EACC exposes bribery in Sh4.2 billion mall

Agency says bosses were given houses by Chinese contractor to build shoppers' paradise.

In Summary

• Kisumu Speaker Onyango Oloo acquired a house from the Chinese contractor.

• Bobasi MP Obiri also received money from Chinese contractor. 

Detectives have uncovered what they claim is irrefutable evidence of bribery in construction of the Sh4.2 billion Lake Basin Development Authority Mall, which is threatening to bring down big names.

The Ethics and Anti-Corruption Commission claims a Chinese contractor, Erdemann Property, dished out bribes to top officials of the LBDA to build the controversial mall whose cost is said to be grossly exaggerated.

It's also almost empty, lacking key anchor tenants and others two years after completion.

Among the inducements allegedly doled out by the contractor were apartment houses in Athi River and Nairobi’s High Rise Estate.

“The Intelligence received with regard to the aforesaid project indicated that certain specified key persons involved in the project received financial and other inducements to facilitate the documented irregularities in favour of the main contractor,” state EACC documents filed in court, and exclusively obtained by the Star.

Pioneered by Chinese investor Zeyun Yang, Erdemann has built more than 4,600 units in Kenya and has partnered with the government in the delivery of President Uhuru Kenyatta’s Big Four agenda.

Affordable housing is one of the Big Four.

Currently, the firm is constructing apartments in Ngara, Nairobi, financed jointly by the national and county governments, part of the Big Four.  

The EACC says when they carried out simultaneous raids on four homes of ex-LBDA Chairman Onyango Oloo, they recovered documents showing he had a property from the Chinese firm.

“This is a clear demonstration of conflict of interest and bears witness to the reasonable suspicion as envisaged under Section 118 of the Criminal Procedure Code of involvement in corrupt activities,” the EACC said.

EACC sources did not disclose exact houses that were given to the LBDA officials.

However, Edermann constructed the Great Wall Gardens in Athi River with 2,173  units.

Some of the three-bedroom units, with en suite master bedroom, go for as much as Sh8 million. The contractor describes them as having top-notch finishing.

The firm also built the controversial Seefar Apartments in High Rise, Nairobi,  which the National Environmental Authority is fighting to bring down. It says the construction is on riparian land.

Oloo, a former secretary general of the defunct TNA party and now Kisumu Assembly Speaker, has moved to court seeking block his prosecution and other actions.

Bobasi MP Innocent Momanyi Obiri, whose firm Quantech Consultancy was procured as the project’s quantity surveyor, has also gone to court to block further raids on his home and business premises.

The EACC had raided the homes of top LBDA officials and those associated with the mall, including Oloo and Obiri, on June 4 last month.

The Star exclusively reported on Wednesday that the EACC has concluded the probe and sent the file to DPP Noordin Haji, setting the stage for high profile arrests.

In reply to Obiri’s court plea, the EACC says Edermann wired Sh2.4 million to the MP's personal account, jointly held with a woman only identified as Martha, raising suspicions.

“We sought to establish whether the said monies constituted an inducement for the irregular management for the project costs by his firm Quantech Consultancy,” the EACC said in defence of its raid.

Detectives said Obiri’s firm overvalued the final works by more than Sh1.1 billion, putting the value of the mall at Sh4.1 billion.

However, a team of experts from the State Department of Public Works put the value of the completed mall at Sh3.01 billion.

In separate papers, the EACC said the contract varied by 57 per cent from the initial Sh2.4 million to Sh3.8 million.

The law only allows a variation of as much as 25 per cent.

The anti-graft agency accuses Oloo, once President Uhuru Kenyatta’s blue-eyed boy, of irregularly charging the mall’s land title deed to a Sh2.5 billion loan that Cooperative Bank gave to the contractor.

“This, they did without the approval of the Treasury and exposed LBDA property to risk of sale in case of default in repayment of the loan,” the EACC said.

It is not clear why the board could not go for the same bank loan themselves, instead of giving it to a contractor to secure a loan.

The LBDA Mall in Kisumu was supposed to be every shopper's dream, featuring a mega supermarket, a three-star hotel and a doctor’s plaza.

However, the mall is virtually a white elephant project, still struggling to sign anchor tenants two years after it was completed. Meanwhile, the bank loan continues to accrue very high interest.

Part of the Cooperative bank loan was to be settled from rent received from the mall, which is largely empty.

The Sh2.5 billion loan was at some point attracting up to Sh43 million monthly interest.

Like the Kerio Valley Development Authority that has been involved in the Sh21 billion dams scandal, the LBDA is also a parastatal in the ministry of the East Africa Community.

Its mandate is to carry out integrated sustainable development planning as well as promote management and conservation of natural resources.

In his application through senior counsel James Orengo, Oloo asked the High Court to quash any evidence secured by EACC through unconstitutional raids.

He complains that the EACC searched his parent’s residence in Manyatta, Kisumu, which was not authorised by the magistrate's court.

“The search of my parents' home was not authorised by the court and therefore was unconstitutional, illegal and unjustified,” he said.

Among the things he said were confiscated were firearms, ammunition, cheque books, title deeds and log books.