Kenyans at centre of US probe into Sh1.5bn bribes

Kenyan government officials are at the centre of an investigation in the US involving Sh1.5 billion allegedly paid by Alcatel-Lucent for the award of a mobile phone licence to Kencell. Photo/FILE 

By MWAURA  KIMANI pmkimani@ke.nationmedia.com and KUI  KINYANJUI pmaina@ke.nationmedia.comPosted Thursday, December 30 2010 at 22:30

Kenyan government officials are at the centre of an investigation in the US involving Sh1.5 billion bribes allegedly paid by France telecommunications giant Alcatel-Lucent for the award of the country’s second mobile phone licence to Kencell 10 years ago.

The case, US court documents show, revolved around the award of the Sh4.4 billion second GSM licence in 2000 to Vivendi’s Kencell.

“After Kenya awarded the second GSM licence, several companies bid to provide infrastructure and services to ‘Kenyan JV’ (Kencell Communications.

“This frame supply agreement valued at  $87 million (Sh6.7 billion) included construction of a switching centre, an operations and maintenance centre and base stations for the mobile network,” say the documents.

“After the initial stages of bidding process, the ‘Kenyan JV’ shortlisted Alcatel CIT to make final bids for the contract. Although the bidding was technically made to Kencell, the bidding process was handled by personnel from ‘French Telecom’ (Vivendi).

“‘French Telecom’ (Vivendi) informed the President of Mobile Division that Alcatel CIT would win the bid under one condition:

an Alcatel entity had to make improper payments to the intermediary in the approximate amount of $20 million (Sh1.5 billion).

The (company’s) president and other employees agreed to this condition,” read the documents.

“There is a high probability that all or a portion of the approximately $20 million in payments made by Alcatel CIT to the intermediary and the related entities was passed on to a Kenyan Company (Sameer), which in turn passed in the funds to Kenyan government officials who had played a role in awarding the original contract to French Telecom (Vivendi),” conclude the court documents.

Efforts to reach the then Communications Commission of Kenya (CCK) director-general Samuel Chepkong’a proved futile.

Investment secretary Esther Koimett referred the Daily Nation to the CCK, saying the regulator was in a better position to give more information on the contract since it handled the bids. The then Finance minister Chris Okemo could also not be reached on his mobile phone.

“Alcatel and its subsidiaries failed to detect or investigate numerous red flags suggesting their employees were directing sham consultants to provide gifts and payments to foreign government officials to illegally win business,” Mr Robert Khuzami, the US Securities and Exchange Commission enforcement director, said in a statement on the ruling.

In one of the biggest corporate bribery cases in recent years, Alcatel-Lucent was charged by US prosecutors in a Federal Court in Florida with violating the internal controls and records provisions of the Foreign Corrupt Practices Act.

US prosecutors said on Tuesday three Alcatel-Lucent subsidiaries, which provide telecommunications equipment and services, bribed foreign officials to win business in Costa Rica, Honduras, Malaysia and Taiwan. In a statement on the issue, Alcatel admitted to using third-party agents and consultants to facilitate its business dealings.

“This business model was shown to be prone to corruption, as consultants were repeatedly used as conduits for bribe payments to foreign officials (and business executives of private customers) to obtain or retain business in many countries,” Alcatel said.