Inside UNRA’s Katosi Rd scam

By Independent Team

How UNRA was conned of Shs 24.8 billion

If the ongoing Mukono-Katosi Road saga were not real, it would definitely qualify to be a script for a blockbuster movie or novel. The movie is shot on location at the Uganda National Road Authority (UNRA) in Kampala; starring Apolo Senkeeto, a US-based financial speculator.  The plot is to get his hands on a booty amounting to Shs 161 billion from UNRA, the government agency in charge of constructing national roads.  He knows there are numerous hurdles because there are several agencies, managed by eagle-eyed technocrats, who will attempt to make his mission a near impossibility.

But as a strong US-based member of President Yoweri Museveni’s ruling NRM, he knows that he has an upper hand politically, which will enable him to beat the bureaucrats at their own game. He sets his eyes on a key road in an opposition-dominated Mukono District – the longstanding Mukono-Katosi road, which the local politicians have always used to undermine President Museveni’s government.

There is another bargaining chip, the Americans are not happy because the Chinese are being awarded all the juicy construction projects, “which is very bad for relations between the two allies.” Having Eutaw Construction Company Inc, a well-known American construction company, to undertake the Katosi road project, would be an irrepressible idea to the political class in Kampala.  With that plot, Senkeeto goes to work.

On Nov.01, 2010, he secures a “resolution” to the effect that the directors of Eutaw Construction Company Inc of Aberdeen Mississippi had formed a Special Purpose Vehicle (SPV) to be named Eutaw Construction Company Inc of Vero Beach Florida with the purpose of soliciting and executing civil works in Asia and Africa. It was to be led by Michael Olvey as company secretary, Richard Pratt and Timothy McCoy as directors. The resolution bears the signature of Thomas .S Elmore as CEO and that of Jonathan J. Haywood as the public notary.  With that document in hand, the company submits a bid in December 2010. Rather incredibly, it was picked as the ‘best-evaluated bidder’ barely two months later.

Never mind that the procurement process for such projects normally takes a year to the bare minimum. But UNRA gets a little suspicious with the documentation submitted by “Eutaw Construction Company Inc.”  There was need to pull some political strings and a rollout of media campaign involving some “spotlight investigative” stories to fight for their thing. At the highest level, they petitioned Museveni and held two meetings with him one of which was at his Kisozi Ranch. In February 2012, Museveni directs the Finance and Works ministries to expedite negotiations with Eutaw. But UNRA refuses to badge. Instead, it re-tenders the project, a decision that Senkeeto and his American accomplices protest to their political ‘god-fathers.’ Enter Abraham Byandala the minister of works and transport. He personally gets involves and verbally directs UNRA to sign Eutaw’s contract. The acting ED of UNRA refuses and asks him to put it in writing, which he did on Nov.13, 2013.

However, UNRA insists on physical due diligence to authenticate the documentation submitted by Eutaw. “Some of the information in the bid would seem not to rhyme with that available on the official website of Eutaw Construction Company Inc,” Luyimbazi, the acting ED, wrote to the Eutaw headquarters in Mississippi. On Dec.05, 2013, UNRA wrote to Eutaw headquarters requesting for an appointment for its legal team to travel to the US to verify the documentation. On Dec.13, UNRA got back a prompt reply dated Dec.10 in which the verification visit was confirmed for Feb.11-14, 2014. The legal counsel and the director audit, were supposed to make the trip. But that is how far it went. But from the documentation seen by The Independent, the acting executive director remained unconvinced about Eutaw’s legal status.

Even when the legal counsel Marvin Baryaruha wrote a legal note advising that due diligence process could be carried afterwards, he insisted on the team traveling to the US first in compliance with the procurement laws.  Investigators are now trying to find out under what circumstances the contract was eventually signed without the due diligence being carried out. With that out of the way, the process of getting the money from UNRA and the Treasury starts. First, the company must submit its documents to the Uganda Registration Services Bureau (URSB), and get a certificate, which it must use to open an account in the bank.  Eutaw Construction Company Inc is registered as a corporate body in Uganda in December 2013 “after meeting all the requirements as per the Ugandan law,” according to Mercy Kyomugasho- Kainobwisho, the URSB director for business registration.

She says URSB did all due diligence to ensure that the application was in compliance with all the laws of Uganda. Eutaw Construction Company Inc gave its address in Uganda is Plot 85 Jinja road, P.O. Box 6585, Kampala.   With that done, account number 16000098 is opened at Housing Finance Bank. But the process of getting the money involves acquiring and submitting various bonds to secure government money just in case something happens.  Senkeeto submits a bond from Housing Finance Bank, which was executed on Nov.13, 2013 with a face value of Shs 16.528 billion. However, it is rejected because it was not in the required format. The bond is withdrawn and replaced with another bond, this time from SWICO with the same face value. Another bond from Housing Finance is re-submitted with a face value of more than Shs 24.79 billion. SWICO and UNRA exchange letters in which the authenticity of the bond was verified.

On Dec.14, 2013, a letter is sent from Housing Finance Bank, with a signature of Mary Kansiime Nyende confirming the performance guarantee. However, six days later, Richard Pratt writes to UNRA withdrawing the advance payment guarantee from Housing Finance Bank and replacing it with an insurance bond from SWICO. As it turns out, all these documents are forgeries, possibly, made on Nasser Road.

Massive Christmas gift

Apparently, from the trail of letters, it seems that the plan was to execute the cash remittance before Christmas or before Jan.01, 2014 because letters were being written right up to Christmas Eve. On December 30, Martin Olwa, the Katosi Rd project engineer, recommends that the advance payment could be made to Eutaw. On Jan.24, 2014, a payment voucher from the Treasury General Account is made vide cheque number FS401300 with a face value of more than Shs 24.79 billion. End of part one.

In part two, investigators are seeking to establish what happened to the money between Jan.24 and March 02 when the ‘contractor’ wrote to give Niu Hong power of attorney. There are indications that out of the Shs 24.79 billion that was advanced to Eutaw, Niu Hong’s CICO was paid Shs 12.24 billion to embark on the road construction.  Investigators are working to establish the whereabouts of Shs 12.55 billion government money because apparently, the account is empty.

They also want to establish why it was not until May 12 that that UNRA woke up to realise that the documents submitted by the contractor could have been forgeries. On June 11 – six months after the money had been disbursed – SWICO wrote saying the company had never issued any insurance bonds to Eutaw.  However, more insurance bonds were purportedly issued by ICEA on June 19 and UAP on the same date but were not received at UNRA until July 02. By then, the PPDA had on June 20 submitted a report to the IGG asking her to investigate irregularities in the Katosi project. Was it an attempt at a cover up? However, there was another situation to deal with – President Yoweri Museveni was scheduled to officially launch the project on July 07.

On Aug 29, the IGG directed the UNRA board to suspend the four UNRA top officials who were close to the deal. They include, Ssebugga-Kimeze, the acting executive Director, Joe Ssemugooma, director finance and administration, Marvin Baryaruha, the legal counsel, and Luyimbazi, the director for planning.  Many more of their accomplices in other top offices will certainly follow them to answer very uncomfortable questions at the investigators’ office. The IGG is particularly angry that UNRA decided to do due diligence after signing the contract whereas Section 34 of the Public Procurement and Disposal of Public Assets Regulations (2003) Act provides that due diligence may be carried out at any stage of the procurement process, it must be carried out strictly before an entity signs a contract and much more before it gets advance payment.

For now, the project has stalled following a directive by the IGG and the government won’t pay any more money for this project until it is ascertained that a valid and binding contract with a genuine contractor exists.  To make matters even worse, the legitimate American construction company has written to the government, saying it has absolutely nothing to do with Eutaw Construction Company Inc. of Vero Beach Florida neither does it know the individuals who got the money from UNRA.

Investigators are trying to establish if the UNRA officials were genuinely duped or they are part of the scheme. Dan Alinange, the head of Corporate Communications, says the bid securities and financial guarantees are forged. “The demands from banks force some contractors to resort to forgeries but, for us, that is not an excuse not to blacklist a contractor,” he says. But how is it that an organisation of UNRA’s stature has not developed capacity to recognise such forged documents to the extent that it can be hoodwinked to release such colossal sums of money to a fraudster?

Alinange says there are many cases they are investigating from local and international companies where they have discovered questionable securities. According to documents The Independent has seen, the UNRA top management could take some of the blame for the escalating number of forged documents especially performance bonds, bid securities and advance payment guarantees.

On July 25, 2011, the top management team resolved that the management and verification of all these documents would be the mandate of the directorate of Finance and Administration, a decision that legal counsel Baryaruha vehemently protested in an Aug.29, 2011 memo. He argued that he, as legal counsel, was not part of that meeting and such a policy decision was the mandate of the Board of Directors.  It is not yet clear if the decision of the top management team is related to the Katosi road scam. But the scam has set off ripples in political circles. President Museveni is reportedly very angry over the scam. Now, it has also set off a bitter war of words between three senior cabinet ministers; Byandala (Works and Transport), John Nasasira (ICT) and Frank Tumwebaze (Presidency and Kampala) including unprecedented threats of legal action between cabinet colleagues. The trio accuses each other of being involved in the scam.

Sophisticated corruption

Many would dismiss Pius Bigirimana, the former permanent secretary in the Office of the Prime Minister “as one of the corrupt” but to understand how corruption at this high level was executed, one has to read his new book titled, “Corruption: A Tale of Wolves in Sheep’s Clothing.” In a telephone interview to answer a question about how his book relates to the UNRA scandal, he said his book “prophesied it and many more are still breaking.”

“I think you realise that my ‘prophecy’ is coming to pass and expect many more to come to the open,” he says. What he worries about even more is the fact that corruption is now taking on an international dimension.

In his book, Bigirimana wrote that such high level corruption deals are executed through corruption networks of individuals intertwined with structures of control and consequently power as well as the crimes “that become a necessary evil in its entrenchment.”

“If the integrity of public servants is up for the highest bidder, it is inevitable that criminal groups will seek to undermine the ability of the State to shut them down,” he writes adding that these criminal groups do this by compromising the mechanisms that are meant to eliminate their illegal activities.

He continues, “In situations where radical measures are put in place to stem the advance of illegal activities, criminal groups will use their contacts inside the State system to modify their practices in such as way as to circumvent these checks and balances. The level to which this infiltration is successful will determine the power of the groups to influence government practices, decisions and policy.  It is only natural that corruption eventually eats away at State governance, and perpetuates an environment where crime thrives and determines the way of life of a Nation.”

Bigirimana warns that corruption has “become a self-sustaining cancer with very strong links to the private sector” and if unattended, these cartels could threaten national security.

According to the IGG’s annual report, which was launched recently, corruption is “getting worse” in Uganda “with an increasing value of public funds misappropriated and with an increasingly high level of sophistication in the means by which public resources are pilfered.” It says in 2013, the Office of Auditor General (OAG) found that funds to a value of $12.9 million were paid by ministries, departments and agencies (MDAs) to various contractors for work that was not executed.

Also, the total number of new complaints received by the IGG increased by more than 30% from 2010.  For example, at least 62% of the new complaints handled in the period from January to June 2013 were related to corruption.   It is not clear though if it is the citizens who are more vigilant and empowered to report cases of corruption.

The IGG says inadequate accountability measures across all government ministries, departments, and agencies create opportunities for corruption as well as the misappropriation of public funds. “The lack of sanctions for failing to comply with public finance management and procurement regulations creates significant opportunities for corruption in Uganda,” the report adds.

The report recommends that the government should set up the Leadership Code Tribunal to facilitate the full implementation of the Leadership Code Act 2012. “The persistence of high-level corruption is exacerbated by the lack of administrative and criminal sanctions in corruption cases,” the report says.

The report specifically cites “upstream corruption” and “grand corruption” both of which take place at high levels of the political system as the most damaging. Indeed, the IGG categorises the “fraudulent procurement” of the Mukono-Katosi road as an example of grand corruption.

Other examples include the national identity card project in 2011; and theft of Shs 58 billion in the OPM in 2012. The report also castigates “syndicated corruption” in which a number of public officials at different levels collude to embezzle public funds.

Bigirimana says this episode should be a blessing in disguise as it could lead to reforms that could make corruption history. Following high level corruption at the OPM, the government, under pressure from donors, acted fast to undertake the development of the High-Level Government Financial Management Reform Action Plan Matrix (HLAM) to address financial improprieties government ministries, departments and agencies. But there is no guarantee that this would help as the “criminal syndicates” are capable of anything. Will another blockbuster movie unfold soon? Your guess is as good as ours.