Ethics & Anti-Corruption Commission v Otieno & 4 others [2023] KEHC 27198 (KLR)

Ethics & Anti-Corruption Commission v Otieno & 4 others (Civil Application E015 of 2021) [2023] KEHC 27198 (KLR) (Anti-Corruption and Economic Crimes) (7 December 2023) (Judgment)

Neutral citation: [2023] KEHC 27198 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Anti-Corruption and Economic Crimes

Civil Application E015 of 2021

EN Maina, J

December 7, 2023

Between

Ethics & Anti-Corruption Commission

Plaintiff

and

Bob Kephas Otieno

1st Defendant

Caroline Chepkemoi Sang

2nd Defendant

Maurice Odiwuor Amek

3rd Defendant

David Obonyo and Lilian Achieng''T/A Damila Enterprises

4th Defendant

Everlyne Owino Ogutu

5th Defendant

Judgment

Introduction 1. The Plaintiff has brought this suit for recovery of Kshs 47,075,978 allegedly to have been corruptly acquired from the County Assembly of Homa Bay (a public organ) and unlawfully, fraudulently and illegally, paid the 4th and 5th Defendants against public policy for services which they did not render to the County Assembly.

2. The Plaintiff claims the said sum of Kshs 47,075,978 together with interest. It also prays for the costs of this suit.

The Parties 3. The Plaintiff is a Body Corporate established under Section 3 of the Ethics & Anti-Corruption Commission Act, 2011. It is mandated to Institute and conduct proceedings for the purpose of recovery or protection of public property.

4. The 1st Defendant was the Clerk of the County Assembly of Homa Bay and the Accounting Officer County Assembly by virtue of Section 148(4) of the Public Finance Management Act (PMFA) No 18 of 2012.

5. The 2nd Defendant was at all times of the suit, the Principal Finance Officer, Homa Bay County Assembly.

6. The 3rd Defendant was at all times relevant to the suit, a Senior Accounts Controller, Homa Bay County Assembly.

7. The 4th Defendants are a married couple and business persons carrying on business in Homa Bay County in the name and style of Damila Enterprises. David Obonyo was a manager at Equity Bank Homa Bay Branch and sole signatory to Damila Enterprises account at all times material to this suit.

8. The 5th Defendant was a spouse of the 1st Defendant.

The Plaintiff’s Case 9. The Plaintiff avers that a sum of Kshs 47,075,978 belonging to Homa Bay County Assembly (hereinafter referred to as “the Assembly”) was fraudulently and illegally paid to the 4th and 5th Defendants, by the 1st, 2nd and 3rd Defendants yet no services had been rendered to the Assembly. The Plaintiff also contends that the 1st 2nd and 3rd Defendants unjustly benefited from the money paid to 4th Defendant.

10. The Plaintiff contends that the 1st Defendant, who was the Accounting Officer of the Assembly under Section 148(4) of the Public Finance Management Act permitted expenditure that was not properly authorized by the Assembly contrary to Section196(7) and 198(1) of the PMFA; in that he failed to ensure proper management and control the finances of the Assembly as provided in Section 147 (1)(a) of the PMFA; making payments by raising forged approval forms for services not rendered contrary to Section 45(2)(a) (iii); failing to account for the finances of the Assembly; fraudulently acquiring public property and unlawfully using his office as the Clerk of the Assembly to confer a benefit to himself and others contrary to Section 46 of the Anti-Corruption and Economic Crimes Act (ACECA), 2003.

11. The Plaintiff avers that the 1st Defendant failed to ensure proper management of the Assembly’s finances as provided for under Section 147(1)(a) and (d) and 162(2)(b), 196(7) and 198(1) of the PMFA.

12. The Plaintiff avers that its investigations on the 2nd and 3rd Defendants who were employees of the Assembly as Principal Finance Officer and Senior Accounts Controller respectively, uncovered that they fraudulently made payments of the Assembly’s money to the 4th Defendant for services that were not rendered and in return received monies from the 4th Defendant into their accounts.

13. The particulars of fraud and illegality on the part of the 2nd and 3rd Defendants include permitting unlawful expenditure without proper authorization, failing to ensure proper management and control of the Assembly’s finances, failing to ensure financial resources over which they had a fiduciary duty were used in a lawful manner, failing to ensure transparency and proper accountability, failing to stop irregular payments, misappropriation of public funds, making payments from public revenue by raising invalid or forged approval forms and converting public property to their own use by improperly using their positions to confer benefits to themselves.

14. In regard to the 4th Defendants, it is averred that they knowingly received public funds without rendering any services to the Assembly and with knowledge that they were not legally entitled to payment; received public funds which they had reason to believe was acquired in the course of corrupt conduct contrary to Section 45(1)(a)(iii) and 47 of the ACECA and that they also fraudulently transferred some of the funds to the 1st, 2nd, 3rd and 5th Defendants’ accounts therefore unjustly enriching them.

15. The Plaintiff further avers that investigations revealed that the 5th Defendant had illegally and fraudulently received Kshs 1,700,000 into her Bank Account from the 4th Defendant purportedly as a loan advancement therefore unjustly enriching herself to the detriment of the public; that she fraudulently acquired public property by receiving payments for services not rendered contrary to Section 45(1)(a) of the PMFA and that she concealed the nature, source and disposition of the property which she reasonably knew was proceeds of crime contrary to Section 3(b)(i) of the Proceeds of Crime and Anti-money Laundering Act (POCAMLA).

16. The Plaintiff contends that all the Defendants jointly and severally converted the sum of Kshs 47,075,978 to their own use, thereby unjustly enriching themselves to the detriment of the Public; The 1st Defendant received Kshs 24,000,000, 2nd Defendant Kshs 3,950,000, 3rd Defendant Kshs 5,000,000, 4th Defendant Kshs 12,225,978 and the 5th Defendant Kshs 1,700,000: That all the Defendants jointly and severally failed to account for, or surrender, the public funds illegally received by themselves.

17. The Plaintiff contends that the Defendants are jointly and severally liable for the loss of the public funds attributable to their fraudulent, corrupt and negligent conduct and claims the sum of Kshs 47,075,978, interest at court rates from the date of withdrawal of the funds from the Assembly’s account until payment in full and the costs of the suit.

18. To prove its case, the Plaintiff called six witnesses: PW1, Noah Ochieng’ Otieno, adopted his witness statement dated 12th May 2021 and then testified that; He was the Director of Finance in the County Government of Homa Bay (the Executive) hence the Accounting Officer; The County Assembly would get its funds from the County Government; That the request by the Assembly for funds, would be made to the County Executive (CEC) Member for Finance (equivalent to Cabinet Secretary) for approval; that he (PW1) would raise the request for funds for the Assembly to the Controller of Budget for approval and once approved by the Controller of Budget he (PW1) would transfer the approved amount from the County Revenue Fund account at the Central Bank of Kenya to the County Assembly Revenue or Development accounts also held at the Central Bank; if the County Government did not have funds in the account at the Central Bank it could loan the Assembly funds in its accounts held in commercial accounts; Once the money is transferred to the Assembly being autonomous the Assembly can utilize the same under the charge of the Assembly Clerk; On 1st July 2015, he and two other officers approved transfer of Kshs 27,482,000 to the Assembly from the County Re-Current Account No 100xxxxxxx at the Central Bank of Kenya; He also transferred funds to the Assembly as follows -On 13th November 2015 Kshs 20,000,000; On 27th December 2015 Kshs 10,000,000; On 29th March 2016, Kshs 10,000,000; On 28th April 2016 Kshs 10,000,000; On 2nd June 2016 Kshs 15,000,000 and on 1st July 2016 Kshs29,610,850. He stated that the transfers were made via RTGS to the Assembly’s Equity Bank account as part of its approved annual budget for the financial years 2015-2016. To prove those transfers, he produced a statement of account which is marked EXB P 4(e).

19. In cross examination, PW1 clarified that he made payment requests to the Controller of Budget and that the Assembly had two accounts at Central Bank of Kenya while the executive had one. He confirmed that he held the signing mandate for Account numbers 100xxxxxxx, 100xxxxxxx, 100xxxxxxx, 100xxxxxxx and 100xxxxxxx belonging to the Homa Bay County Government.

20. He explained that the request for funds from the Controller of Budgets is done through Form A which indicates the amount and nature of requisition, whether the funds are for recurrent or development and also the account to which the funds are to be transferred. The budget extract is attached to the form. Once satisfied the Controller of Budget gives approval through Form B which must be accompanied by Form C which is signed by two signatories. All the documents are then forwarded to the Central Bank and payments made directly to the beneficiaries.

21. He explained that the funds transferred to Equity Bank was upon the Assembly’s request. He conceded that he did not have any document to prove that the transfers appearing in paragraph 20 of his statement were to the County Assembly. He denied that Form A is usually accompanied by the quarterly expenditure report and stated that the Assembly sends that report directly to the Controller; He explained that the Assembly gets its funds through the County Revenue Fund but when that account does not have money, they borrow from the recurrent account ending 06xx In regard to this case County Government (Executive) Funds were loaned to the Assembly as an advance to be recovered later. The Assembly provides the amount required and details of the accounts where they wanted the funds sent. The monies were received by Equity Bank but not in the Account of the County Assembly at Equity Bank. He supported the contention that money belonging to the Assembly was lost.

22. He clarified that he is a signatory to the County Executive Recurrent Account from where the funds were transferred to Equity Bank; He was the second highest ranking officer in Finance. He filled form A based on the information provided by the Assembly. The controller of Budgets only approves withdrawal from the County Revenue Fund but not from the County Recurrent or Development Account. The funds are accounted for during supplementary budget. The Assembly then accounts for the monies received independently to the Controller of Budget and Auditor General.

23. He further explained that the requisition for funds is generated by the County Assembly Clerk to the CEC Finance with details of amount required, account to be transferred to and the purpose of the money. The Assembly has its own budget funded by the National Government through the County Government (Executive) and it was entitled to monthly tranches. He referred to the document at page 68 of the plaintiff’s bundle as the statement of account of the County Government (Executive) Services at the Central Bank – Recurrent Account.

24. PW2, Alex Kinyanjui, a Senior Forensic Investigator in Digital Forensics working with the Plaintiff adopted his statement dated 10th May 2021; that he was requested to check in the Integrated Financial Management Information System (IFMIS) system whether payments amounting to Kshs 47,075,978 were made by the County Assembly to Damila Enterprises and that he found the transaction was missing in the invoice module and also that there were no payments from the County Assembly to Damila Enterprises in the IFMIS.

25. On being cross-examined, PW2 confirmed that Damila Enterprises was listed as a supplier in IFMIS that he was not aware if Homa Bay County had complied with the directive to have all payments done through the IFMIS; that his role in the investigation was to trace payments that had been made to Damila. He referred to a payment previously made to Damila at page 1226 of the Plaintiff’s bundle of documents. He stated that the payments from the County Government of Homa Bay to the County Assembly was done through Real-Time Gross Settlement (RTGS). Whenever a cheque payment was made, the cheque number was indicated. He could not confirm whether the County Government of Homa Bay was using IFMIS for payments but he confirmed that the transaction in question was not in the IFMIS. He explained that the alternative to IFMIS payments was manual payments using vouchers.

26. PW3, Jacinta Adede, adopted her statement dated 6th April 2021. She was an Assistant Accountant at the Assembly in the years 2014 to 2015 and was appointed as the Chief Finance Officer from September, 2018 when the 2nd Defendant who held that positon was suspended. She referred to a cheque dated 8th January 2015 in the name of Damila Enterprises which was prepared by herself and signed by the then Clerk, Bob Cephas and Senior Accounts Controller, Maurice Ameka (3rd Defendant). She also referred to other cheques on pages 80-85 of the Plaintiff’s bundle, drawn in favour of Damila Enterprises from Co-operative Bank but explained that she only prepared the cheques on page 80, 81 and 85. She stated that the cheques were drawn from payment vouchers which although she was not shown any vouchers. She testified that in her examination in chief. Damila must have done some work for a cheque to have been drawn in its favour; that Damila had done landscaping and vegetation of the Assembly grounds. However, she was not sure Damila had laid the cabros. She confirmed that the 1st Defendant could not operate any of the accounts held by the Executive arm of the County Government.

27. She confirmed that on diverse dates, Kshs 27,482,000, Kshs 20,000,000 and Kshs 10,000,000 was transferred from the Central Bank of Kenya account of the Executive arm to Equity Bank Limited. She contended that monies were not received by the County Assembly directly.

28. She confirmed that although the former clerk of the Assembly was a signatory to the Cooperative Bank Account No 011xxxxxxx the 1st Defendant was not a signatory.

29. She explained that the suspense account referred to in her statement is a temporary account held by the bank for its own internal use and which neither the Executive arm nor the County Assembly operates; The Assembly has a recurrent and Mortgage account, and funds can be borrowed from the Mortgage account with the approval of the Board. She did not know whether money was borrowed from the mortgage account in the year 2015.

30. She further testified that suppliers are paid either through IFMIS, cheque or RTGS; The list of all suppliers is available in the procurement office; One has to be pre-qualified to be a supplier; She did not know what was seized by the Plaintiff in respect to Damila enterprises. She also stated that if monies in account ending 06xx were lost, there is no way the 1st Defendant would have been involved.

31. She confirmed that she wrote three cheques to Damila from payment vouchers after which they were examined by the Accounts Controller; that there were other accounts assistants who also had authority to draw cheques; that writing of cheques comes at the tail end of the payment process; that some work was done by Damila, finer details of which would be known by the procurement department; that cheques were written before confirmation that any work had been done and that she looked at the voucher but no other document. She also testified that the Plaintiff took documents from the Senior Controller’s and Clerk’s Offices but not the Finance Office; that the cash book, payment vouchers, cheque books and vote books plus supporting documents are kept in the Senior Accounts Controller’s Office. The Senior Accounts controller at the time, Maurice Amek (3rd Defendant) was the custodian of payment vouchers and was the one who instructed her to draw the cheques in favour of Damila; that before drawing the cheque, the vouchers would be prepared by the Accounts Assistant, Rolex Acholi, and documents attached which proved that the work was done. She could not recall any audit query raised in regard to the cheques which she had prepared as the Auditor General does not query junior accountants; She stated she did not initiate the payment process to Damila. Payments were authorized by the Accounts Controller, the Clerk, and another signatory.

32. She explained that her predecessor ( the 2nd Defendant ) did not hand over to her as she had been interdicted. She stated that other than the cheques shown to her, she was not able to tell the entire sums paid for work done; that the County Assembly and the County Executive being independent bodies, there is no way that the Assembly would spend money from the recurrent account of the Executive. Both bodies drew from the County Revenue Fund Account at the Central Bank of Kenya and other sources of income for the Assembly included sale of tenders.

33. PW4 a Security Officer at Cooperative Bank, adopted his witness statement dated 12th May 2021. He stated that for the Bank Account ending 0100 in the name of the County Assembly of Homa Bay, the signatories were as indicated in the Account opening form any two people but the Clerk’s signature was mandatory. She testified that the form refers to the “County Accounting Officer” which he interpreted to mean the County Clerk; that he was in the same role in the years 2015 and 2016 as he is in currently. He confirmed having printed the cheques drawn in favour of Damila Enterprises and the bank statements from the bank’s computer at their headquarters but that his electronic certificate is only in respect of the bank statements. He conceded that the certificate does not specify the printer and computer used.

34. He testified that the cheques bore two signatures but he could not tell the identity of the people who signed them. He confirmed that the documents were drawn upon the Co-operative Bank of Kenya and that the transactions indeed took place. He however stated that his role was to print the documents and not confirm whether the transaction took place.

35. PW5, Leonard Kimutai Kipsanait, a Manager at the Central Bank of Kenya (hereinafter CBK) adopted his witness statement dated 4th May 2021. In that witness statement, he stated that the Bank received a Court order issued in Misc. Cause Number 968 of 2020 to investigate Account Number 100xxxxxxx belonging to the County Government of Homa Bay; that the bank statements were supplied to the plaintiff on 18th June 2020 together with account opening documents and mandate cards. He confirmed that the statements filed in court are a true reflection of the records provided by CBK.

36. He explained that CBK provides banking services to County Governments (Executive and Assemblies) as provided by Section 4A and Part VIII of the Central Bank of Kenya Act and the Public Finance Management Act (PMFA).

37. He explained that the payment process which is fully automated is first generated and approved in the IFMIS which is owned and operated by the National Treasury. After completion in the IFMIS, the transactions are moved to the Internet Banking (IB) System which is interfaced with the IFMIS. The Central Bank of Kenya thus plays no role in the initiation, verification and approval of payments from the Counties and thus has no capability to vary or amend any payment instructions as the files received from IFMIS are encrypted; that the CBK system however verifies the digital signature of the payment files received from IFMIS to authenticate its source then places the files in a queue in the Internet Banking platform awaiting approval by the authorized officers of the County; after approval, the system checks whether there are sufficient balances in the respective accounts and also checks correctness of the payment information. The payments then await auto-transmission to the receiving Commercial bank accounts on the following working day.

38. PW5 stated that initiation, verification, approval of payment, uploading of payment files from IFMIS, submission of payment files to the Internet Banking platform, approval of payments in the Internet Banking systems is all done by the authorized users of the entity concerned in this case the County Assembly.

39. He was emphatic that the 1st Defendant had no signing mandate in the CBK account ending 06xx. He explained that the account belonged to the executive arm of the County not the Assembly and asserted that no money was transferred form that account to the County Assembly but rather that the money went into an account of the Equity Bank.

40. PW6, Paul Githinji Kariuki, who was the Central Operations Manager at Equity Bank Limited at the material time adopted his witness statement dated 12th May 2021. He produced a letter from the Plaintiff to Equity Bank dated 24/2/2021, requesting for information and documents. He also referred to several cheques images all drawn upon Homa Bay County Assembly Account ending 5106, held at Equity Bank, Homa Bay Branch in favour of the Manager Equity Bank.

41. He also referred account opening form for the account ending 51xxin the name of Homa Bay County Assembly, letter dated 19/5/2014 from the Homa Bay County Assembly to the Manager Equity Bank, Homa Bay Branch authorizing opening of a Mortgage Account, extracts of the suspense account ending 07xx; Account opening forms for account ending 49xx in the name of Damila Enterprises; bank statements for the account for the period January 2015 to January 2019; Statements for account ending 86xx in the name of Caroline Chepkemoi Sang between 1/1/2015 to 21/1/2019; account opening form for account ending 50xx in the name of Otieno Bob Cephas; authority from Homa Bay County Assembly to pay Kshs 15 million to seven beneficiaries among them Damila Enterprise (2. 7 million) and Bob Cephas (2. 5 million); the statements for account ending 23xx in the name of Evelyne Awino and account ending 62xx in the name of Maurice Odiwuor Amek for the period 1/3/2013 to 9/5/2017. Production of the bank statements was however objected to on the ground that they were not accompanied by a certificate under Section 106 B of the Evidence Act and the objection was sustained by this court.

42. In cross examination, PW6 confirmed that monies were paid from the CBK and the Co-operative Bank to Equity Bank. He stated that the owner would direct where the money would be paid.

43. PW6 clarified that the owner of the money held in a suspense account may spend it but that the money in the suspense account in issue belonged to the Executive arm and the County Assembly could not issue instructions on how to spend it; that Damila Enterprises received Kshs 5 million from the Assembly’s Mortgage account; and in that according to him the account ending 06xx belonged to the County Assembly. He stated that the total amount that left that account was Kshs 27,482,000 and that Kshs 5 million left the account to Damila Enterprises account internally within Equity. He explained that a suspense account belongs to the Bank; that it is an account where a person wishing to pay monies to several beneficiaries sends monies and then issues instructions on how the monies are to be disbursed to those beneficiaries.

44. PW7, Vivian Akinyi, a Procurement officer who worked with the County Assembly, adopted her witness statement dated 7/4/2021 and then testified that she knew the 1st Defendant to 4th Defendants. She testified that the Plaintiff raided their offices and only the Principal Procurement Officer at the time would know whether an inventory was rendered as contracts and awards were kept in his custody.

45. She confirmed that she knew David Obonyo in person as he used to work at Equity Bank and would visit the Assembly offices often but stated that she did not know whether he did any work for the Assembly as a contractor or supplier. She could not recallmaking reference to a company called Welbrah Construction. She explained that paragraph 8 of her statement referred to what would ideally be in a suppliers file but not what is in the actual files; that the entity that tendered needed not to have the minutes of the Tender Committee;

46. In cross examination, she explained that she did not see documents relating to Damila Enterprises since she was not involved in the procurement process. She could not also remember the companies that were pre-qualified by the County Assembly at the material time.

47. PW8, Ishmael Nyachae, an investigator working with the Plaintiff adopted his witness statement dated 5th May 2021. He testified that on 22nd March 2019 he received instructions to investigate embezzlement of funds by employees of the County Assembly of Homa Bay, some of whom had companies trading with the Assembly; that he wrote to the County Assembly and requested for documents; that he also obtained some documents upon obtaining warrants to investigate through the courts; that he analyzed them, identified witnesses and recorded their statements. He stated that Damila Enterprises was one of the companies suspected to have fraudulently received the funds and that he established fraudulent payment to Damila and obtained documents from Equity and Cooperative Bank and forwarded the file to the DPP with recommendations.

48. In cross examination, he explained that there were no procurement documents relating to Damila Enterprises in the bundle forwarded by the Clerk of the Assembly and stated that the Clerk, whose name he could not recall, had told him that Damila had not done any work for the Assembly as it had not supplied any goods or rendered any services to the County Assembly.

49. He explained that back in 2014 County Assemblies did not have accounts at the Central Bank so monies could be transferred from the County Government (Executive) account to the Assemblies at the request of the employees of the Assembly; that the Assemblies became autonomous in 2014 and opened their own recurrent and development accounts at the Central Bank of Kenya which were operated by their employees.

50. He clarified that the only money belonging to the County Government of Homa Bay that was at the CBK that could be drawn by the County Assembly was that which was in the County Revenue Fund but not that in the County’s Recurrent Account or Development account.

51. He testified that he did not receive any documents to show whether or not the companies investigated were pre-qualified.

52. He asserted that the ultimate beneficiaries of the funds were the 1st, 2nd, 3rd,4th and 5th Defendants and that is why he recommended that the monies be recovered from them.

53. PW9, Getrude Sielei, an investigator working with the Plaintiff testified that she received a file that established that Damila Enterprises was paid Kshs 47,75,978 by Homa Bay County Assembly; that it then transferred Kshs 24,200,000 to Bob Cephas who was the Clerk of the Assembly, Kshs 5,000,000 to Maurice Amek who was the Senior Accounts Controller, Kshs 3,950,000 to Caroline Sang who was the Finance Officer and 1. 7 million to Evelyn Agutu who is the wife of the Bob Cephas. She stated that the Kshs 47 million came from Homa Bay County Recurrent Account Number 100xxxxxxx at CBK in six tranches between 1/7/2015 to 2/6/2016: Kshs 5 million was paid to Damila Enterprises from the Assembly’s mortgage account Number 098xxxxxxxxxx at Equity Bank. Several other payments were made to Damila Enterprises from the Assembly’s Co-operative Bank Account Number 0114xxxxxxxxxxx between 25th January 2015 and 15th October 2015.

54. The witness produced the Suspense Account Book and contended that the suspense account was created to conceal the source of money paid to Damila Enterprises; that the Clerk of the County Assembly neglected to provide the Plaintiff with documentation of how the money was moving from the account to Central Bank.

55. On being cross-examined, she explained that the criminal investigations were already complete and all she required to do in this case was to convert it into civil format. She reiterated that Damila did not supply any goods or render any services to the County Assembly. She stated that she examined some documents for services supplied to the County Government by Damila , to wit, an invoice dated 3/3/2015 for Kshs 2,330,000 for grading and gravel indicating Damila as the supplier, and two other invoices for Kshs 7,604,732. 05 and 9,505,032. 05.

56. She explained that there was an RTGS for Kshs 29,610,850 dated 1st July 2016 from account ending 06xx whose signatories are not the Defendants herein; that she did not come across any document authorizing the 1st Defendant to transact in account ending 06xx but that the County Chief Finance Officer (PW1) had demonstrated that the money from Central Bank of Kenya was monthly allocations to the Assembly from the County Governments Executive arm and he was a signatory to that account. She also stated that at the time, the Assembly did not have its own account at the Central Bank of Kenya.

57. She also testified that the Bank statements showed that Evelyne Agutu received monies from Damila. He stated that he had not come with any document to show that the 1st Defendant received monies from Damila and that the suspense account should have paid employee salaries but not suppliers.

58. She clarified that she did not carry out independent investigations but only did a financial analysis that none of the Defendants is a signatory to account ending 06xx and thence could not authorize transactions; that transactions in the suspense account were not authorized by the signatories of that account but by the Clerk of the Assembly; that she did not produce an authorization letter by the Clerk and that ordinarily, the purpose of payments from the suspense account is indicated but in this case it was not. She described the County Revenue Fund as where the money comes from before it goes to either the Assembly or the County Executive account; that there was no documentation showing authorization by the Executive for its money to leave the Recurrent account at CBK and that a requisition from the Assembly was not provided due to a fire at the County offices. He contended that there were documents showing the Clerk authorized payment to Damila but they were not before Court.

The Defendants’ Case 59. The 1st, 4th and 5th Defendants filed a statement of Defense dated 17th September 2021. They averred that the Plaintiff is non suited and that no cause of action is disclosed in the Plaint for which the Court can grant any relief in favour of the Plaintiff. They prayed for a preliminary order that the suit filed is a nullity and should be struck out and /or dismissed in limine with costs.

60. They denied that the sum of Kshs 47,075,978 and indeed any property of Homa Bay County Assembly was paid to them or to anyone known to them and that any money paid to them was for goods and services delivered to the Assembly. They maintained that they were unaware of any particulars of illegality and/or fraud on the part of the 2nd and 3rd Defendants or any other person known to them.

61. They averred that the claims in paragraph 10,11 and 13 of the Plaint which refer to illegal and fraudulent payment of monies by the 1st Defendant to the 4th and 5th Defendants for services not rendered to the Assembly as borne out of ill will, vendetta and infantile imagination to malign their good names as there had been no doubt as to their qualifications, competence and performance of their roles.

62. The 1st and 5th Defendants averred that if any money was paid to them, then sums were legally owing, not obtained from Homa Bay County Assembly but paid out of private contracts between themselves and the 4th Defendant and that in any case, the Doctrine of Privity of Contract precluded the Plaintiff from challenging any such agreements and payments made to them when it was not a party to such agreements.

63. The Defendants denied being served with the demand notice referred to by the Plaintiffs in Paragraph 17 of the Plaint.

64. They asserted that the orders sought in the Plaint are unfounded, illegal and contrary to Public Policy as they did no wrong in discharging their duties and functions.

65. The Defendants admitted the averments in paragraph 19 of the Plaint in so far as the jurisdiction of this court is concerned. They however, averred that the current suit is bad in law, incompetent, mischievous, misconceived and an abuse of the Court process and urged the court to dismiss it with costs to them.

66. Bob Cephas Otieno, the 1st Defendant, who was the Clerk of Homa Bay County Assembly at the time, adopted his written statement as evidence. He testified that he was a mandate holder of the Assembly’s accounts at the CBK but the account ending 0627 did not belong to the Assembly but to the Executive. He had no control over that account from which Kshs 41 million is alleged to have been lost; only Kshs 6 million was paid from the Assembly account.

67. He knew Damila Enterprises as it was a supplier to the Assembly, and it did the driveway and parking of the Assembly, renovation of the Clerk’s offices A & B, which work was below Kshs 6 million. He produced the tender documents for the renovation of the Clerk’s office and quotation thereto prepared by Dexter Konsults whom he testified, were hired as consultants to check on the works at the Assembly from 2013 to 2022.

68. He denied receiving Kshs 24 million from Damila Enterprises or authorized payment of Kshs 41 million to Damila Enterprises. He explained that Damila was only paid by the Assembly through CBK Accounts ending 93xx and Mortgage Account ending 36xx and recurrent accounts at Co-operative Bank and Equity Bank ending 01xx and 51xx respectively. He contended that the CBK account for which he had mandate on behalf of the Assembly was not a subject in this case.

69. In cross-examination, he confirmed that he had mandate to issue the authority to pay. Caroline Sang and Maurice Ameka were alternative signatories to the Equity Mortgage account ending 60xx 51xx and the Cooperative Bank Account ending 01xx. For any supplier to be paid, his signature was mandatory, along with either Sang or Ameka. All the three would have to be aware of the supplier.

70. He further testified that he had been convicted in Criminal Case No 1 of 2018 which conviction was upheld on appeal and that there is another case against him that is pending, E002 of 2021 but which cases are not related to this one.

71. He confirmed payment of Kshs 5 million to Damila through the Assembly’s Mortgage Account for renovation of the Clerk’s office. He produced documents prepared by Dexter Consults EXB D1 in support of the tender. The tender between Damila and the Assembly were not produced. The 1st Defendant testified that the tender was worth Kshs 2. 8 million and a further Kshs 2. 2 was for phase two of the renovations. He explained that Damila had been awarded 11 tenders by the Assembly and that the same were lawfully awarded. He claimed that the tender documents were seized by the Plaintiff during the raid in Assembley’s offices.

72. He further testified that he did not know the Manager of Damila or the owners as the tender is not awarded to people but companies. The contract had been signed by one Bernard Oloo for Damila. He denied knowing Bernard Obonyo and Lilian. He recognized and admitted to having signed cheques of Kshs 98,910, 500,000, 922,414, 461,207, 461,205 to Damila and Manager Equity Bank. He denied knowing the manager in person.

73. In cross examination, he was presented with two cheques, one No 283 for Kshs 3,600,000 indicated as presented by Cephas Otieno He denied presenting them and stated that it may have been another person with similar names.

74. He denied having been paid by the 4th Defendant through cheque numbers 282 and 385 stating that they must have referred to another Bob Otieno

75. DW2, Caroline Chepkemoi Sang 2nd Defendant (DW2) testified that she was not a signatory to the County Revenue Fund, she did not pay money to Damila Enterprises and that Damila did not pay any money to her; that the Assembly did not have a suspense Account at Equity Bank or control over money in the suspense account. She denied receiving Kshs 3,950,000 from the Assembly. She explained that being an alternative signatory, she only signed cheques when the Accounts Controller, Maurice Amek, was not there, and that she had not signed any cheques for Damila. Her role was preparation of monthly summaries after payment had been done for purposes of requisition of funds.

76. She confirmed that Damila did some works. she disputed that in 2015 she was appointed as a member of the evaluation Committee and contends that she did not participate in the tender process.

77. She confirmed knowing Obonyo Mireri one of the proprietor’s of Damila and a Manager at Equity Bank and businessman in Homa Bay. She stated that she did not however deal with him at the Assembly in any manner that benefitted her personally.

78. She explained that when the Assembly did not have money at Central Bank of Kenya and in the recurrent Bank Accounts, bill would accrue and await funds.

79. She further explained that there was a budget before awarding any tenders. She referred to the tender for renovation of the Clerk’s office phase two, at page 90 of the Defendant’s bundle, and explained that there had been a budget for it which was not produced.

80. She conceded that she was found guilty of Corruption in Criminal Case No 1 of 2018, and that the conviction was upheld on appeal and she is aware of a pending criminal case No E001 of 2021.

81. She further explained that to sign cheques, she went through the contract, LPO/LSO and Certificates of Completion which had been approved by the procurement department. RTGS slips would be filled in the Accounts office and authorized by the Clerk.

82. In cross-examination, she confirmed that her Equity account received money from Damila Enterprises but could not confirm that the amount was Kshs 3,950,000. She explained that she had private dealings with Damila where she leased a truck, KCD 987J, to them in 2014 at Kshs 20,000 per day and the payment accumulated to 5. 5 million, where upon she received Kshs 4 million and the balance was pending. She stated that there was no written agreement and she had no proof of it and claimed that the log book for the vehicle was with her lawyer but the same was not produced in Court.

83. She confirmed that David Obonyo and Obonyo Mireri is one and the same person.

84. Maurice Odiwuor Amek the 3rd Defendant (DW3) adopted his witness statement dated 19th October 2022 and testified that he was the Senior Accounts Controller at the County Assembly of Homabay and a signatory to the Assembly accounts; that the account ending 06xx belonged to the Executive and not the Assembly; that he only dealt with documents and not verification of works which was done by the internal audit department; that he assigned Jacinta Adede Ogwe (PW3) the task of but he did not know whether the cheques were paid.

85. He testified that the Homa Bay Service Board had assigned Equity Bank to manage their fund account which is why the cheques were drawn to the Bank’s manager.

86. He explained that all cheques drawn had payment vouchers and they followed due process; that the vouchers were seized by the Plaintiff during the raid; that he offered event Organisation services y to David Obonyo Mireri, for which he raised an invoice of Kshs 5,705,000 but he was not aware that he had any relation to Damila Enterprises; that some of the money was paid to him in cash and some through the bank but he could not remember the finer details. He stated that he did not have evidence of the event or items for catering. He contended that the Kshs 3,542,646 paid to Damila was for work done.

87. In cross-examination, he confirmed that he signed the cheque for Kshs 3. 5 million in favour of Damila and the Manager, Equity Bank.

88. He confirmed that he was convicted in Criminal Case No 1 of 2018, which conviction was upheld on appeal and that he is still in prison.

89. Everlyne Awino Ogutu, 5th Defendant, (DW4) testified that she was aware that there were allegations that she had been fraudulently paid Kshs 1. 7 million by the Homa Bay County Assembly. She testified that she had done work for David Obonyo worth Kshs 5 million and produced a receipt, invoice and quotations for interior design work. She claimed that Obonyoi had paid her through other accounts other than Equity. She denied receiving money from the Assembly.

90. In cross-examination, she testified that she had never done business with Damila Enterprises and had no proof of the payments made by Obonyo.

91. She conceded that the 1st Defendant is her spouse; that she was aware of the Criminal case where he had been convicted of corruption. She stated that she did not produce statements of her accounts; that she had no evidence of the works alleged to have been done for Obonyo but produced proof of payment. She explained that her accounts at Equity Bank were frozen by the Plaintiff and explained that the payments done to her by Damila Enterprises were for goods delivered to Obonyo Mireri. She conceded to having received payments from Obonyo and Damila but none from the Assembly.

92. DW5, David Obonyo Mireri, (DW5) adopted his witness statement dated 14th September 2021 and testified that he and Lilian Achieng are the proprietors of that Damila Enterprises; that it supplied Homa Bay County Government with grains and did construction work for the County and the Assembly and had received payment from both entities. The Assembly paid Kshs 6 million to him and the rest was paid by the Executive. He testified that Damila was prequalified and was on the IFMIS as a contractor for the County and the Assembly.

93. In cross examination, he testified that there being an interim payment certificate meant that work had been done to a certain level for it to be paid. The contract sum for renovation of the County Assembly house was Kshs 3. 2 million and it was paid in installments. He was not the one that signed the contracts for Damila Enterprises but one Bernard Oloo. There was another contract for renovation of the Clerk’s office for Kshs 2. 6 million and another for refurbishing the Assembly’s roofing. The contract period is not provided nor were the tender documents available. He also referred to a tender award for cabro works for Kshs 2. 8 million, which was also paid in installments.

94. He testified that he paid Evelyn (5th Defendant) for the supply of curtains; that he had borrowed money from Bob Cephas (1st Defendant) when he lacked capital and would repay hence explaining the payments made to the 1st Defendnat. He confirmed having made payments to Maurice Amek, and Caroline Sang but stated that the payments were for private contracts between them that were verbal. He further stated that he did not pay any of the Defendants from the amounts received from the County or the Assembly.

The Plaintiffs’ Submissions 95. Learned Counsel for the Plaintiff, Olga Ochola, submitted that Article 227 of the Constitution of Kenya requires that Public Procurement be carried out in a system that is fair, equitable, transparent, competitive and cost effective. The requisition made by the 1st Defendant in Forms A and cash transferred through Form C upon approval by the Controller of budgets. Money was wired from Central Bank of Kenya account ending 06xx to Equity Bank Limited Suspense Account ending 07xx to the Assembly account and then to the 4th Defendant’s account after which it was distributed to the rest of the Defendants.

96. The 1st to 3rd Defendants unlawfully authorized payments of Kshs 47,075,978 to the 4th Defendant for services not rendered and benefitted from the amount paid thereby breaching their fiduciary duty and the Provisions of the Procurement and Public Finance Act.

97. There was no approved budget or a procurement plan as required by Section 45, 70 and 86 of the Public Procurement & Assets Disposal Act to authorize payments. The contracts produced by the Defendants were also not in conformance to the Public Procurement & Assets Disposal Act and the Contracts Act.

98. Evidence that the 4th Defendant was awarded 12 tenders by the County Assembly of Homa Bay was not adduced. The 1st Defendant denied receiving money from the 4th Defendant and failed to mention any loan agreements between them which facts were stated by the 4th Defendant.

99. The 2nd Defendant claimed to have leased a truck to the 4th Defendant but neither a log book nor a lease agreement was presented.

100. The 3rd Defendant claimed that he had provided funeral services to the 4th Defendant for a burial but failed to adduce any evidence that the burial took place, or any items were procured for the event.

101. The 5th Defendant claimed to have supplied the 4th Defendant with household interior goods and services worth 1. 7 million but failed to produce any evidence of the delivery.

102. The 4th Defendant did not adduce any evidence of his employees or his registered status as a contractor or engineers who carried out the alleged works at the Assembly offices. He could not confirm the methods of the tender process, the alleged contracts did not specify the contract period, the capacity of Benard Oloo to sign those contracts on behalf of Damila, he had not witnessed the execution of the contracts and the contracts did not have the seal of Homa Bay County Assembly. He confirmed receipt of Kshs 47,075,978 in his Equity Bank Account and that he had debited into the accounts of the other Defendants, monies based on private arrangements.

103. Learned Counsel for the Plaintiff submitted that the transactions were a case of blatant distortion and violation of the Law on Procurement and Public Finance. Counsel placed reliance on the case of Ethics & Anti-Corruption Commission v Vulcan Lab Equipment Ltd & Anor (2020) eKLR where it was held that:“a contract entered into in a procurement process that is flawed for violating the Public Procurement & Assets Disposal Act is stricken by invalidity and illegality and cannot be given effect by the Courts”.

104. Counsel further submitted that the 1st to 3rd Defendants failed to protect public property and revenue through making of payments for services that had not been rendered and through fraudulent acquisition of public property by the Defendants.

105. On the allegation by the Defendants that they could not produce documents to support their case as the documents were impounded by the Plaintiff, learned Counsel submitted that no evidence had been adduced that the Defendants made any application to procure those documents.

106. Counsel contended that since the Defendants occasioned loss to the Homa Bay County Assembly amounting to Kshs 47,075,978, and benefited from the fraudulent scheme, they are liable to compensate the County Assembly to the full extent of the loss.

107. Counsel cited the following cases in support of her submissions: EACC V Bob Kephas and Evelyne Ogutu, HC ACEC Suit No 4 of 2018.

Republic v Public Procurement Administrative Review Board; Arid Contractors & General Supplies (Interested Party) Ex parte Meru University of Science and Technology (2019) eKLR

EACC v Vulcan Lab Equipment Ltd & Another [2020] eKLR

Lustman & Company [1990] Limited v Corporate Business Centre Limited & 4 Others [2022] KEHC 42 (KLR) (Commercial and Tax (4 February 2022) (Ruling)

EACC v Stephen Sanga Barrawah t/a Mediscope Agencies & 20 others [2018] eKLR

William Kabogo Gitau v George Thuo & 2 others [2010] eKLR

The 1St, 4Th And 5Th Defendant’s Submissions 108. The Learned Counsel for the Defendants, Mr. Seko Minayo submitted that the 4th Defendant rendered construction work to both Homa Bay County Government and the County Assembly of Homa Bay with twelve tenders totaling to Kshs 47,410,624, had been paid by both entities and both owed him substantial monies.

109. He submitted that PW2 had confirmed that Damila is listed as a supplier in the IFMIS system and had received Kshs 16,610,464. 10 from the County Government. He contended that the Public Procurement & Assets Disposal Act provides for several methods of becoming a supplier including open tendering, restricted tendering and requests for quotations.

110. He further submitted that PW3 that had prepared the cheques from co-operative Bank had confirmed that there were accompanying vouchers and LPOs and that payments were made through RTGS. She has also confirmed that cabro works, landscaping and vegetation works had been done by Damila for the Assembly. She had further confirmed that the 1st Defendant did not have any mandate over the account ending 06xx which belonged to the Executive arm. He thus submitted that the evidence adduced by the Defendants was sufficient to rebut the Plaintiff’s allegations that the 4th Defendant was not a supplier to the County and to prove that the payments received by him were for work done.

111. Counsel further submitted that the 1st Defendant discharged his duty by ensuring that payments made via cheques were verified and that the accompanying documents were in place.

112. He further submitted that if the funds from the account ending 06xx were lost, the 1st Defendant was not responsible for such a loss as he was not a signatory to the account or the suspense account held for the County Executive.

113. On whether funds paid to the 4th Defendant were lawful, he submitted that the County paid Kshs 41,400,000 while the Assembly paid Kshs 5,077,468 to Damila enterprises and 14 million via RTGS which monies had not been paid to the Defendants. He contended that the monies debited to the rest of the Defendants were not from the County payments but from other businesses run by Damila Enterprises.

114. He submitted that the Plaintiff had not proven its case on a balance of probabilities and therefore not entitled to the reliefs sought.

The 2nd Defendant’s Submissions 115. The Learned Counsel for the 2nd Defendants, Mr. Ogola submitted that the Plaintiff’s burden of proof was not discharged against the 2nd Defendant as there was no approval form produced to support particulars of fraud on the 2nd Defendant’s part. The Plaintiff has not demonstrated that the monies paid to the 2nd Defendant came from the monies paid from the County Executive and Assembly as Damila had other funds in its account. In any case, the money received from the county had been from the executive account over which the 2nd Defendant had no control over.

116. He submitted that no evidence was authorized payment to the 4th Defendant. The Plaintiff had also not tendered evidence of requisition by the County Assembly for monies to be transferred by the Executive arm for its use. He submitted that the participation of the 2nd Defendant in any of the transactions was not proved.

The 3rd Defendants’ Submissions 117. Mr. Ouma, Learned Counsel for the 3rd Defendant submitted that the funds in the suspense account were drawn from CBK Account ending 06xx owned by the Executive and the 3rd Defendant had no control. The 3rd Defendant was also not a signatory to the Co-operative Bank Account ending 01xx and he could thus not authorize any payments from the said account. He argued that the Plaintiff had not tabled any evidence demonstrating the 3rd Defendant participation in any payments from the two accounts. Counsel submitted that the procurement office had the responsibility of providing supporting documents that preceded the payment process; that the cheques were prepared based on vouchers generated from the procurement department and that no audit query had been raised with regards to payments made to the 4th Defendant.

118. Counsel contended that there was no evidence against the 3rd Defendant to warrant this court to allow the prayers in the Plaint and urged it to dismiss the suit in its entirety and order the Plaintiff to pay costs to the 3rd Defendant.

Issues For Determinationi.Whether public funds in the sum of Kshs 47,075,978 were unlawfully paid to the 4th Defendants by the 1st, 2nd and 3rd Defendants.ii.Whether the 1st, 2nd and 3rd Defendants, who were all employees of the County Assembly of Homa Bay, and the 5th Defendant, who is a spouse of the 1st Defendant, unlawfully benefitted from the funds paid to the 4th Defendant.iii.Whether the Defendants are jointly and severally liable to the County Assembly for the said funds.iv.Who should bear the costs of this suit.

Analysis And Determination (i) Whether Public Funds In The Sum Of Kshs 47,075,978 Were Unlawfully Paid To The 4Th Defendants By The 1St, 2Nd And 3Rd Defendants. 119. Out of the Kshs 47,075,978 that is alleged to have been fraudulently paid to the 4th Defendants, Kshs 41 million is said to have been drawn from the County Government (Executive) Recurrent Account held at the CBK and paid to an Equity bank, Homa Bay branch, suspense account. The balance was from the County Assembly.

120. The County Government of Homa Bay (Executive) and the County Assembly of Homa Bay are independent entities. According to PW1, PW3 and PW5 each entity had and operated its own accounts at the Central Bank of Kenya (CBK) but both drew their funds came from the County Government Revenue Fund (CRF: The exchequer).

121. PW1 narrated the procedure that is followed when paying money to the Assembly from the exchequer. His evidence was corroborated by PW3 (Jecintar Adede) who in her witness statement stated that the County Revenue Fund was like a pot from which both the County Executive and the County Assembly drew their funds; that however, once the funds were transferred from the Exchequer to the recurrent or development account of one or the other entity neither could use the others money; that the Clerk of the County Assembly was a mandatory signatory to the County Revenue Fund at the CBK but not to the other accounts belonging to the County Government (Executive) and as such he had no mandate over those other accounts. He however had full mandate over the County Assembly’s accounts in the CBK and in the commercial banks to wit, Equity and Cooperative Bank.

122. In regard to the impugned funds amounting to Kshs 41 million the court heard that the same were drawn from an account of the Executive arm at the CBK. PW1, who at the material time was the Director of Finance in the Executive arm at the time, testified that the monies were transferred to the County Assembly in several tranches from the County Government’s (Executive) CBK Recurrent Account No 100xxxxxxx between 1st July 2015 and 1st July 2016. PW1 stated that the monies were paid through RTGS into an Equity Bank’s suspense account at the request of the County Assembly. He explained that the funds were part of the Assembly’s approved annual budget for the F/Y 2015-2016 and were paid to it as a loan to be repaid later. PW1 exhibited and produced a statement of account (Exb4e) which clearly proves that money moved from the Executives CBK recurrent account to the Equity Bank suspense account.

123. From the evidence tendered before this court the practice of paying County Assembly funds into the Equity Bank suspense account was not unusual. In my finding what was unusual and fraudulent was that the funds were utilized to pay the 4th Defendant. This is because, as the court was told, money paid into the suspense account was for paying the salaries and allowances of the Assembly’s employees and nothing else. In her evidence PW3 who was an Accounts Assistant at the Assembly at that time explained that once the funds hit the suspense account a soft copy of the payroll would be sent to the bank for it to process and pay the individual salaries. She explained that the practice was however stopped in the year 2020. PW3 was categorical that suppliers were not paid from the suspense accounts of the bank but from the Assembly’s accounts in those banks.

124. Once monies were paid into the County Assembly’s accounts the Accounting Officer responsible for its proper utilization was the Clerk of the County Assembly in this case the 1st Defendant (see Section 148(4) of the Public Finance Management Act (PMFA). As the accounting officer the 1st Defendant was obligated to ensure that the resources of the Assembly were used in a manner that was not only effective, efficient, transparent and economical but also in a manner that was lawful and authorized (see Section 149(1) (a) and (b) of the Public Management Finance Act).

125. In this case there is evidence that money was paid to the 4th Defendant from the Equity Bank suspense account and the Assembly mortgage account. Evidence of the payments from the suspense account is contained in a record titled (Extract from Homa Bay Branch Salary Suspense GL A/C 098xxxxxxxxx (EXB P6). There were not just one or two or three payments to the 4th Defendant but several of them all of them approved by the 2nd and 3rd Defendants by virtue of their offices and authorized by the 1st defendant as the Accounting Officer. According to the plaintiff the total amounted to the sum now claimed in this case.

126. It is my finding that not only were the payments to the 4th Defendant irregular but they were also unlawful. Firstly, because the 4th Defendant was not an employee of the Assembly so he should not have been paid with funds drawn from the suspense account as that account was for salaries and allowances only. That was the testimony of PW3 and the same was not rebutted. Secondly, because, and I have found this as a fact, the 4th Defendant did not supply any goods or render any services to the County Assembly as would have entitled him to the payments.

127. Neither the 4th Defendant nor the 1st,2nd and 3rd Defendants adduced evidence to support the payments made to the 4th Defendant and which payments he does not dispute. The 4th Defendant merely stated that he received the sum of Ksh. 41 million for rendered services to the Executive arm of the County and as such the payments were valid. However, as I have stated it was proved by PW1 on a balance of probabilities that money belonged to the County Assembly. The payments to the 4th Defendant were therefore unlawful.

128. Learned Counsel for the Defendants made a lot of capital from the fact that their clients did not have mandate over funds in the account where the monies paid to the 4th Defendant were drawn. However, as I have already stated there was evidence by PW1 which proves on a balance of probabilities that once the money left the recurrent account of the Executive arm at the CBK it went to a suspense account from which the County Assembly paid its workers. It is my finding that once the money hit that suspense account it left the Executive arm of the County and became public funds vested in the County Assembly.

129. The 4th Defendant also received a payment of Kshs 5 million from the County Assembly mortgage account which had been authorized by the 1st and 2nd Defendants, and which fact is admitted by the 4th Defendant. The 1st Defendant claims that the monies were for renovation works carried out in the County Clerk’s office phase 1 which cost Kshs2. 2 million and phase 2 which cost Kshs 2. 8 million. The 4th Defendant produced contracts as proof of legitimacy of the payments. However, it is the Plaintiff’s case that the monies were unlawfully paid as there was no budget for the alleged works, the procurement process was not carried out as required under Public Procurement and Disposal of Assets Act, that no works claimed were not performed and that the contracts produced in evidence by the 4th Defendant were just a cover up for siphoning public funds.

130. I have considered the evidence and submissions on this particular issue very carefully and I am in agreement with the submission of Counsel for the Plaintiff that there was also no justification for the payment of the Kshs 5 million. There can be no justification of a payment arising from a flawed tender process as happened in this case where there was no advertisement; no evidence of a budget being in place; no evidence of bidding having taken place; no sittings of the relevant committees and no evidence of the awards and their acceptance. The documents tendered in evidence by the 4th Defendant as proof of contracts between the Assembly and Damila Enterprises have so many shortcomings that rendered them not convincing at all. Most did not have the contract period yet a contract for works must have a contract period. Moreover, there was evidence from Vivian Akinyi (PW7) that there were no documents in the procurement office in support of tenders awarded to the 4th Defendant and that that was the position even prior to the raid conducted by the Plaintiff which means that the contracts were made later for the purposes of this case. PW7 was at all times material to this case a procurement professional working at the County Assembly of Homa Bay and would have seen the contracts if they indeed existed. It is my finding therefore, that contrary to the 1st Defendant’s assertion in the witness statement dated 14th September 2022, the procurement process was not followed. The 1st Defendant alleged in his witness statement that the tender in this case were restricted but he did not tender evidence of approval of that method.

131. In light of the foregoing, I find that even the payment of Kshs 5 million admittedly received by the 4th Defendant and which was proven to have been made by the 1st and 2nd Defendants was not valid. The 1st and 2nd Defendants acted illegally in authorizing monies to be paid to the 4th Defendant in regard to a flawed procurement and also for services not rendered to the County Assembly. There was also no explanation from the 1st, 2nd and 3rd Defendants as to why the 4th Defendant was not paid through the IFMIS system and the only conclusion that can be drawn form this was done to disguise the fraud.

132. I am not persuaded by the argument by the Defendants that they were unable to defend the Plaintiff’s claim because the procurement documents were impounded by the Plaintiff. The Civil Procedure Rules and the Evidence Act have provisions to aid a party who intends to produce a document(s) in the possession of their adversary. The Defendants have not demonstrated that they made a Request for Documents and failed to get them. In the absence of proof of that request their argument cannot be taken seriously.

133. The procurement process having not been followed and indeed there being no evidence that services were rendered by the 4th Defendant the payments were not justified and it would be remiss for this court to find otherwise. My so saying finds support in the holding in the case of Ethics & Anti –Corruption Commission v Vulcan Lab Equipment Limited [2020] eKLR that:“a contract entered into in a procurement process that is flawed for violating the PPDA is stricken by invalidity and illegality and cannot be given effect by the courts.”

ii: Whether The 1st, 2nd, 3rd And 5th Defendants Benefited From Funds Unlawfully Paid To The 4Th Defendant. 134. The 1st and 4th Defendant claimed that Damila Enterprises supplied goods and rendered services to the County Assembly of Homa Bay County Assembly. As earlier stated by this court, whereas the 4th Defendant produced some documents as justification for the monies paid, the same were incomplete and did not serve as proof of tenders having been awarded or the procurement process having been followed. There was also no evidence of the tenders to the 4th Defendant being direct tenders as alleged by the 1st Defendant in his witness statement and there was no evidence of performance of the contracts that would have followed the award of the tenders if at all. Accordingly, any payments to the 4th Defendant would have been an offence under Sections 45 (2(a) (iii) and (b) of the Anti-Corruption and Economic Crimes Act.

135. Save for the 1st Defendant who, at the hearing, vehemently denied to have received any money hence contradicting his own witness statement, the rest did not dispute that payments in the sums pleaded in the Plaint were made to them by the 4th Defendant. The payments were proved through account statements and the account statement of the 4th Defendant contained in his own bundle of documents was testament that he paid a sum of Kshs 24 million to the 1st Defendant. The 4th Defendant also conceded that he paid the 2nd and 3rd Defendant and also the 5th Defendant.

136. As a matter of fact, the statements of account reveal that any payment received by the 4th Defendant from the Assembly was followed by a payment to the other Defendants. Just as examples, when the 4th Defendant received Kshs 7,000,000 from the County Assembly on 13th November 2015 he paid Kephas Otieno (1st Defendant) Kshs 4,000,000, Caroline Sang (2nd Defendant) Kshs 1,500,000 and Maurice Amek (3rd Defendant) Kshs 1,500,000. Similarly, when he received Kshs 5,900,000 from the Assembly on 24th December 2015 he paid them Kshs 3,200,000, Kshs 750,000 and Kshs 650,000 respectively. All the payments followed a similar pattern and the question that begs an answer is whether these payments were lawful or not.

137. I have already found that the payments to the 4th Defendant were unlawful. It is also my finding that any payment made therefrom to the other Defendants was equally unlawful.

138. As earlier mentioned, whereas in his witness statement the 1st Defendant conceded to receiving payments from the 4th Defendant he recanted this at the hearing. However, as I have stated earlier his denial was negated by the evidence and admission of the 4th Defendant. The denial also dented his credibility as a witness and to rendered his testimony untrustworthy and unreliable.

139. On his part the 4th Defendant sought to justify the payments to the 1st Defendant by stating that he was repaying loans advanced to himself by the 1st Defendant. He produced the documents on pages199 and 201 of the 1st, 4th and 5th Defendant’ bundle of documents to prove the loan agreements. One document is dated 24th April 2015 and is for a sum of Kshs 14,000,000 while the other is dated 18th August 2015 and is for a sum of Kshs 10,600,00 making a total of Kshs 24,000,000 as is averred in the plaint. The problem however, is that given the denial by the 1st Defendant, the two documents cannot be in support of the monies paid to him by the 4th Defendant. It is unlikely that one can forget that he advanced such huge amounts of money to another and received payments for the same thereafter. My finding therefore is that these ‘loan agreements’ did not exist but were doctored for the purposes of this case. It is also not lost to this court that it would have been un-procedural for the 1st Defendant to have had such dealings with a person who was getting tenders from a procurement entity headed by himself (see Section 43(1) as read with subsection (5) of the Public Procurement and Disposal Act of 2005 which is made even more clearer in Section 59(2)(c) of the 2015 Act. Hence from whatever angle one looks at it the payments made to the 1st Defendant by the 4th Defendant were unlawful.

140. The 2nd and 3rd and the 5th Defendants also admitted that they received payments from the 4th Defendant. The 2nd and 3rd Defendants were employees of the County Assembly who were involved in the processing of the payments made to the 4th Defendant. As seen earlier the payments made to them followed a similar pattern as those of the 1st Defendants in that whenever the former received payment from the Assembly he would make a payment to them repaid.

141. The explanation given by the 2nd and 3rd Defendants was that the payments arose from agreements between them and the 4th Defendant for provision of different kinds of services: lease of a truck for the 2nd Defendant and provision of outside catering at his mother’s burial in the case of the 3rd Defendant. As for the 5th Defendant who happens to be a spouse of the 1st Defendant it was for supply of interior décor in the 4th Defendant’s house.

142. I have perused the evidence tendered by these three Defendants in support of the payments made to them and it is my finding that they do not rebut the Plaintiff’s averment and evidence that the payments were unlawful. This is because to begin with, none of the defendants adduced proof of them engaging in the businesses alleged; a business permit or license, whichever was applicable would have sufficed. Secondly there was no evidence of payment of resultant taxes (VAT) which in the circumstances of this case goes to show that no such business was undertaken as opposed to it being evidence of tax evasion. Thirdly documents and in this case I refer mainly to the receipts issued were not compliant with the law as they should have been ETR (electronic Tax Register) receipts as provided in Section 43 (4) of the Value Added Tax Act as would be expected in such transactions. The invoices produced in evidence do not also have a tax element. In my view this only goes further to prove that the payments were illicit. As for the 2nd Defendant she did not even prove ownership of the truck she allegedly hired to the 4th Defendant.

143. An argument was raised that the law did not prohibit the employees of the Assembly from carrying out business with its suppliers. My finding however, is that no such business was carried out at all. Finding that the documents adduced by the Defendants were cooked to hoodwink this court into believing there was business as to justify the payments made to them by the 4th Defendant who in turn fraudulently received money from the County Assembly.

144. It was also argued that the 2nd and 3rd Defendants were not responsible for authorizing payments to the 4th Defendant. It is however on record that they each played a role in the processing of the payments. According to PW3 the 3rd Defendant was the Senior Accounts Controller and payments were either authorized by the Clerk or by the Senior Accounts Controller. The 2nd Defendant was the Director Finance and no payment would have gone without her notice. This court was told that the two of them were also alternate signatories to the Assembly’s accounts. The two were privy to and even played a role in these payments and if anything was clearer from the pattern of the impugned payments, it is that it was more probably than not an inducement for them to make the unlawful payments. The other side of the coin would be that the Defendants were using the 4th Defendant as a decoy to siphon public funds from the County Assembly. Whatever the case they occasioned a loss to the Assembly and received a benefit which would amount to unjust enrichment were they to be allowed to retain the money. This then leads me to the next issue.

iii: Whether The Defendants Are Jointly And Severally Liable To The Plaintiff For The Loss Of Kshs47,075,978. 145. Having come to the conclusion, that the payments to the 4th and indeed to the 5th Defendant, as her payment though it was made by the 4th Defendant it originated from the County Assembly, were unlawful as no goods were supplied and no services were rendered to the County Assembly and having come to the conclusion that they all unlawfully benefitted from the payments I cannot hesitate to make a finding that the Defendants are all liable for the loss. To hold otherwise would encourage illicit enrichment from corrupt practices.

146. Article 266(5) of the Constitution provides that:“If the holder of a Public Office, directs or approves the use of Public Funds contrary to Law or instructions, the person is liable for any loss arising from the use and shall make good loss, whether the person remains the holder of Public office or not.”

147. Section 203 (1)(a) of PFMA also states that:“A public officer is personally liable for any loss sustained by a County Government that is attributed to –a.The fraudulent or the corrupt conduct or negligence of the officer.”

148. The 1st to 3rd Defendants have since left the offices they held at the material time but even so, their liability to the County Assembly of Homa Bay still stands.

149. Section 51 of ACECA also states that:“A person who does anything that Constitutes Corruption or economic crime is liable to anyone who suffers a loss as a result for an amount that would be full compensation for the loss suffered.”

150. The Plaintiff brings these proceedings pursuant to powers bestowed upon it in the Constitution, under Section 11(1)(j) of the Ethics and Anti-Corruption Commission Act and Section 53 of the Anti-Corruption and Economic Crimes Act and as such it is competent to do so. In the premises I do find and hold that the Defendants are jointly and severally liable to the Plaintiff in the sum claimed.

iii: Who Should Bear The Costs Of This Case. 151. The Plaintiff prays for the costs of the suit and interest at court rates and interest from the date of the fraudulent withdrawal of the funds from the Assembly’s account till payment in full.

152. In regard to costs it is trite that, whereas costs are in the discretion of the court, the general rule is that they follow the cause and this case is no exception and so the costs shall be borne by the Defendants.

153. In regard to interest Regulation 3 of the Anti-Corruption and Economic Crimes Regulations, 2003 provides as follows:“Interest on compensation, e.t.c.i.The interest rate prescribed for the purpose of Section 53(1) of the Act is 12% per year.ii.For the purpose of subsection 53(1) of the Act, for each amount for which a person is liable under section 51 and 52 of the Act in relation to a loss suffered or benefit received, interest is payable from the date the loss was suffered or the date the benefit was received.”

154. Interest shall therefore be calculated at the rate and in the manner prescribed in Regulation 3 aforestated.

155. In the upshot, I enter judgement for the Plaintiff against the Defendants jointly and severally in the sum of Kshs 47,075,978, costs of the suit and interest to be calculated in accordance with Regulation 3 set out above.

IT IS SO ORDERED.DATED, SIGNED AND DELIVERED ONLINE VIA MICROSOFT TEAMS AT NAIROBI THIS 7THDAY OF DECEMBER, 2023. E.N MAINAJUDGE