By PATRICK MAYOYO pmayoyo@ke.nationmedia.com and JAINDI KISERO jkisero@ke.nationmedia.com
Posted Thursday, March 22 2012 at 22:00
Posted Thursday, March 22 2012 at 22:00
IN SUMMARY
- Pension savings used to pay for projects which either did not get off the ground or were not completed
The National Social Security Fund has controversially paid Lugari MP Cyrus Jirongo and a construction firm owned by a Ugandan businessman more than Sh830 million as settlement for incomplete housing projects from the Moi era.
According to documents seen by the Daily Nation, NSSF entered into a consent with Mugoya Construction and Engineering and S.K.Jirongo and Sololo Outlets as settlement in two separate cases they had filed against the pension fund.
Part of the released Sh800 million was to pay for incomplete projects cancelled years ago. The large payments were released after negotiations by way of out of court settlements.
In one case, the fund paid Sh342 million to Ugandan businessman James Isabirye of Mugoya construction Company for a project in which the contractor was supposed to build 265 housing units on a plot owned by the fund in Karen.
The houses were never built. But the contractor put in claims on the grounds that he had done some basic work before the project was cancelled.
NSSF defence in court has been that no payments were due because the contractor proceeded to the site before he was asked to take possession of it.
Mugoya carried out excavations of the road boundary and cleared the site. As at the time of cancellation of the project in 1995, the NSSF had paid Mugoya Sh91 million.
It is for these minimal works that the workers body has shelled out the hundreds of millions.
Documents show that the original claim by Mugoya was for Sh663 million.
In September last year, the board authorized the management of the company to negotiate with Mugoya and reach a final settlement.
Subsequently, negotiations were held and the parties agreed to settle at Sh 342 million.
In the Sh 342 million consent NSSF entered with Mugoya Construction and Engineering, the Fund lawyer P.M.Bunde, said was in relation to a tender awarded to the firm for planned development of the Karen property at a cost of Sh 1,910,856,740.
The construction firm was to build 256 housing units, an administration block, club house, kindergarten and auxiliary buildings.
However, the project never took off because work started even before approvals had been granted by the Nairobi City Council. Karen/Langa’ata residents also opposed it.
“Subsequently, due to the above stated setbacks the project was cancelled on 2nd December, 1999. Consequently, in 2005 Mugoya Limited sued the Fund claiming Sh 663,323,620.30 plus damages, interest and costs,” the legal officer notes.
In the case concerning, Mr Jirongo, a letter written by NSSF Legal officer, P.M.Bunde, dated January 6, this year confirms that S.K.Jirongo and Sololo Outlets had agreed to be paid more than Sh 490 million, to settle the case.
“We are in receipt of a consent dated 22nd December, 2011, fully and finally settling the above stated matter at Sh 490, 850,090. The consent further provides that the cost of the suit be awarded to the Plaintiffs,” the letter says in part.
The NSSF legal officer says that the Fund entered into an agreement with the two parties in September 1992 for the development of a housing project at a cost of Sh 1.2 billion which was to be financed through PostBank Credit.
“In August 1993, the Fund terminated the Project Development Agreement and took over the site citing breach of the contract terms by the developer. The developer consequently instituted a court case against the Fund claiming Sh 4,250,758,154 as damages arising from the termination,” he says.
Since the matter had been outstanding in the court for the past 12 years, the Fund lawyers advised that an out of court settlement be explored.
The Fund Board authorised the management to evaluate the proposals and subsequently, negotiations were held and the parties agreed on Sh 490, 850,090 as full and final settlement.
The Sh490 million paid to Mr Jirongo was in respect to the development of Hazina Housing Estate.
The latest developments comes at a time when the NSSF managing trustee Alex Kazongo has been sacked.
Furthermore, the NSSF does not have a full board after the tenure of the current trustees expired on February 9.Mr Kazongo was sent on leave on February 20, this year ahead of the expiry of his contract in May.
Mr Tom Odongo, the manager in charge of investments, was appointed to act in his position.
Chair of the board of trustees Adan Mohammed sent out a press statement saying Mr Kazongo, who assumed office in May of 2009, had been sent on leave “pending expiry of his contract” in May.
“The Managing Trustee of NSSF has proceeded on leave pending expiry of his contract in accordance with the government circular dated 23 November 2010,” Mohammed’s statement said.
Mr Kazongo was sacked from (NSSF) at the height of an ownership battle at East African Portland Cement Company (EAPCC).
The board of the State-controlled retirement benefits scheme said he failed to meet its expectations.
His dismissal followed a review of his performance during the first term done by the board of trustees which recommended that his contract, which still has two months to run, should not be renewed.
He was the matchbox that sparked fire at the cement maker when he shocked government officials by revealing that NSSF had reduced its stake in EAPCC in December, claims which his replacement, Mr Tom Odongo has denied.
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