THE DCI has opposed a blanket unfreezing of Ksh1.04 billion belonging to Kisumu Urban Project (KUP) funded by the French government before investigations on suspected money laundering and suspicious disbursement is completed.
A trial court was told the DCI is however not opposed, to the partial release of the funds to pay genuine contractors who completed their work and have attached verification certificates.
There was a whiff of fraud in the initial transmission, retention and proposed expenditure on non-existent projects, read embezzlement, of the fund.
Investigations were started after it emerged that the KSh1.04 billion was sent to a wrong account and then taken back to the Treasury.
It could be a genuine error or criminality in open sight.
According to the State, only Ksh227 million that needs to be unfrozen had been clearly tabulated and accounted for contractors who have done their work.
The State said a further Ksh448 million for projects of intended works to be done may also be released while two thirds of the money should remain frozen till light is shed on its expenditure.
“These are projects for works to be done between now and June,” the prosecutor said.
She explained that to protect the government from being sued for non payment, some funds need to be unfrozen.
This partial disbursement, it was explained, is to pay off contractors for completed projects that can be verified on the ground so as to offset interests that may accrue against the government.
KUP and by extension the County Council of Kisumu are holders of the account and has been undertaking more than 30 projects projects in Kisumu.
The government borrowed money from the French for the completion of the projects by December 2019.
They include roads and housing projects.Most works have stalled after the KUP projects accounts were frozen.
An affidavit presented in court by Issacs Ogutu, a detective pursuing the case, the state wants KUP authorities to shed light on the project’s cash flow.
“The investigators want to ascertain whether or not there is criminality,” state counsel Jemima Aluda said.
She said the State needs time to investigate, contact French authorities, get statements from Kisumu county officials and even Treasury where the erroneous transmission was initiated…
The trial court heard that in December 2018 the French government disbursed Ksh1.04 billion that was to be sent to KUP accounts at Diamond Trust but was “erroneously sent to KCB.”
Unfreeze whole amount
Officials from the National Treasury then directed KCB to transfer the Money to Diamond Trust but it refused,demanding formalities form the respective PS, who also refused to write a letter.
KCB then instead insisted the money be re-routed to Treasury before it was later transfred to Diamond Trust where it’s frozen.
The court heard that there were some contracts however that had to be undertaken and hence the need to unfreeze some of the cash.
Aluda said investigations of money laundering by officials from the national treasury was on going as well following the suspicious disbursement.
She said investigators need two months to piece the case together and ascertain, indeed if there was a genuine error in transmitting the cash to the wrong account, an error that occurs anyway, and to find out how the authorities have spent money allocated to them for KUP projects.
The projects were to improve roads, sanitation and schools for marginalised people in Kisumu and was funded by Agency Francaise de Development(AFD) as a loan.
Senior counsel George Oraro has asked the court to unfreeze the whole amount.He said there has been no evidence of impropriety four months down the line.
A ruling will be made on May 7 2019.