expected to dredge a special berth, clear the site, build facilities, including the administration building, and set up a security system and information and communication technology hub.

This entails the construction of a free trade zone, port, logistics hub and industrial zone where companies using Mombasa Port would be allocated space to set up depots. Dredging of the berth will include widening and reclaiming of land for the project.

The works entail the development of a port facility (multi-purpose berth) of 300 meters quay length, a trestle of 450m in length and minus 15-metre draft. It will also have a container and vehicle yard with a capacity of 1,830 Twenty-Foot Equivalent Units (containers) and 2,000 vehicular units. Also, in the plan are buildings and dredging of navigational channels.

Besides the civil and building works, there will also be a cargo handling equipment package that shall see the supply of mobile harbour cranes, forklifts, reach stackers, tractors and trailer chassis. The other components in the larger project include the construction of the 4.6km access road connecting the Port to the Mombasa southern bypass road.

However, despite all these lofty dreams of what the SEZ will do to the people of Mombasa and Kenya in general, irregularities on how the tendering process was handled by the former KPA management now risk derailing the whole project.

As it is, the project which is already five months late cannot start due to tender irregularities. JICA has twice rejected KPA’s decision to disqualify one bidder on account of “minor” oversights that are not crucial to the tender evaluation stage.

If KPA goes ahead and awards a winner in the current state, other competitors could lodge a complaint at the Public Procurement Regulatory Authority (PPRA). This will further derail the project which is critical for the success of the entire Dongo Kundu SEZ project.

For now, all eyes are on the new KPA administration to see whether they will correct the wrongs done by their predecessors.

In a recent case concluded in a Mombasa Court, a couple from Nairobi lost Sh11 million to unscrupulous land dealers in Kilifi who had posed as a famous doctor owning prime land in Kikambala.

The couple bought the land through an agent without meeting with the alleged vendor said to be a Dr Ernest Muinde Kioko, a consultant physician at a Nairobi hospital.

Property developer Shezad Fazal and his wife Carol Mungai were introduced to the said land on June 2015 by an unregistered land agent, David Nyambu who was known to Fazal.

According to the evidence adduced in court, the imposter used Dr Kioko’s Identity Card and forged signatures but used a different picture.

The fraudster also forged a sale consent of Kioko’s wife who they alleged to be Naomi Kalekye Muinde.

However, it turned out that Dr Kioko’s wife is an Asian contrary to the consent.

The money was deposited into an account of Ernest Muinde Kioko (imposter) in Equitorial Commercial Bank, through personal cheques by his lawyer Leonard Shimaka.

The couple’s attempt to meet the vendor on several occasions before finalising the transaction failed to materialise as they were informed he was a busy man.

Accompanied by his uncle and nephew, Fazal travelled to Mombasa and was shown the land by Nyambu and another person called Alfan.

At the property, they met a caretaker, a Mr Shaban Rogers, and proceeded to view the property.

Alfan asked Fazal to contact Shimaka and they agreed to meet at the advocate’s office.

According to a court testimony by Shimaka who oversaw the sale transaction, the imposter visited him with a land agent, Musa Bakari, and introduced himself as a doctor based in Nairobi looking to sell the said land and requested him to act as his advocate once he secures a buyer.

He said after a week or two, Bakari through Nyambu, communicated to him that they have a buyer and they met him in his chambers.

In June 2015, accompanied by Faiz, Nyambu, and Alfan, the developer went to Shimaka’s office and confirmed the sale price as Sh11 million plus a 10 per cent deposit and was issued a copy of the title deed.

Fazal then asked to meet the vendor but was informed he was busy.

On June 16, 2015, Shimaka did a search which confirmed the owner of the property to be Dr Kioko, and to satisfy themselves, Fazal also did an independent search on June 22, 2015 and confirmed that the property had no encumbrances and was registered in name of Kioko.

Shimaka sent them a sale agreement in triplicate for execution and he forwarded it to their advocate, a Mr Ali, for independent legal advice and also for him to act for them in the transaction.

Shimaka proceeded to pay the vendor the full amount through personal cheques, a fact Fazal told the court was reckless and ought to have used RTGS.

Shimaka admitted that he did not see the marriage certificate when he prepared the spousal consent and the wife did not appear before him.

The transfer was eventually effected on July 29, 2015.

However, on December 2, 2015, Fazal was called by M/s Apollo Muinde and Company Advocates, who informed them that Dr Kioko is claiming ownership of the property.

In a judgment issued by Justice Sila Munyao, the couple lost the case filed against Dr Kioko, lawyer Leonard Shimaka, Birir, Shimaka and Co Advocates T/A Marende, Lands Registrar, Mombasa County, The Chief Land Register, Attorney General, and National Lands Commission.

The judge admitted there was quite some sophistication in the level of fraud that has revealed itself in this case and the plaintiffs were swallowed into the scam.

“But maybe, on reflection, they could have been extra careful about the whole transaction and exercised some extra due diligence especially given that they never saw the vendor,” said Justice Munyao.

The judge noted that the money they paid is traceable and maybe they can get some relief by tracing it.

“I wish them luck. I am very sympathetic to them because they lost a colossal sum of money,” said Justice Munyao.