Blow to Waluke, Wakhungu as EACC allowed to cite new evidence in Sh564m case

Basically, this is the evidence that was used to convict the two

In Summary
  • Basically, this is the evidence that was used to convict Waluke and Wakhungu, but has never been filed.
  • In the ruling, the judges allowed EACC to adduce new evidence in an appeal filed by the National Cereals and Produce Board (NCPB) in 2012
Businesswoman Grace Wakhungu and Sirisia MP John Waluke
Businesswoman Grace Wakhungu and Sirisia MP John Waluke
Image: FILE

A court, Friday allowed the anti-graft agency to adduce new evidence in a case where Sirisia MP John Waluke and Grace Wakhungu are defending fraudulent award involving Sh564 million.

A three-Judge bench of the Court of Appeal (Hannah Okwengu, John Mativo and Weldon Korir) delivered the significant ruling in an application filed by the Ethics and Anti-Corruption Commission on November 4, 2014.

In the ruling, the judges allowed EACC to adduce new evidence in an appeal filed by the National Cereals and Produce Board (NCPB) in 2012 against Erad Supplies and General Contractors, whose directors are Waluke and Wakhungu.

Basically, this is the evidence that was used to convict Waluke and Wakhungu, but has never been filed in the separate ongoing civil case at the High Court and now at the Court of Appeal.

The civil case has been pending in the Court of Appeal since 2012.

In this case, NCPB and EACC seek to set aside the arbitral award of Sh564 million made to Erad Supplies Limited and subsequently confirmed by the High Court requiring NCPB to pay fraudulent claims made by Erad Supplies.

Erad Supplies is the company that Waluke and Wakhungu were found guilty of using to defraud the government in a botched tender to supply maize to NCPB.

In seeking to adduce new evidence, EACC, in its application, told the Court of Appeal that the evidence was not available when the High Court considered the matter and upheld a Sh564 million award in favour of Erad Supplies and its directors to the detriment of taxpayers.

NCPB and EACC, in the 2012 civil appeal, argue that the arbitral award, pursuant to which Erad Supplies auctioned NCPB assets and obtained a payment of more than Sh297 million, was fraudulently obtained using forged documents.

The Magistrate’s court which convicted the two ordered that they pay back this amount to NCPB, but the same is part of what Waluke has appealed against in the criminal case.

The upshot of the Court of Appeal ruling is that the court has admitted evidence that EACC obtained from South Africa, and which was primarily relied on by the trial court, demonstrating that Erad Supplies Ltd and its directors Waluke and Wakhungu forged documents to prove that they stored maize in a South African warehouse as part of a well-orchestrated scheme to justify the fraudulent claim at NCPB.

In its ruling delivered virtually, the Court of Appeal Bench said;

“Accordingly, we allow the applicant’s (EACC) application dated  November 5, 2014, and order that the applicant (EACC) be and is hereby allowed to adduce additional evidence by way of affidavit evidence.”

“That the affidavit of one Kipsang Sambai (EACC Investigator) together with the evidence received from South African Authorities attached thereto is hereby deemed as duly filed and served upon all the parties to this appeal.”

The court ordered that Erad Supplies be and is hereby granted leave to file a reply to the said affidavit within 15 days from the date of this order.

EACC, through Advocate Ben Murei, moved to the Court of Appeal in 2014 seeking to join the NCPB appeal as an interested party and adduce new evidence received from South African Authorities.

EACC obtained evidence from South African Authorities demonstrating that the documents, purportedly emanating from South African firms on the basis of a huge award of Sh564 Million was made, were forgeries and did not emanate from the said firms.

For instance, one of the documents on the basis of which storage charges of USD 1,146,000.00 was awarded to Erad Supplies is forged and did not emanate from the purported supplier/bailee, M/s Chelsea Freight, CK 2002/046548/23, of 14th Floor John Ross House, suite 406/407, Johnson Lane, Durban, 40001, South Africa.

Consequently, the director of Erad Supplies, one Grace Wakhungu, lied on oath and produced false evidence during the arbitration proceedings.

In its papers filed in court, EACC argues that an award procured through perjury and false documents is decidedly contrary to public policy and ought to be set aside.

In their defence during trial, subsequent appeal at the High Court and now the current Waluke appeal against conviction and sentencing in the Court of Appeal, the main argument is that Waluke and Wakhungu should not have been convicted because the Sh297 million they obtained from NCPB was, according to them, pursuant to a pure commercial transaction which was even validated by the High Court.

According to them, the decision of the arbitrator awarding them for breach of contract by NCPB was validated by the High Court and even if the same is being challenged at the Court of Appeal, the arbitral award has never been set aside.  

Consequently, in the event, the Court of Appeal, upon consideration of the new evidence admitted Friday, declares that the award was fraudulent and sets it aside, it will negate the current claims by the Walukhe and Wakhungu.

If NCPB succeeds to set aside the arbitral award at the Court of Appeal, it will bring to closure all claims by Erad Supplies and its directors including more than Sh260 million balance which has not yet been paid to Erad due to a court injunction.

Officials said the amount could be more due to the interest earned over the years.

Erad’s claim from NCPB was for more than Sh564 million but they had only managed to recover about Sh297 million when NCPB secured an injunction against further claims pending the hearing and determination of the appeal filed in 2012.  

In 2004, after drought hit the country and there was an acute shortage of maize, the Ministry of Agriculture instructed NCPB to purchase two million bags of maize for famine relief and the Strategic Grain Reserve. Consequently, NCPB floated a tender for the provision of 180,000 tonnes of white maize. Five companies were picked.

Hala General Trading LLC, Euroworld Commodities Ltd and Erad were contracted to supply 40,000 tonnes each, while Purma Holdings and Freba Investments got tenders for 30,000 tonnes each.

Erad Supplies was contracted to supply 40,000 metric tonnes at $229 per tonne and ship the maize to the Mombasa port.

However, a dispute ensued between Erad Supplies and NCPB after NCPB cancelled the contract after discovering fraud by Erad and its Directors after the contract had been awarded.

Erad referred the dispute to an arbitrator and used forged documents to justify their claim for alleged loss of profits and maize storage charges. Erad and its two Waluke and Wakhungu successfully argued the arbitration case against NCPB and the arbitrator ruled in favour of Erad and awarded it Sh564 million as compensation for losses and storage fees.

Aggrieved by the arbitrator’s decision, NCPB moved to the High Court and again its case was dismissed by Justice Leonard Njagi.

Erad and its directors proceeded to execute the arbitral award and obtained Sh297 million for alleged loss of profit and interest allegedly incurred by Chelsea Freight in South Africa.

While the civil appeal by NCPB to set aside the award was still pending in the Court of Appeal, EACC, in the execution of its mandate, commenced investigations locally and abroad focusing on the criminal aspects of the matter.

EACC leveraged on Mutual Legal Assistance (MLA), an international arrangement where a country requests the Government of another country to help it obtain evidence for legal proceedings.

The EACC investigations, which finally led to the jailing of Waluke and Wakhungu, established that the alleged purchase and storage of 40,000 metric tons of white maize was a well-orchestrated fraud by Erad's directors.

In jailing the two, the magistrate’s court was satisfied by the EACC testimony that Erad and its directors procured the arbitral award fraudulently using forged documents.

The two were jailed while the civil case was still pending before the Court of Appeal.

In 2014, EACC joined the NCPB appeal at the Court of Appeal seeking to adduce new evidence to further prove Erad Supplies and General Contractors Ltd used forged documents to defraud the government.

It is this Application that the Court of Appeal determined and issued the ruling on Friday.

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