Ethics & Anti-Corruption Commission v Catherine Nkirote Maingi, John Kago Murima & Jane Makena Maingi [2017] KEHC 3248 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

ANTI-CORRUPTION & ECONOMIC CRIMES DIVISION

MISCELLANEOUS APPLICATION NO. 43 OF 2016

IN THE MATTER OF: ANTI-CORRUPTION AND ECONOMIC CRIMES

ACT (CAP.65)

-AND-

IN THE MATTER OF: AN APPLICATION BY ETHICS AND ANTI-

CORRUPTION COMMISSSION FOR AN ORDER

UNDER SECTION 56 OF THE ANTI-

CORRUPTION AND ECONOMIC CRIMES ACT

TO (CAP.65) TO PROHIBIT THE TRANSFER OR

DISPOSAL OF OR OTHER DEALINGS

(HOWEVER DESCRIBED) WITH EQUITY BANK

ACCOUNT NUMBER 0020192678243, EQUITY

BANK ACCOUNT NUMBER 0940197601341,

EQUITY BANK ACCOUNT NUMBER

1180263423271, EQUITY BANK ACCOUNT

NUMBER 0260192617892, AND CO-

OPERATIVE BANK OF KENYA ACCOUNT

NUMBER 01109416161300, KIMATHI BRANCH

-AND-

IN THE MATTER OF:  AN APPLICATION BY THE ETHICS & ANTI-

CORRUPTIO COMMISSION FOR AN ORDER

UNDER SECTION 56 OF THE ANTI-

CORRUPTION AND ECONOMIC CRIMES ACT

(CAP.65) TO PROHIBIT THE TRANSFER OR

DISPOSAL OF OR OTHER DEALINGS

(HOWSOEVER DESCRIBED) WITH PARCEL OF

LAND REFERENCE NUMBER L.R [particulars withheld]

ETHICS & ANTI-CORRUPTION COMMISSION......................APPLICANT

- VERSUS-

CATHERINE NKIROTE MAINGI........................................1ST RESPONDENT

JOHN KAGO MURIMA…………………....……..............2ND RESPONDENT

JANE MAKENA MAINGI.………………...……………..3RD RESPONDENT

R U L I N G

1. Before the Court are two applications brought underSection 56of theAnti-Corruption and Economic Crimes Act 2003. The first was by the Respondent and is dated 15th June, 2017.  It seeks orders:

a. for the release of funds previously withheld by and in Equity Bank Account number [partyiculars withheld] , Equity Bank account number [particulars withheld], Equity Bank account number [particulars withheld], Equity Bank account number [particulars withheld] and Cooperative Bank of Kenya account number [particulars withheld], Kimathi Branch.

b. for the unfreezing of all the accounts owned and/or operated by the Applicants jointly or separately.

c. allowing the Applicant’s unlimited access to their Banks Accounts and/or Bank Accounts operated by them jointly and/or severely.

d. for the cancellation of the inhibition order previously issued by this Court against Land of Land Reference number L.R. [particulars withheld].

e. for any other relief  the court deems fit and just in the circumstances.

f. costs be in the cause.

2. The application is premised on grounds that as a result of the Court order, the businesses of the Respondents have come to a halt. The Respondents have been subjected to overwhelming debt and have been unable to pay their debts in good time, putting them at risk of being rendered bankrupt. The application is also based on grounds that the Court order sanctioning the freezing of the Respondents Bank accounts and the inhibition order issued against them expired on the 16th of June, 2017 and there is no other justifiable reason why their accounts should continue being frozen since no charges have been brought against the Respondents in the past six months.

3. At the hearing on 27th July, 2017, learned Counsel Mr. Omari appearing for the Respondents relied on the application, together with the Supporting Affidavit of John Kago Murima and argued that for the six months that the order was in effect, there had been no tangible investigations conducted to warrant an extension. He objected to any extension and argued that the only thing the Ethics and Anti-Corruption  Commission (the Commission) had established in the six months of investigation was identifying the directors of the companies under investigation.

4. Mr. Omari contended that the 2nd Respondent is a business man and the proceeds of his ongoing businesses have been going into his frozen account which he has no access to. He argued that the 2nd Respondent has never traded with the National Youth Service and that the account was frozen solely because he is the husband to the 1st Respondent. Counsel urged the Court to grant the prayers of the Respondents application which he said also acts as the response to the application filed by the Applicant, for the preservation order to be extended for a further period of six months. He urged the Court to reject the prayers for the extension of the order.

5. The second application was by the Applicant and is dated the 15th June, 2017.  It is brought under Section 56(3)of theAnti-Corruption and Economic Crimes Act 2003 and seeks orders:

a. THATthe orders issued on 16th December, 2016 prohibiting the Respondents, by themselves or through their agents or servants from transferring, disposing of, wasting or in any other way dealing with Equity Bank Account number [particulars withheld], Equity Bank account number [particulars withheld] , Equity Bank account number [paticulars withheld], Equity Bank account number[particulars withheld] and Cooperative Bank of Kenya account number [particulars withheld] , Kimathi Branch be extended pending the hearing of this application inter partes.

b. Further that the said preservation orders be extended for a further period of six months.

c. THATthe order issued prohibiting the Respondents, by themselves or through their agents or servants from transferring, disposing of, wasting or in any way dealing with parcel of land reference number L.R. [particulars withheld]be extended pending the hearing of this application inter partes.

d. Further that the preservation orders concerning the parcel of land reference number L.R. [particulars withheld]be extended for a further period of six months.

6. The Application relies on the Supporting Affidavits of Patricia C. Kinoti dated 24th May, 2017, 16th June, 2017 and 4th July, 2017 respectively and is premised on the grounds that there are reasonable grounds to suspect that the properties in question were acquired as a result of corrupt conduct.  That documentary materials were retrieved from the Respondents residences upon the execution of a search warrant, which upon analysis thereof revealed additional avenues for investigation.

7. At the hearing, Mr. Kagucia, learned counsel appearing for the Applicant, explained that at the beginning of the investigation, the focus was on three companies. Investigations however established that the Respondents herein are involved in the operations of at least six companies, all of which had participated in tender number NYS/RT/2014-2015, which was awarded irregularly. All six companies were trading with National Youth Service (NYS) and participated in the same tender and investigation had established that the directors of the companies in question are affiliates of the Respondents.

8. Mr. Kagucia noted that the disparities discovered between the unit costs of the goods supplied and the prices stated at the time of bidding, in some instances, were as high as 300%.  It would require the assessments of a Quantity Surveyor to establish the true value of the contracts under inquiry. Counsel argued that there was imminent danger of the Respondents, or their agents disposing of the assets in question if the preservation orders were discharged. This would defeat the Applicant’s investigation or any efforts to recover the assets. He urged the Court to grant the prayers of the Applicant.

9. In addressing the Respondents application, Mr. Kagucia argued that the difficulties that the Respondents are undergoing financially are not grounds to obtain the orders sought in the Application filed by the Respondent. Counsel explained that the account of the 2nd Respondent was frozen because the 1st Respondent, who was the recipient of funds from the irregularly awarded tender number NYS/RT/2014-2015, transferred Kshs. 26,200,000 into that account. He urged the Court to dismiss the Respondents’ Application.

10. Having considered the two applications and the rival submissions, the issue for determination is whether the court should extend or discharge the preservation orders on record.

11. Section 56 of the Anti-corruption and Economic Crimes which governs this matter provides as follows:-

“(1) On an exparteapplication by the Commission, the High Court may make an order prohibiting the transfer or disposal of or other dealing with property if it is satisfied that there are reasonable grounds to suspect that the property was acquired as a result of corrupt conduct.

(2) An order under this section may be made against a person who was involved in corrupt conduct or against a person who subsequently acquired the property.

(3) An order under this section shall have effect for six months and may be extended by the court on the application of the commission.” (emphasis added)

12. The three Affidavits sworn by Patricia C. Kinoti provide an account of the progress that the Commission has made in the investigation into the matter.  In the Affidavit sworn on 24th May, 2017, Particia Kinoti indicated that there was a search at the Respondents residences wherein documents relating to companies affiliated with the 1st Respondent which had all participated in the irregularly awarded tender NYS/RT/23/2014-2015, were retrieved.

13. She averred that the investigations reveal that the 1st Respondent exercised control over four other companies that participated in the tendering process and from this tender, these companies were the recipients of Kshs. 121 million.This discovery opened up new avenues for inquiry involving requisitioning and analysis of numerous documents.

14. In the affidavit sworn on 15th June 2017, Patricia Kinoti indicated that the Commission had made great strides in its investigation as a result of the documentary materials retrieved in the search of the Respondent’s premises. In addition to Qsetters Investments, Venyte Suppliersand Joscate Suppliers,the Respondents were in possession of crucial operational documents in relation to Eribet Fair Deal Suppliers, Elandic Logisticsand Jamsty Limited.

15. She deponed that these documents bear handwritings and signatures that must be subjected to examination by a Document Examiner to establish whether the Respondents are the authors and/or signatories thereto.  She also deponed that investigations revealed a massive inflation of prices resulting in overpayment based on a comparison between the unit cost of items purchased by the said companies/businesses on behalf of NYS and the quotations submitted.

16. In the Further Affidavit sworn on 4th July, 2017 Patricia Kinoti averred that the Commission had obtained records from the Registrar of Companies regarding the particulars of the directors and proprietors of the Respondents affiliate companies and/or businesses whose documents were retrieved from the 1st and 2nd Respondents’ residences. The commission has reservations about the identities of the proprietors of the companies/businesses in question and there is reason to believe that they are related to the Respondents. These suspicions require further investigation by way of inquiry with the Registrar of Persons.

17. From the foregoing it is my view that the Applicant has demonstrated considerable progress in its investigation, and that more time is needed to finalize investigations.  It is in the interest of justice for the investigations to be allowed to determine whether due process was followed in the award of Tender No. NYS/RT/23/2014-2015 and whether the Respondents are culpable of any corruption or economic crime. This can only be determined if the Applicant is given an opportunity to complete its investigations.  The purpose of the investigations will be defeated if the orders sought by the Applicant for the extension of the preservation orders, are not granted.

18. It is observed that at the hearing of this matter, evidence was produced by counsel for the Respondents indicating that the 2nd Respondent has another business which generates profit and is not subject of the ongoing investigation by the Applicant. The funds from this business are currently within the frozen account of the 2nd Respondent together with funds linked to the investigation.

19. During the hearing of this matter, Mr. Omari, learned counsel for the Respondents urged the Court in the alternative, to preserve Kshs. 26,100,000 which is the amount directly connected to the investigation, and allow the Respondent access to other funds coming from his other businesses.

20. The Respondents claim to have suffered hardship as a result of the freezing of the accounts. The Supporting Affidavit filed by John Kago Murima dated 9th May, 2017, states that the Respondents have lapsed insurance policies and other debts which have fallen due.

21. Section 89 (1)(a) of the Proceeds of Crime and Anti-Money Laundering Actprovides for the variation and rescission of orders and states that:

(1) A court which makes a preservation order-

(a) may, on application by a person affected by that order, vary or rescind the preservation order or an order authorizing the seizure of the property concerned or other ancillary order if it satisfied-

i. that the operation of the order concerned will deprive the applicant of the means to provide for his reasonable living expenses and cause undue hardship for the applicant; and

ii. that the hardship that the applicant will suffer as a result of the order outweighs the risk that the property concerned may be destroyed, lost, damaged, concealed or transferred;

22. For the foregoing reasons, I make the following orders:-

a). The preservation orders granted on 16th December, 2016 be and are hereby extended by a period of six (6) months.

b). The preservation order with regards to Equity Bank Account No. [particulars withheld] held by the 2nd Respondent be and is hereby limited to Kshs. 26,100,000, being the funds linked to the ongoing investigation.

It is so ordered.

SIGNED DATEDandDELIVEREDin open court this 4th day of October 2017.

…………………………………….

L. A. ACHODE

JUDGE

In the presence of ………………………………...….Advocate for the Applicant

In the presence of …………………………..….Advocate for the Respondents