On July 15th 2003, the Government of Kenya (represented by the Treasury and Ministry of Defence) entered into a contract with Euromarine Industries by which Euromarine would deliver an oceanographic survey vessel to the Kenya Navy for close to Ksh 4.6 billion. The contract features as one of the 18 contentious security related contracts colloquially described as Anglo Leasing type. On the same day, two financing contracts were also entered into with two Spanish firms. At some point, Euromarine sub-contracted the ship’s construction to another Spanish firm known as Astilleros Gondan.
Payments on this contract were stopped in June 2005, following the earlier intervention of John Githongo, former Permanent Secretary for Governance and Ethics in the Office of the Kenya President. Euromarine was then reported to have instituted legal action against the Government of Kenya for the withheld payments on the navy ship – derogatorily called “Kenya’s Spanish Armada” by a former British High Commissioner to Kenya, Edward Clay. The withheld payments have generated political pressure on the Treasury including, according to John Githongo’s Report to President Kibaki of November 2005, direct requests to him by the former Ministers for Justice and Internal Security (Kiraitu Murungi and Chris Murungaru). The ship deal remains cloaked in mystery and has been the subject of an extraordinary press statement by Chris Murungaru in which he names the President as the substantive Minister for Defence and categorically states that no such procurement could have been undertaken without President Kibaki’s authorization, which was given according to Dr. Murungaru in June 2003. The navy ship contract is also listed as one of the 18 security related Anglo Leasing type contracts by the Controller and Auditor General (April 2006), the Parliamentary Accounts Committee (march 2006) and the Ministry of Justice and Constitutional Affairs (September 2006).
KACC is still, of course, conducting the investigations it started in 2004, though its Director Justice Ringera told the committee that as of September 2006 the “international investigation was not complete.” Since January 2007, Treasury has also been waiting for a report on this contract by international audit firm PriceWaterhouseCoopers. Nevertheless, the controversy surrounding this contract prompted the Parliamentary Departmental Committee for Defence and Foreign Relations to intervene and undertake its own limited inquiry into the naval ship contract. The inquiry included a 4-day fact finding visit (September 25 – 28 2006) to dockyards in Spain and meetings with Euromarine Industries, the Head of the Kenyan public service, senior officials from Treasury, Kenya’s Embassy in France (which covers Spain) and the Kenya Anti Corruption Commission. The report of the inquiry tabled by the Chairman of the departmental committee, G.G. Kariuki, and adopted by Parliament on May 2nd 2007, claims to have confirmed the existence of the ship docked at Ribadeo, Spain and apparently already christened “Jasiri Mombasa”.
The report, adopted by Parliament on May 2nd 2007, runs to only 13 pages including an executive summary, and has one annex containing 6 photographs of 4 members of the departmental committee on what we are told is the ship Kenya is meant to pay for, and take delivery of.
Mr. Kariuki and his team make three broad recommendations: first of all it recommends that the Government submit to the International Arbitration Court; secondly it recommends the appointment by the Government of Kenya of an independent survey of the value of the project; and thirdly, it recommends that the Government decide whether or not it wishes to terminate the contract and take the required action.
While we await the imminent report of PriceWaterhouseCoopers on the 18 Anglo Leasing type security contracts, we would like to point out but a few of the gaping holes in this report. A reading of the departmental committee’s report reveals several curious facts and consequent questions that require answers from G.G. Kariuki and his parliamentary colleagues:
1. The departmental committee did not meet with the Attorney General at all. It did not scrutinize the legal and financial contracts which purportedly legitimize the demands for payment being made by Euromarine for the procurement of the ship they believe they visited. Why?
2. Although the committee says it “took upon itself the responsibility to establish the truth regarding allegations of irregular procurement of a naval ship for the Kenya Navy” it does not assess the procurement process at all save to note that there was a contract dated July 15th 2003 between the Government of Kenya and Euromarine Industries, a Spanish registered firm, and a sub-contract between Euromarine and Astilleros Gondan, a Spanish ship builder based in Ribadeo, Spain, the venue of the committee’s visit. Wouldn’t the appropriate place to start its inquiry be a review of whether or not the procurement law was followed as regards sub-contracting? More fundamentally, was the committee not curious as to why the ship was being bought through an intermediary, broker or middleman? What value did Euromarine brings to this deal?
3. The committee held discussions with officials representing Euromarine but not with the ship builder, Astilleros Gondan. In fact the website of Astilleros Gondan does not list Jasiri Mombasa or indeed any Kenyan vessels in its list of ships built between 1969 and 2006. How does the committee explain this curious omission?
4. Lt. Col P. Kituku, the Kenyan naval officer who was said to be supervising the ship’s construction told the committee that “he had been appointed to oversee the ship’s construction in 2002 by the Defence Council and arrived at the Astilleros Gondan’s shipyard in Spain in January 2002.” While moving the motion of adoption of the report, the chairman G.G. Kariuki, confirms these dates when he said “The navy officer arrived in Spain in January 2002.” This is very strange because the contract for the ship was only signed on July 15th 2003, and if we are to believe Dr. Murungaru, the former Minister of State, presidential authorization was only given in June 2003. What was he doing in Spain even before the tender that was said to have been floated on September 11th 2002? Is it not noteworthy to the committee that the KACC took statements from the then Chief of General Staff, General Kibwana and the top naval brass as far back as June 2005?
5. The same officer also told the committee that “through Euromarine, Astilleros Gondan had been contracted by GOK to build other marine vessels in the past. For instance he mentioned the two logistic ships delivered in 1993; five inshore patrol boats delivered in 1994; and two offshore patrol boats delivered in 1996, all of which are still in service to date.” Is this really true? As noted above, Astilleros Gondan does not claim to have built any vessels for Kenya and in fact was only registered as a defence exporter by the Spanish government in September 2005 (more than two years after the contentious contract was signed).
6. Though the committee “was informed by Euromarine and the Kenyan supervising naval officer Lt. Col P. Kituku, that the ship is practically over 90 per cent complete” and that funds permitting it can be completed in another two months, the ship has no weaponry at all and that Euromarine was not responsible for arming the vessel at all. The G.G. Kariuki committee was told by a Mr. Salvador Surroca Vineta, that “the GOK would have to sign a new contract with arms manufacturers to fit its desired weaponry system.” Nevertheless the committee claims that the ship is already equipped with a satellite communications system while dryly noting that “only parts of the oceanographic vessel’s survey equipment have been installed to date.” Recall that the primary function of this ship is to conduct oceanographic surveys. The clincher to us was the offer by Euromarine that “if GOK expressed interest in the ship, Euromarine would negotiate the terms with suppliers for a new arrangement” because as they helpfully pointed out the warranties for various pieces of equipment already installed on Jasiri Mombasa “have since expired.” Mr. Sorroca then “confided that his firm had received queries on the ship from at least three governments including Indonesia, Thailand and Philippines.” The committee followed this by expressing “satisfaction with the physical structure and state of the ship.” How can the committee have been satisfied with such a scenario, in which Kenya is being asked to pay Ksh 4.6 billion for a ship for our navy which for all intents and purposes is merely a steel hulk with out-of-warranty-equipment and no guns?
7. Much was made by Euromarine of its desire to forego already commenced arbitration proceedings at the “Permanent International Court of Arbitration in the Hague”, and to resolve the matter amicably. Incredibly, the committee did not broach the issue of the allegations of unlawful and corrupt procurement which have been raised by former Permanent Secretary for Governance and Ethics, John Githongo and the serious procedural queries raised by the Controller and Auditor General in his special audit report of April 2006. Why?
8. The committee did not seem to use any prior inquiries into this contract in conducting its inquiry. It makes no mention of the KACC investigation of Euromarine and its co-financiers. It makes no mention of the reports by the Public Accounts Committee, the Controller and Auditor General or the Githongo report. did not speak to the Controller and Auditor General or John Githongo. It is written without context and worryingly relies as its primary source of information, on the officials of the contractor whom they were meant to be inquiring into. Why was the committee so determined to ignore the concerns raised by prior official reports, and to urge the Government to renegotiate or submit to international arbitration?
9. Further no attempt was made by the committee, or none is mentioned, to make contact with the alleged financiers of this Ksh 4.6 billion ship (Navigia Capital and Impressas de Financas). There is no mention of any inquiries made of Credit Lyonais Bank which is listed as the creditor to the Government of Kenya in the External Public Debt Register. Why was the committee ignoring the financing and debt aspect of the ship they visited?
10. Finally, the committee is under the misapprehension, possibly because of a confusion arising from whom it talked to, coupled with its not calling for the contract itself, that the naval ship contract “was signed before the current Government came to power.” This is what GG Kariuki told Parliament on April 26th 2007 as he asked the House to adopt his report. It is untrue. The contract was signed on July 15th 2003. Why is Mr. Kariuki under such a false impression? Why does he say to Parliament that the construction started in March 2003, more than 3 months before the contract was signed? What exactly is going on?
11. As he moved the motion for adoption of the report, GG Kariuki also told Parliament that “the committee was assured that this ship was inspected according to the international standards by Kenya and Lloyd’s specifications and other international marine standards.” Why then does the report reflect a different position on page 10? The committee was clearly told that “acceptance trials with inspectors from Lloyd’s Registers and Kenya Navy personnel would be conducted once outstanding issues are settled.”
12. The report attracted media attention, prior to its adoption by Parliament, when it was produced in court on March 20th 2007 by lawyers Fred Ngatia and Kioko Kilukumi before Justice Emukule. The duo argued, for their respective clients, Euromarine Industries, Pritpal Thethy and Andrew Burnard, that the Kenya Anti Corruption Commission had no basis for continuing to investigate them over the Ksh 4.6 billion navy ship contract as the same had been cleared by Parliament. How did the report come into the possession of these lawyers?
In Parliament on May 2nd 2007, GG Kariuki berated the navy for not treating Euromarine better, for not taking possession of the ship, and of course for not paying up. He feels that Euromarine “has been very reasonable to Kenya” and further “the Government should immediately enter into an agreement with the consulting company and settle what they owe.” Our view is diametrically opposed to this. Until Kenyans are sure that the law was not broken, and that this ship is worth what we have collectively been billed for it, the Government must not pay another shilling to Euromarine or anyone else in relation to these 3 contracts. What we expect of legislators, including GG Kariuki, is to hear their unequivocal demands of government for the speedy conclusion of the real investigations and not using his committee’s flimsy report to clear any party and prejudice the Kenyan position. Kenyans need to be clearly told what their financial obligation is and when it will be ended. The external public debt register puts our current obligation at Ksh 4.6 billion payable with 4.8% interest between July 2003 and July 2010.
The GG Kariuki report, in short, provides no basis whatsoever for clearing any of the public officers and commercial entities involved in this deal. It is of little use in assessing whether Kenya will get, if it takes delivery of the ship, value for money. The committee itself admits its lack of capacity to make such determinations as it recommends at the end of the report that “GOK should consider having an independent surveyor to undertake the naval ship’s inspection and evaluation of works and services done.” The committee considers that such an evaluation would provide the basis for responding to the case allegedly filed by Euromarine at The Hague and negotiations with those who hold us in their debt to the tune of Ksh 4.6 billion.
Mars Group Kenya invites readers to carefully scrutinize this report. It reveals more than has ever been in the public domain about this contract and the manner in which it has been dealt with by the Executive, Legislature and Judiciary. Our analysis of the Hansard of that day is that there will be in the near future a determined effort to use parliament and its committees to clear the 18 Anglo Leasing type contracts, including for example the “communication centre for the armed forces” also known as Project Nexus. Kenyans beware. No less than 4 MPs urged the departmental committees to do so, and Mr. Kariuki said “as Dr. Murungaru has said, the time has come when we should go and investigate all the 18 projects which have been giving us a very bad image internationally.”