The scandal of Arror and Kimwarer dams

The suspects behind the Sh7.5 billion Arror and Kimwarer dam projects scandal had set out to defraud the public and did everything to achieve their goal including bending procurement laws for their benefit.

This is according to a confidential forensic audit report that Sunday Nation has seen.

The audit done by a private firm and the report shared with the Office of the Director of Public Prosecutions (ODPP) paints a picture of greed and carelessness by both the Kerio Valley Development Authority (KVDA), which was the procuring entity, and CMC Di Ravenna Italy-Itinera JV.

“The fraudulent intent can be traced back at the time of drawing the contract agreement (notwithstanding its illegality) whereupon, advance payment was put as a condition of contract agreement, whereas the parties to the contract, KVDA and CMC Di Ravenna Italy-Itinera JV were aware that advance payments are economic crimes,” the audit states.

The audit found that KVDA did not advertise or send invitations to tender for the commercial contract, contrary to requirements of the Public Procurement and Asset Disposal Act.


Moreover, the procuring entity did not prepare tender documents for the purpose of processing the commercial contracts for the two dam projects.

“In light of the foregoing, it means there was no contractual commercial contract document processed in accordance with the provisions of PP&DA 2015 by KVDA in respect of CMC Di Ravenna Italy-Itinera JV.

“Therefore, the commercial contract agreement entered into between KVDA and CMC Di Ravenna Italy-Itinera JV did not meet the provisions of Section 68(1) of the PP&DA 2005, rendering the commercial contract agreement an illegality,” the audit states.

The audit observed that particular conditions of the contract agreement, which formed the basis for the Sh7.5 billion payments, were not derived from any tender document as the document was never prepared.

“Advance payment is a discretionary contractual condition between the employer and contractor. Hence, its elevation as a term in loan facilities agreement shows the level of involvement of the lenders (BNP Paribas Fortis SA/NV Intesa Sampaolo SPA, Unicredit SPA and Unicredit Bank AG) in the illegally granted advance payment totalling $75.3 million (Sh7.5 billion).”

Furthermore, the advance payment was found to have been inflated: clause 30 of Standard Tender Document for Procurement of Works (STDPW, Roads, Bridges, Water and other Civil Engineering Works) stipulates that when advance payment is made, it should be 10 per cent of the contract sum. But the audit found that advance payment for Arror dam was overpaid by $25.2 million and that of Kimwarer by $16.4 million.

Another notable flouting of the law to have the contract agreement signed involved getting a guarantee for the advance payments.

For example, the guarantee for the Sh4.1 billion advance payment to the Italian contractor for Arror dam project was issued by Heritage Insurance Company contrary to requirements of Clause 30 of STDPW, which states that only a bank with in-country presence can issue such guarantee.

KVDA had paid Sh3.4 billion as advance payment for Kimwarer dam project.

“The guarantee shall be issued by a bank located in the Republic of Kenya, or a foreign bank through a correspondent bank located in the Republic of Kenya, in either case subject to the approval of the employer,” Clause 30 states.


The audit also questions the wisdom in abandoning the initial plan for a concession agreement, which would have been cheaper, for a more expensive commercial contract.

“The review has established that the intention of abandoning the concession agreement contract and inducing an illegal commercial contract was to enable defraud money from the Kenyan people. In a commercial contract, the contractor’s intention is to earn maximum benefit in all ways and at times unethically. This could have been the motivation of abandoning the concession agreement contract for commercial contract agreement,” the audit states.

The ODPP has charged former Treasury Cabinet Secretary Henry Rotich, former Treasury Principal Secretary Kamau Thugge, former Principal Secretary Susan Koech, former KVDA Managing Director David Kimosop, Mr Kennedy Nyachiro (chief economist), Mr Jackson Kinyanjui (head of Europe division at the Treasury) and Mr Titus Muriithi (director of resource mobilisation at Treasury), among others.

They have been charged with jointly conspiring to defraud the government millions of shillings by entering into a deal to construct the two dams, without approval.

They are all out on respective bonds as their trial proceeds. The audit was done in September 2019, two months after the suspects had been arrested.


With regards to the advance payments, the audit observed that the law governing such payments, Section 31(1) of PP&DA was flouted as the Italian contractor had not proved its capability or that it had resources to provide the services that were required for it to qualify for the payments.

The advance payment, the audit observes, was in contravention of PP&DA as well as the Anti-Corruption and Economic Crimes Act (ACECA), as the contractor had not proved it deserved to be paid the sum.

The audit also noted that the particular conditions in the contract agreement that led to the payment of the Sh7.5 billion were drawn after the commercial contracts were inferred.

“This is evidenced by capturing the amount of advance payment in the particular condition of contract clause 14.2 as $41,611,140 and $33,663,324 for Arror and Kimwarer, respectively, rather than showing it as a percentage of contract sum expected to be awarded. This means that the particular conditions of contract were drawn after the contract was inferred, since there was no tender document prepared by KVDA in line with Section 52 of PP&DA,” the audit noted.

While the justification for the advance payments was that it was to assist the contract mobilise quickly and start the work, the forensic audit found that the money was never used for that purpose.

The report noted that as soon as the money hit CMC Di Ravenna’s bank account, “it engaged in a spending spree”.

“The expenditure was not related to mobilisation. It is clear from the expenditure done that, the conditions stipulated under the advance bank guarantees were contravened, hence there were enough grounds to demand for refund of the advance payments on the ground of breach of the condition precedent.”

The prosecution of suspects in the Arror and Kimwarer dam projects and the actions President Uhuru Kenyatta too,k including cancelling the Kimwarer dam project and a cost rationalisation plan for Arror project have remained controversial, exacerbated by the intra-Jubilee divisions.
The two projects are in Elgeyo Marakwet County, whose senator Kipchumba Murkomen is Deputy President William Ruto’s confidante.

Mr Murkomen and other political leaders from the Rift Valley have accused President Kenyatta of interfering with development projects in the region so as to undermine Dr Ruto’s 2022 presidential ambitions.

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