Some senior officials of the National Treasury and their cronies have been hit with asset seizures, including buildings and bank accounts, after investigations unearthed the embezzlement of more than Sh1.55 billion from a UN agency-backed rural financial inclusion programme, in a series of transactions including transfer of funds to personal accounts.
Investigations by the Ethics and Anti-Corruption Commission (EACC) revealed how officials took advantage of weak management systems to siphon funds meant for the Rural Outreach of Financial Innovations and Technologies (PROFIT), jointly funded by the Kenyan government and the International Fund for Agricultural Development (IFAD).
This is in reliance on court documents filed by the EACC and the accused have not filed their responses to the allegations.
IFAD is a specialised agency of the UN that addresses poverty and hunger in rural areas of developing countries.
An investigation report filed by the EACC in the High Court claimed there was plunder, including a Sh799.84 million cash withdrawal by an official who served as the accountant for the PROFIT programme.
The stolen Sh1.55 billion ended up in individuals’ accounts and was partly used to buy residential and commercial buildings in Nairobi, Machakos and Uasin Gishu counties.
The High Court has allowed the EACC to seize the assets and barred the Treasury officials and their associates from transferring, withdrawing or dealing with the assets and funds held in bank accounts pending the hearing and determination of a recovery suit filed by the anti-graft agency.
Those named in the court documents over the scandal include a former accountant of the PROFIT programme, Billy Otieno Obango; Gladys Julliet Chepkarat, John Maina Muriithi (senior accountant at the National Treasury), Nemwel Moturi Mutonya (senior accountant at the National Treasury), John Ngure Kabutha, Lilian Wanjiku Dishon (senior deputy accountant general at the National Treasury).
Others listed in the court documents are George Kihara (Head of Accounting Unit at the National Treasury), Susan Warukira (Principal Accountant at the National Treasury), Sylvia Awino Obango, Philip Sigo Chepkarat, 020 Investments Limited (a firm whose directors the EACC claimed in court documents to be Gladys Juliet Chepkarat’s children) and Jarods Agency Limited.
The PROFIT programme, which was launched on December 22, 2010, operated under the Treasury’s Directorate of Budget, Fiscal and Economic Affairs, was established to improve access to credit for small-scale farmers through credit guarantees, direct lending via microfinance institutions and capacity-building initiatives.
The total funding to the PROFIT programme was $30,891,000(approximately Sh4,001,929.050 at current exchange rates), shared between IFAD ($30,330,000 or Sh3,929,251,500) and the Government of Kenya ($561,000 or Sh72,677,550), court documents said.
The programme ended on December 31, 2019. However, the EACC in the court filings alleges that after its closure, some officials fraudulently processed and authorised the release of Sh1.554 billion from the National Treasury under the guise of programme funding.
The Commission claims that the funds were illegally drawn by Mr Obango and Ms Chepkarat and channelled to various entities, with part of the money allegedly used to acquire properties including residential buildings in Nairobi, Athi River and Eldoret.
EACC has filed a suit seeking recovery or forfeiture of Sh1,554,455,284.35 linked to the PROFIT programmes, which it says constitutes proceeds of corruption.
Court records said that investigations revealed that officials maintained an operations account for the PROFIT programme at Co-operative Bank of Kenya even after the initiative ended. On December 8, 2016, then National Treasury Principal Secretary Kamau Thugge had introduced Mr Obango, Ms Chepkarat and Mr Maina as additional signatories to the account.
Court documents show that in March and May 2023, residual funds amounting to Sh206 million were transferred from the PROFIT account to an account belonging to the Rural Kenya Financial Inclusion Facility (RK-FINFA) at Housing Finance Bank.
EACC alleges that after PROFIT’s closure, a further Sh1.379 billion was fraudulently released from the National Treasury to the programme’s Co-operative Bank of Kenya account. Of this amount, Sh579.3 million was allegedly transferred to various entities, while Sh799.8 million was withdrawn in cash by Mr Obango.
The Commission further claims that between November 2019 and June 2022, three signatories to the PROFIT programme account colluded to transfer Sh81.4 million to 020 Investments Limited, which investigators describe in court documents as a proxy company linked to Ms Chepkarat.
The agency also alleges in its court documents that in October 2022, Mr Obango and Ms Chepkarat fraudulently opened a KCB Bank Kenya account in the name of PROFIT using false documents after the programme had already ended.
According to EACC, Sh175.3 million was subsequently disbursed from the Treasury into the account. Of this amount, Sh157.8 million was paid to various entities through cheques supported by allegedly forged documents.
The Commission claims Mr Obango, on one occasion, withdrew Sh897,600 in cash, while Ms Chepkarat withdrew Sh16.1 million, bringing the total amount allegedly embezzled through the KCB Bank account to Sh174.7 million.
Investigators say the fraud was facilitated through fake payment vouchers purporting to seek funding for PROFIT activities. The documents were allegedly backed by requests for funds purportedly originating from IFAD, despite the donor having ceased funding the PROFIT programme after its closure in 2019.
EACC told the court that genuine PROFIT payment vouchers required a two-stage approval process, including certification by an Authority to Incur Expenditure (AIE) holder and authorisation by the accounting officer.
“The false payment vouchers purportedly prepared in the name of PROFIT only had one-step authorisation by an accounting officer,” the Commission stated in court filings.
An AIE is a financial document used primarily in public sector and grant management to authorise specific officials to spend up to a defined budget limit.
The anti-graft agency further alleges that Mr Obango used proceeds of corruption to acquire a residential flat in Stoni Athi, Mavoko, from the National Housing Corporation for Sh8.85 million and spent about Sh18.1 million to purchase four housing units in Kamulu’s Avana Garden Estate.
Ms Chepkarat and Philip Chapkarat are accused of using part of the funds to develop a four-storey building known as Skyline Hotel in Eldoret.
Court documents said that the EACC probe established that 020 Investments Limited illegally received a total of Sh104,839,792 between November 12, 2019 and August 4, 2023 and used it to purchase three houses within Eldoret town’s Racecourse area.
Mr Muriithi, Mr Motanya, Ms Dishon, Ms Theuri, and Mr Gichuru are accused of abusing their positions and failing to stop the loss of cash in the PROFIT programme.
