By TNLM Team
A rather innocuous debate took place in the United Kingdom recently. It was a protest by members of the British Parliament against the use of British aid money going to finance elitist projects in poor countries as opposed to the money targeting the very poor in these poor Third World countries.
The organisation at the centre of the controversy was Actis, which is the beneficiary of British aid money through CDC. The debate followed a serialisation by leading British media of Actis investments in various parts of the world that showed that Actis was only investing in gated communities or developments for the rich.
Claire Provost of The Guardian of London was the lead investigator for this story.
Now an even bigger scandal involving Actis has evolved from right under our noses linking Vodafone officials in Kenya to a multi-billion scandal.
Not only is Actis promoting elitist projects but now it is also engaged in corrupt activities with sister British companies to the prejudice of British taxpayers.
And the Actis-Vodafone Garden City scandal could not have come at a worse time: the British government has just finished hosting the first UK Anti-Corruption Summit in which the British government made worldwide declarations regarding corruption involving British companies. The Summit declared that Britain will no longer tolerate dodgy business practices, and that British companies are required to abide by a very high standard in this regard.
However, Actis and Vodafone have not been paying much attention to this new resolute attitude of the British government.
Act One: Conceived from the start to be a preconceive deal
The recently released KPMG details a very brazen and unsophisticated corrupt transaction in which the shareholders of Safaricom have lost hundreds of millions of shillings.
According to the KPMG Report, the steering committee of the new Safaricom corporate headquarters, proposed to be named the One Campus Project, included Bob Collymore and John Tombleson (the two Vodafone directors at Safaricom) although KPMG could not “find evidence of a formalised mandate” for this steering committee. This is an important qualification by KPMG. It points to a preconceived plan to ensure a certain decisional result outside of a formal structure.
Consistent with this overall design, KPMG was able to establish correspondence that Safaricom’s Finance Director, John Tombleson, was in communication with the yet-to-be-selected Safaricom property consultant, Mentor Management Limited (MML), “discussing the possibility of Safaricom acquiring land at the Garden City site several months before the formal process commenced.” In a normal establishment observing minimum corporate ethics and standards (particularly a listed company and where the persons are senior Vodafone employees) this would have invalidated the entire tender process, but not in Safaricom where it was intended that the desired fraudulent outcome was to be achieved.
And the fact that the officers identified by KPMG as being responsible and overseeing the process are still holding their respective positions is a sound indicator that corruption is really endemic and tolerated.
KPMG also document a critical fact: this advance lobbying by Finance Director, Tombleson and the “identified” consultant had been rejected by senior managers at Safaricom who did not identify with the rationale of relocating a blue chip company of Safaricom’s stature to Thika Road. But the process was marshalled forward.
In addition, the pre-ordained consultant “had not been prequalified within Safaricom at the time it was submitting its proposal for property search.” In fact, such a scheme within a public sector organisation would amount to a criminal conspiracy to defraud the organisation.
Act Two: Eliminate objective standards
At first sight, one may be forgiven for thinking that this was a brazen and unsophisticated scheme undertaken carelessly, but a closer scrutiny quickly identifies an execution process tinged with such a primitive sense of impunity.
Let us begin by unravelling the web. Remember that the total budget for this project is Shs12.5 billion – the most expensive real estate development for a corporate head office in Kenya’s history. So the first step is to retain a consultant who will not be subject to open scrutiny.
We have identified that the lead property consultant was already being consulted many months before the formal process was commenced but to show how completely corrupt Safaricom had become, the three shortlisted property consultants were identified as follows (and we wish to quote the KPMG report verbatim): “Kinuu informed us that Tombleson proposed MML”; “…DTZ was brought in through Muraszko”; Knight Frank was invited as it was a prequalified supplier for Safaricom and was also one of the leading property consultants in the country.”
A tender process in a listed company is being conducted through a process where senior officers walk into a room with their preferred companies and sign them into the tender process. It must be obvious that the other multi-billion tenders that Safaricom routinely issues are all conducted in this manner. Indeed the KPMG report confirms this as the norm in Safaricom tenders.
The Vodafone establishment in Safaricom had this already wrapped up: the Finance Director from Vodafone, John Tombleson, proposes MML, Richard Muraszko, Vodafone Property Group representative, walks in with DTZ even though according to KPMG “DTZ were in the process of establishing an office in Nairobi in August 2013 … and did not have much experience in the Kenyan market” when they were proposed by Muraszko.
Knight Frank was included in order to get the number of bidders to three and not because it was a serious contender in the process. This is so because “the proposal evaluation criteria for this RFP had not been defined prior to the RFP being sent out and receipt of bids”, but the RFP was “determined after the bids had been received.” In fact, some of Knight Frank’s bid documents “did not bear the Procurement Department stamp for an opened tender while the rest of the proposals had this stamp.”
MML were declared winners of the tender and John Tombleson and Collymore signed off the decision on January 28, 2015 but no formal contract was issued to MML and the “absence of an executed contract between Safaricom and MML meant that MML was not expressly restricted to acting for Safaricom alone, declaring conflict relationships or restricted from receiving financial benefits from other parties in this transaction such as Actis.” KPMG conclude by stating that so far “MML has received Sh23,052,000 as payment for their involvement in the One Campus Project. This amount is more than 10 times the amount quoted in their initial bid for the project search.”
The fraud in the One Campus Project could not have been possible unless professional responsibility was eliminated to do away with a comeback possibility. It was intended that any opinion would remain just that; an opinion without professional consequences on the players. The conflict of interest has to be understood in this light.
Act Three: Escape processional scrutiny
Collymore and John Tombleson decision to do a deal with Garden City having been preconceived it was necessary to use an agency (MML), which would guarantee that Garden City emerged the winner in the sham tender.
The choice of MML was classic.
MML is owned 99.9 per cent by Garden City. So how could MML provide objective advice to Safaricom? MML, Actis and Garden City shared the same office, the same address and the same personnel. To illustrate the corrupt nexus between MML and Garden City in this transaction, KPMG note that the “Garden City (tender) proposal was received four days after the submission deadline.” Obviously, MML ensured that Garden City knew of what the competing bidders had quoted, which would allow Garden City place a more competitive bid.
To narrow down the competition further, in a meeting with “Collymore and “chairman”, it was unanimously agreed” that the two most competitive bids of Eldama Ravine plot and the Kenyatta Family land at the Northlands site be eliminated. It is obvious that it was bound to be difficult to rope in the Kenyatta family into the fraudulent scheme and Northlands was dropped.
KPMG report confirms that Collymore and the “chairman” were the architects of the scheme.
Act Four: The stench begins to get unbearable!
Even for MML, the stench from this corrupt deal was beginning to become nauseating and unbearable. We quote the most damning section of the KPMG report:
“In an email dated 26th July 2015 (on a Sunday and one day before lease agreements for the five acres were signed), Hoddell informed Kinuu that Rob Spooner (Spooner) had resigned from Profica and the One Campus project due to reputational risks resulting from exploitation of Safaricom by Actis/Aspire.
Hoddell stated that: “Between you and me, I understand that Rob Spooner has resigned from Profica and the project. He has been concerned about reputational risk to him due to the exploitation of Safaricom by Actis/Aspire. This information is extremely confidential and I would appreciate it if you do not mention this to anyone else on the team at the moment.”
Clearly, an insider from Actis could tell that a criminal conspiracy was going on and that this was likely to have serious consequences on him as a professional and he opted to resign, literally at the 11th hour.
When shareholders are defrauded through a scheme that has been confirmed by one of the co-conspirators, this amounts to a breach of the law and entitles the shareholders of the company and the government, in the general public good (since government has a substantial stake in Safaricom) to act.
This feeding frenzy was being accelerated at a breakneck pace lest it was discovered and frustrated. An Actis director, Koome Gikunda, is quoted in the KPMG report as pushing to extract as much as possible from Safaricom: “… I don’t know whether the attached sufficiently covers our risks – our lawyers will review. Also need to ensure we have our 15% profit of all costs included. In any event, I’m still in favour of using the rush to begin enabling works as a forcing mechanism to tie up the larger deal (once we have cash from the land sale).”
Nothing could be clearer; Actis, with the assistance with Safaricom insiders, was out to milk Safaricom to the bone. First, KPMG confirm that there was no evidence of price negotiations or commercial valuation reports analysing the price of the land that Safaricom was buying from Actis. In actual fact, KPMG “observed that the land sold to Safaricom had been purchased from East African Breweries Limited (EABL) by RDIL (Actis) at Sh1,200,000,000 for 32 acres. This is equivalent to Sh37,500,000 per acre.”
Yet Safaricom bought the 5 acres for the One Campus Project for Sh1,150,000,000 (Sh230,000,000 per acre) meaning that Actis recouped all its outlay for the 32 acres it had previously bought from EABL.
KPMG further report that they “undertook a property search for land prices around Garden City and the Kasarani area and found that the average rate per acre is Sh100 million to Sh150 million” as indicative values. Going by these values, Safaricom shareholders lost in excess of Sh650 million! It is no wonder that a director of Actis is overcome with guilt and resigns on account of this shameless “exploitation of Safaricom by Actis.”
The very act of a public company purchasing property without undertaking a professional valuation is, under the Companies Act, a decision which amounts to gross negligence and the directors of Safaricom must leave office immediately on their own accord or risk facing lawsuits by shareholders to vacate office.
This is what explains why Safaricom CEO, Collymore, and the Finance Director were insisting on MML being appointed the property consultants for this project: MML are not qualified or registered valuers. If Knight Frank had been appointed, they would not have recommended to Safaricom to purchase the land without first presenting a market valuation report. That would have been a professional obligation. It explains why Knight Frank’s tender documents were not even opened or stamped; they could not have been suitable partners in this fraud.
In addition, the chief officers MML ignored a tiny detail in their haste to “exploit” Safaricom: it is alright to appoint MML as property agents but the law forbids them (Safaricom) from paying or receiving monies as a property agent if MML is not a registered property agent under the Estate Agents Act, which requires that any person who “brings together, or taking steps to bring together, a prospective vendor … and a prospective purchaser” or participates in the negotiation of “terms of sale … as an intermediary between or on behalf of the principles” must be a registered Estate Agent. MML is not a registered Estate Agent and the payments made by Safaricom to MML are, obviously, against the law.
Act Five: Who sacrifices who?
Why is the KPMG report too hot to handle for Safaricom? It cites and incriminates all the senior Vodafone directors who know too much about each other. It is the reason that Collymore is not interested in dealing with the corruption findings in the report but is more concerned about using the police to trace the source of the leakage.
At a recent Safaricom Board meeting, Collymore begged for John Tombleson not to be fired saying that the mistakes made could be forgiven. Really? It is rather obvious that the two Vodafone directors, John Tombleson and Richard Muraszko, will not agree to go alone: they will take the whole ship down. Another Vodafone Director, Roy Masamba, was allowed to serve out his entire notice period (continue to work with the victims of his crimes) even after serious breaches of Vodafone Code of Conduct were established and proved. This was the least that could be done for him to buy his silence.
However, these Vodafone directors have little choice in this: Rob Spooner has already admitted his status as a prosecution witness by confirming in writing that the whole “deal” had serious “reputational risk” attached to it “due to the exploitation of Safaricom by Actis/Aspire”.
This is in clear breach of British law as it is a clear conspiracy to defraud the shareholders of one company (Vodafone) by another (Actis). It now all depends on how the British government actualises the recent resolutions made at the London Anti-Corruption Summit with regard to corporate corruption.
Kenya Airways has just received its own draft forensic report undertaken by Deloitte. Unlike, Collymore, Kenya Airways Chairman, Dennis Awori, has released the findings of the draft report as they await the final report. Kenya Airways has with immediate effect suspended all those who have been adversely mentioned in the report pending the finalisation of the audit report.
In addition, Awori has also announced the creation of a whistleblowers’ forum to encourage anybody with any information regarding any malpractice within Kenya Airways to come forward and anonymously share the information. Dennis Awori and his team have nothing to hide.
Compare this reaction to that of Collymore: Call in the police; announce that an important document has been stolen and that this will not be tolerated; call for the immediate arrest of the whistleblower.
Tellingly, no action has been taken against the senior Vodafone directors who have been adversely mentioned. Board members were berated at the last Board meeting with police officers in attendance and for effect. Why is Collymore so afraid?
We all know why.