Kenya: Waluke Firm Forged Papers to Show Maize Stored in South Africa, Court Told
Sirisia MP John Waluke and his business associate Grace Sarapy Wakhungu forged documents to show that they stored maize in a South African warehouse as part of a ploy to justify a Sh500 million claim from the National Cereals and Produce Board (NCPB) in a 2004 scandal that haunts taxpayers to date.
Following an acute shortage of maize that year, NCPB floated a tender for the provision of 180,000 tonnes of white maize.
Erad Supplies & General Contractors Ltd was contracted to supply 40,000 metric tonnes at $229 per tonne and was obliged to ship the maize to the Mombasa port within four weeks from the date of signing the contract.
But a dispute later arose between NCPB and Erad. Ultimately, no maize was delivered and Erad referred the disagreement to an arbitrator.
NCPB, through lawyer Patrick Lutta, argues that using these forged documents, the two business partners, who are directors of Erad, were able to successfully argue an arbitration case against NCPB, and were awarded $3,106,000 (Sh311,184,072.50) in 2009.
This included $1,960,000 (Sh196,378,641) on account of loss of profit, and $1,146,000 (Sh114,861,580) on account of storage costs due to the supplier, as well as interest at 12 percent per annum with effect from October 27, 2004, along with the costs of the arbitration proceedings.
The arbitrator also dismissed NCPB's counter-claim, in the total sum of $71,006,549 (Sh7,113,097,436).
NCPB, which is supporting requests by the Ethics and Anti-Corruption Commission (EACC) and the Director of Public Prosecutions (DPP) to have Mr Waluke and Ms Wakhungu prosecuted for graft, said the two proceeded to demand and recovered over Sh314 million from it on the basis of the award.
"Mr Waluke and Ms Wakhungu executed the arbitral award and recovered over Sh314 million from NCPB after attaching and selling its assets and obtaining garnishee orders against its bank accounts," Mr Lutta says.
EACC investigations locally and abroad -- made possible through Mutual Legal Assistance (MLA), an arrangement where the State requests the government of another country to help it obtain evidence -- has established that the procurement process and alleged purchase and storage of 40,000 metric tons of white maize was a well-orchestrated fraud by Erad's directors.
EACC wants Mr Waluke and Ms Wakhungu prosecuted for graft, saying that investigations had established that Erad used an invalid tender security bid and ought not to have been technically evaluated as responsive. "The firm also procured the award fraudulently by means of false testimony and forged documents," says EACC in court papers. Mr Waluke and Ms Wakhungu, through lawyer Nelson Havi, are seeking to stop their prosecution, arguing that the evidence being relied upon to justify their prosecution was adequately dealt with during arbitration, and that it had also been rejected by the Court of Appeal.
NCPB, for its part, says EACC has the legal mandate to carry out investigations including issues relating to the claim by the two business partners arising out of the arbitration award.
"Mr Waluke and Ms Wakhungu will have an opportunity to defend themselves at the trial and clear their names," said lawyer Lutta, for NCPB.
EACC, through lawyer Ben Murei, states that Erad alleged that it had made all arrangements to bring maize that had been procured and stored by M/S Chelsea Freight, South Africa, for a period of 123 days but that NCPB failed to meet certain conditions and hence it could not import the maize.
It was this testimony that resulted in the arbitration award, including storage charges of $1,146,000 purportedly paid to M/S Chelsea Freight.
Pursuant to MLA, EACC obtained evidence from South African authorities demonstrating that the documents purportedly emanating from firms in the country on the basis of which huge awards were made were forgeries.
"In particular, one of the documents (an invoice) on the basis of which storage charges of $1,146,000 were awarded to Erad and its directors, is forged and did not emanate from the purported supplier, M/s Chelsea Freight in South Africa," EACC says in court papers. The hearing of the case has been set for March 11.