An explosive Government audit of Anglo Leasing-style contracts caused so much alarm in President Kibakis inner circle that some politicians suggested it should be delayed or watered down , the Nation can reveal today. Energy minister Kiraitu Murungi and Kieni MP Chris Murungaru expressed their fears during a discussion with anti-corruption czar John Githongo that the audit – of 18 suspect security contracts – could reveal even more questionable deals hatched by Narc.
One of them said that following the public outcry over the first two Anglo leasing deals – for a passports system and CID forensic laboratories – any new disclosures might bring down the Kibaki administration. The two raised their concerns at a meeting in January 2005, when Mr Murungi acknowledged that political fund-raising normally fuelled corruption, and then went on to press for the part payment of some Sh4 billion owed to a firm building a patrol boat for the Kenya Navy, which had been blocked by graft investigators.
When Mr Githongo, then the Permanent Secretary for Ethics and Governance, asked what would happen if another Narc scandal followed the Anglo Leasing affair, Mr Murungaru replied, "People would give up completely," while Mr Murungi, whose ministry oversaw the Governments anti-corruption programme, added: "Even us who are fighting corruption would suffer ... if there is another Anglo Leasing or even something bigger like another Goldenberg , it would be a disaster." The report, by auditor general E.N. Mwai, was completed last year and has yet to be released. A Cabinet paper is reportedly being prepared to clear the way for implementation of some of its recommendations, more than a year after the scrutiny started.
But today the Nation can reveal that a whole year before last weeks storm which forced Finance minister David Mwiraria out of office and left Vice-President Moody Awori and minister Murungi under siege, members of President Kibakis inner circle were worried about the likely result of another financial scandal becoming public because of the Government audit. Mr Murungaru – who was then minister for National Security, the portfolio covering many of the contracts – remarked during the January meeting that the audit report was useful to the Government in "terms of educating us" but would cause serious problems if it was made public "as it is".
Bound by law
He was reminded that the Auditor-General was bound by law to present his reports on the management of public funds to Parliament and the Cabinet and its release could only be delayed to give the authorities breathing space.
Yesterday Mr Murungaru, through his lawyer, Mr Paul Muite, declined to comment on this or any other matter related to the incident and said he would respond to questions at a press conference today. Payment for the controversial ship, which was being built in Spain, was among billions of shillings withheld following questions raised by Mr Githongo about security-related contracts.
As a result, the auditor-general was ordered to carry out a special audit of all such contracts dating from November 2004. Special audits, unlike the Public Accounts reports, can only be released on the authority of the Cabinet, which has yet to discuss the matter. The Kibaki mens anxiety over Mr Mwais report emerged at a meeting held in Mr Murungarus Harambee House office. On the agenda was the possible payment of some of the controversial contracts, in the expectation that the firms would contribute to Narcs fund for grassroot elections and the Constitutional referendum.
When Mr Murungi and Mr Murungaru insisted on some of the payments being released, Mr Githongo, according to records, ruled out negotiation over contractors who collected payments but supplied "nothing but air"; a position the two ministers then supported. But he was willing to consider a compromise on other contracts which had been fulfilled. He reminded the two that the auditor-general was a Constitutional office holder and had to present his report to Parliament "and if he does, we are done for." Mr Murungaru was adamant that a way should be found to minimise the effect of the auditor-generals disclosures about the contracts, arguing that doing this was in the national interest.
"We have all taken an oath that whatever we do will be in the best interest of this nation," he is quoted as having said. "You must realise that opening up or rather making a report about these procurements, other than entertaining the public, will have the deadly effect of portraying this country as one that is incorrigibly corrupt. If Mwai (auditor-general) can accept that, seriously tell him to do it for good faith and good measure." Mr Murungis personal assistant, Mr Kaburu asked for the questions to be faxed to the Ministers office. "I cannot promise to get the answers until tomorrow because he has already left for the day," Mr Kaburu said.
Three attempts
That January meeting marked one of at least three documented attempts by Mr Murungi to unblock contract payments stopped as a result of corruption investigations. Records show that Mr Murungi raised the issue with Mr Githongo in September, 2004, and at the time emphasised a message from his colleagues to the PS that "you are doing this work yet you are killing our political future."
The matter came up again in January, 2005, with Mr Murungis colleague, Mr Murungaru, explaining suspect contracts under the Office of the President and trying to allay Mr Githongos doubts about them. Dubbed by Mr Murungi "the chairman of the resource mobilisation committee", Mr Murungaru – who was dropped from the Cabinet last year after being banned from visiting the United States and Britain – openly admitted to knowing two of the figures thought to be associated with controversial contracts and the Kenya Navy ship tender –Mr Anura Perera and Mr Deepak Kamani.
Mr Perera, a Cyprus-based Sri Lankan has denied any links to the Navy ship contract or having carried out any defence contracts for the Kenya Government. Officially the Navy ship tender was awarded to a company called Euromarine. But records show that Mr Murungaru believed Mr Perera was associated with the Navy ship and talked of the tycoons business principles and religious values while arguing for the release of Euromarines payments.
The minister described Mr Perera as a Buddhist and a philanthropist, whose religious values forbade him to trade in instruments of death. According to Mr Murungaru, the Kibaki political camp had received a great deal of assistance from a contractor in 1992, 1997 and 2002, when they finally ousted President Moi through a coalition uniting the LDP and the National Alliance Party of Kenya. At a time when the Treasury was refusing to reveal the identity of the person behind Anglo Leasing and Finance Company, Mr Murungaru openly described Mr Kamanis personality and approach to business.
Said the MP: "He (Kamani) will play the game you want him to play. If you want him to play the cowboy, he will play the cowboy. If you want him to play the straight and narrow, he will do it. But I have kept a distance from him because he has so many issues, such as the Mahindra, which were done by people we are sitting in the Cabinet with." The most recent indication of the audit reports existence came from Treasury permanent secretary Joseph Kinyua, who assured the public last week that some Sh16 billion due to be paid on suspect contracts was being held back at the Treasury until the deals were cleared by the auditor-general and the Kenya Anti-Corruption Commission.
The auditor-generals findings could introduce a new twist to the ongoing debate over the Kibaki administrations handling of Anglo leasing type contracts inherited from the Moi government, and those it initiated on entering office. Sources say that by August, 2004, Narc had signed US$277.7 millions worth of Anglo Leasing-type contracts – where either the contracted company was fictitious or the tender value was hugely inflated – while those signed by Kanu between late 2001 and when it left office in 2002 were worth $443.36 million.
All the Narc contracts were sealed under Mr David Mwiraria, who resigned last week as Finance minister. At the weekend, however, Mr Murungi said he would not resign as a minister following reports that he pushed for the payment of questionable contracts to free funds for Narcs political activities, and tried to persuade Mr Githongo to abandon investigations into the Navy deal in exchange for a debt case against his father being dropped. He has publicly denied trying to raise party funds from questionable contracts or that he was ever involved in the Anglo Leasing affair.
The first of the Anglo leasing scandals to rock Narc was the Sh2.7 billion tender for the purchase of equipment to issue tamper-proof passports exposed last year. Soon after, the media uncovered another questionable security contract for the construction of a CID forensic laboratory at Sh4.3 billion.
Both turnkey contracts involved Anglo Leasing and Finance Company, a firm whose directors Government officials claimed not to know and which did not exist at the addresses indicated in its contracts. When the deals were questioned, Anglo leasing returned the Sh91 million it had received for the passports contract and billions more it had been paid for the CID laboratories project, where no work had been done on site.
No delivery
Evidence shows that the auditor-generals report could have grouped the multi-million shilling Anglo Leasing type contracts into three: contracts on which there was no delivery but money was paid, contracts awarded to fictitious companies, and those which were grossly overpriced. Two weeks ago Mr Murungaru, reacting to a 31-page dossier compiled by Mr Githongo on corruption in the Kibaki administration, claimed President Kibaki was aware of the Navy boat contract – one of 18 tenders whose payments were blocked on suspicion of corruption – and argued that it was free of fraud.
Evidence shows that he had made the same point to Mr Githongo and Mr Murungi at the January, 2005 meeting, saying President Kibaki knew about the project because he was the Finance minister when the Kenyatta government bought the Navy boats being replaced by the Euromarine vessel
Deeply familiar
Although the Kenya Anti-Corruption Commission has previously interviewed Mr Kamani for only two hours, Mr Murungaru during the meeting seemed not only to be deeply familiar with both Mr Kamani and Mr Perera, defending their track record and stressing that one of them was "very close" to the Kibaki regime.
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