How State agency is turning millionaires into beggars

Monday, February 24th, 2020 09:50 | By
Assets Recovery Authority director Muthoni Kimani. PD/FILE

On January 23, Phyllis Njeri Ngirita, one of the suspects in the National Youth Service (NYS) corruption case, broke down at the Milimani Law Courts after the magistrate pushed forward a ruling on her application to be allowed to withdraw Sh800,000 from her frozen bank account.

The suspect, through lawyer Evans Ondieki, wanted to be permitted to withdraw the money to pay school fees for her son at Pembroke House School in Gilgil, where he had arrears amounting to Sh3.4 million.

Njeri, who owns Njewanga Enterprises, together with her mother Lucy Wambui and brother Jeremiah Gichini, are facing charges relating to the loss of Sh468 million at NYS and they became the first casualties of the Assets Recovery Agency which was created towards the end of 2015.

The agency obtained an order from Justice Hedwig Ong’udi allowing it to freeze bank accounts, land and vehicles belonging to the Ngiritas.

Ngirita’s predicament illustrates the plight of suspects facing corruption charges whose money and assets have been frozen by the agency and whose lives have literally been turned upside down. They are Kenya’s increasing number of poor millionaires.

Sending shivers

The Asset Recovery Authority (ARA) is the newest sheriff in town, which is sending shivers down the spine of suspected graft lords, more than the Ethics and Anti-Corruption Commission (EACC) and the Directorate of Criminal Investigations (DCI). 

Its seemingly unlimited powers stem from the fact that it has the ability to reduce those suspected of involvement in corruption to beggars by freezing their bank accounts and seizing their assets. 

Suspects who have fallen under the ARA’s axe include government officials, politicians, high profile businesspeople and wheeler-dealers. The consequences are dire—they can’t run businesses, pay cash bail when charged while others are forced to avoid financial institutions for fear of leaving a money trail.

The first assignment for the ARA was NYS Phase One where they recovered assets worth Sh500 million. They then moved on to phase two of the scandal involving former Youth Principal secretary Lillian Omollo, former NYS Director-General Richard Ndubai and his deputy Nicholas Ahere. 

The High Court in October 2018 froze 10 accounts with Sh33.1 million belonging to Omollo and her children on suspicion they were used as conduits for millions of shillings stolen from NYS. 

The former PS has been fighting to have the accounts unfrozen, arguing that she could not meet her family’s basic needs including food, housing and school fees.

To date the authority has frozen approximately Sh8.6 billion in cash and assets belonging to suspects. The assets range from houses, land to expensive cars.

The authority’s director Muthoni Kimani told the People Daily they are preparing to go for the accounts of more individuals suspected of involvement in graft as they seek to support President Uhuru Kenyatta’s spirited war against theft of public resources.

Muthoni says they have upped their game and are now going for suspects who have hidden the loot in businesses and accounts registered under their proxies to hide their identities.

“It (freezing bank accounts of suspected graft lords) has been challenging and full of risks on the part of our lives but we are determined to carry on,” Muthoni said, noting that they are currently focused on embattled Nairobi Governor Mike Sonko and NYS Two suspects.

Early this month, Sonko successfully moved to court seeking the lifting of an order obtained by ARA in December, freezing five of his accounts. Two days later, ARA obtained orders to freeze 10 of his accounts, holding about Sh18 million, suspected to have been stolen from Nairobi county.

The ARA mandate is to identify, trace, freeze and recover proceeds of graft, money laundering, drug peddling, human trafficking and other criminal activities such as financing terror activities.

 The authority only needs to suspect that a person facing graft-related charges acquired their wealth irregularly for it to demand that they account for how they acquired it. Failing to do so will see the authority move to court seeking to freeze the accounts. 

Questionable money

“All we need is to have a whiff from a whistleblower or through our own initiative that someone has money or assets that are questionable. We investigate and summon the subject, and if they cannot explain, we freeze,” said Mohammed Adow, a senior counsel at ARA.

If there are questions, account holders are required to explain the source of their wealth and if they say they acquired it through business, they have to provide registration documents, county permits, tax returns and accounts records.

Before 2015, according to ARA analysis, suspects registered shadowy companies under their names to run illegal business with government and opened several bank accounts also under their names to hide the loot.

 But since the war on graft was scaled up, the strategy has changed.

These days many State officers are registering briefcase companies using their kin or distant friends’ names or fake identities and then facilitate illegal tenders and request that the money is saved in accounts owned by lawyers, proxies or in offshore accounts.

To avoid being detected, the suspects, according to Mohammed, deposit and withdraw the cash in amounts between Sh500,000 and Sh900,000 to avoid being questioned about the source of funds or the purpose for withdrawals by banks as required by law.  But ARA is aware of this game and has successfully obtained orders to have accounts belonging to relatives of individuals accused of graft frozen.

For instance, Pamela Aboo, the wife of a Kenya Revenue Authority (KRA) officer, Alex Mukhwana, had her three accounts holding Sh19 million at Equity Bank frozen after she failed to explain where she got the money that was deposited in amounts of Sh150,000 to Sh300, 000 between 2016 and 2017. Aboo said she ran transport, banana, and sugarcane and cereal businesses in Busia although the deposits were done in Mombasa and Nairobi. 

Explain deposits

 But ARA, which believed the deposits were kickbacks made to the accounts on behalf of her husband, was able to satisfy the court that the accounts had been used as a conduit for corruption money after Aboo failed to show proof of her alleged business.

Other suspected graft lords are buying properties using proxies’ names or investing heavily in company shares, insurance policies or Treasury Bonds to hide their loot. Though ARA is able to follow cash even in dormant accounts, bank transactions, according to Mohammed, give the authority “easy and quick” intelligence.

“The systems we have allow us to even go for the banks where the holders only do deposits. But most people are not doing transactions with banks because they want to remain unnoticed but we are still getting them,” he said.  

Lawyer Danstan Omari, who is fighting seven cases of frozen accounts in court on behalf of his clients, said the effects of the orders, which he claims are “blind to the reality of the people whose accounts are frozen” is extensive and are causing victims great financial pain.

“From schools fees, medical bills and other financial obligations, one is literally turned into a beggar even if you have millions in your back accounts,” he said.

While Omari says ARA should be empowered to make graft unattractive, of great concerns is that even if the subject case relates to one of the accounts belonging a suspect, or a fraction of the amount in an account, ARA freezes all the money.

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