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How City Hall lost Sh500m in irregular homes transfer

Former Nairobi Town Clerk Roba Duba signed away a Sh2 billion residential estate owned by the defunct City Council of Nairobi to a pension fund eight months after leaving office, investigations have revealed.

The irregular transfer of Mariakani Estate to the Local Authorities Pension Fund (Lapfund) is estimated to have cost City Hall at least Sh500 million, a hearing of the Nairobi County Public Accounts Committee (PAC) was told on Tuesday.

Mr Duba, now Moyale MP, resigned from office in June 2012 to run for the parliamentary seat but signed the estate’s transfer document on February 18, 2013, a month before the city council was dissolved.

Mr Duba signed away the 10.13-acre estate with 30 blocks of eight flats each for Sh1.4 billion, including the land valued at Sh1 billion.

“A re-evaluation was done last year and the estate found to be worth Sh1.9 billion,” County Finance Executive Gregory Mwakanongo told the assembly’s PAC.

Committee members said the estate, which is located in Nairobi’s South B estate, is worth more than the amount indicated in the latest valuation.

COLLECTS RENT

City Hall continues to collect nearly Sh3 million monthly rent from the estate, adding complexity to the transactions. Mr Mwakanongo said City Hall would only stop collecting the rent at the direction of a court.

Transfer of the estate was done on the strength of a resolution of the then council’s Finance committee meeting held in August 2012.

A tenant in Mariakani estate, South B. The estate was valued at Sh1.4 billion in 2013.
A tenant in Mariakani estate, South B. The estate was valued at Sh1.4 billion in 2013.

PAC chairman Robert Mbatia said the transfer was made in contravention of the law because such an important decision required the approval of the full governing council.

Minutes of that Finance committee meeting show that City Hall owed Lapfund Sh2.1 billion, but Lapfund had agreed to waive 50 per cent of the amount on the basis of a property swap.

This reduced the amount to Sh1.2 billion and the transfer of Mariakani should have left City Hall with no arrears.

Mr Mwakanongo told the committee that instead, Lapfund continued demanding payment from City Hall when the county government came into office in May 2013.

“It’s not like I knew of this disposal immediately I was appointed. Lapfund would still send statements showing what is outstanding but without any indication that Mariakani had been transferred to them. They did not deduct the value of Mariakani in those statements,” he said.

The county government only came to know of the transfer in the second half of 2014. Lapfund’s claims against City Hall has since risen to Sh6 billion.

‘TRANSFER WAS ILLEGAL’

PAC members also declared the transfer illegal, citing the freeze that the Transitional Authority (TA) imposed on the transfer of all local authorities properties during the transition period.

TA had issued a public notice placing a moratorium on all transfers unless they were sanctioned by the authority.

“The authority may, on its own motion or on a petition by any person, review or reverse any irregular transfer of assets or liabilities in contravention,” it had said.

The freeze apparently took effect on March 9, 2013, two weeks after the deal was signed.

But the transfer document shows that whoever was filing first wrote March 18 before cancelling and changing the date to February 18, 2013 — a move that would push back the transfer date by one month and outside TA’s period of scrutiny.

The committee members now want the county to seek legal advice on how to reverse the transfer based on the cited illegalities although they expressed scepticism over the Executive’s willingness to pursue the matter.

“Your department must seek legal advice towards ensuring a solution to the matter, it will be a good start,” Dandora One MCA Stephen Kambi told Mr Mwakanongo.

GO TO COURT

“The illegalities speak for themselves. You don’t need a rocket scientist to tell you that the transfer was done fraudulently.”

“If the county is willing, it will go to court. So far we doubt their willingness as no challenge has ever been launched,” said Mr Mbatia.

Documents seen show that Mariakani was only one of multiple properties that were lined up for transfer to Lapfund and the Local Authorities Pension Trust (Laptrust) to offset billions of shillings that City Hall owed them.

Others were Jamhuri Estate, Old and New Ngara, Jevanjee/Bachelors Quarters and the Sunken Car Park.

The transfer is just one of the many irregularities that have surfaced recently as the county comes to terms with the ills of the defunct city council.

Schools, health centres and fire stations are among county-owned entities that have been invaded by private developers who have laid claim to hundreds of acres of public land.

City Hall has been struggling with debts owed to statutory bodies especially the two pension funds it now owes in excess of Sh10 billion.

It has now resorted to daily standing orders of Sh1 million to each of the two bodies to avoid falling behind in remittance of current dues even as historical debts continue to accumulate interest.