A court dispute between the Teachers Service Commission (TSC) and a former senior pensions official has exposed how fictitious bank accounts were allegedly used to siphon money meant for retired teachers before the fraud was uncovered by the National Treasury.
The Employment and Labour Relations Court ruled that TSC had sufficient grounds to dismiss Acting Senior Deputy Director Pauline Mbithe over negligence and insubordination linked to the fraudulent payments. However, the court also found that the commission violated her constitutional rights through an irregular disciplinary process and unlawful retention of her personal financial records.
The fraudulent scheme was first detected after the Treasury raised concerns in a letter dated October 31, 2018, following complaints that some retired teachers had failed to receive pension payments despite funds having already been released.
“The fraud appears to have been happening for a while. This is self-evident from the show cause letters issued to two other employees attached to the department,” the judge said.
According to court proceedings, suspicious accounts were processed within the TSC Pensions Department between March and May 2018, leading to the loss of funds intended for retirees.
Internal investigations reportedly uncovered fictitious claims involving several officers. Ms Mbithe told the court that she directed her juniors to begin investigations immediately after the Treasury flagged the issue.
She further stated that one officer admitted fictitious claims had been processed and linked the transactions to other employees.
Despite this, the court held that the fraud continued undetected for months under her leadership and faulted her for failing to escalate the matter to the TSC Chief Executive.
“This paints a picture of a department that lacked effective control mechanisms,” the court said.
“It was the petitioner’s responsibility as head of the department to ensure suitable controls were developed to stem fraud.”
The ruling also revealed confusion and procedural irregularities within TSC after the fraud was discovered. The commission reportedly issued Ms Mbithe with multiple interdiction letters, conducted parallel investigations and relied on reports prepared after she had already been suspended.
The court heard that she was issued with a show cause letter even before an investigations committee had been established.
One TSC witness admitted that the commission may have rushed the disciplinary action before completing investigations.
“The matter was serious and had caused embarrassment to the respondent and the government,” the witness said, adding that this may have triggered a speeded up disciplinary process, hence the decision to issue the officer the show cause letter immediately.
The court further criticised TSC for confiscating and retaining Ms Mbithe’s M-Pesa and bank statements for years despite failing to use them during disciplinary proceedings.
“It was improper for the respondent to hold onto them, particularly without a court order or other justification,” the court added.
The judge also faulted the commission for withholding witness statements and investigation reports from the former official ahead of the disciplinary hearing.
“That, without a doubt, negatively impacted on her ability to prepare for her case,” the judge said.
Although the court declined to reinstate Ms Mbithe, it awarded her Sh647,955 for unfair termination and an additional Sh1 million for violation of her constitutional rights.
The case has renewed scrutiny over weaknesses in public pension systems, with past anti-corruption reports having warned of possible fraud linked to poor supervision, weak ICT safeguards and manipulation of pension records.
Earlier audits also flagged risks involving alteration of pension payment points, payroll manipulation and destruction of records to conceal fraudulent activity.
Concerns over pension fraud in the public sector have continued to grow, with recent reports raising questions over billions of shillings allegedly paid to phantom retirees and unexplained inconsistencies in pension reconciliations.
Email your news TIPS to Editor@nairobilawmonthly.com, and to advertise with us, call +254715061658 anytime of the day
