Prime
How bicycles deal was played
Mr Bagarukayo, considered a chief suspect because he acted as an agent for Aitel in the botched deal, was recently arrested and grilled by CID officials but released. PHOTO JOSEPH KIGGUNDU
Legislators on the Local Government and Public Service Committee of parliament are grilling several officials over the botched supply of 70,000 bicycles for village and parish councils. The deal is worth Shs9.9 billion.
Originated by the Local Government Ministry, the first contract agreement signed was in favour of the supplier, Amman Industrial Tools & Equipment Ltd (Aitel). The agreement signed on November 16, 2010, allowed the contractor to access 90 per cent of the funds on presentation of a bill of lading, packing list, commercial invoice, copy of certificate of origin, copy of insurance and pictures of the bicycles.
In a November 25 letter to the permanent secretary in the Local Government Ministry, Mr John Kashaka Muhanguzi, the Solicitor General, cleared the contract writing thus: “This is to advise that the contract has been cleared for signature.” Subsequently, the contract was signed by Mr Muhanguzi on behalf of government and witnessed by Sam Emorut, the assistant commissioner in-charge of policy and planning in the ministry.
But following objections from Accountant General Gustavio Bwoch that the 90 per cent payment before supply was unfair, another contract giving Aitel access to 40 per cent payment, was signed on the same day [November 26, 2010]. This newspaper has copies of both contracts.
On December 17, 2010, Mr Muhanguzi applied to the director of payments and settlements at Bank of Uganda to open a Foreign Letter of credit (LC) in favour of Aitel.
“This is to request you to open a foreign letter of credit in US dollars equivalent to Shs9,999,974,446 (Shs Nine billion nine hundred ninety nine million nine hundred seventy four thousand four hundred forty six only) [sic] less bank charges in favour of M/S Amman Industrial tools & Equipment Ltd,” he wrote, indicating the source of money as Local Government Ministry.
The letter was copied to the AG, Secretary to Treasury and director of banking in BoU.
On December 22, Mr Muhanguzi wrote to the director of banking at BoU: “This is to request you to transfer Shs9,999,974,446 from Ministry of Local Government forex transfer account 000110308000001 to Ministry of Local Government Letter of Credit account 000110318000001 to facilitate opening of a foreign letter of credit in US dollars in favour of M/S Amman Industrial Tools and Equipment Ltd.”
But on December 27, Mr Muhanguzi wrote corrigenda to the LC pointing out errors from himself to BoU. He asked that the bank account be changed from Citibank to Stanbic Bank. He also asked that partial shipment of bicycles be allowed, port of loading was changed to India instead of China, and the consignee changed to Aitel instead of the PS Local Government. Sources say the reason for the change of bank was suspicious and could have been influenced by interest in kick-backs.
On January 3, 2011, the BoU computer system generated correspondence showing the amendments made to the LC as requested by Mr Muhanguzi. But on March 2, the assistant director, Payments and Settlements at BoU, Mr Anthony Musumba, wrote to Mr Muhanguzi raising discrepancy in documents under LC.
Discrepancies upheld
“This is to inform you that we have received documents value USD1.842.000 on approval basis. The following are discrepancies: An original delivery note signed by the authorised agent of the applicant and original acceptance certificate issued by the applicant were all not submitted; the final destination on the bills of lading, packing lists and certificates of origin is Kampala instead of the parishes and village councils in Uganda. The alteration on the certificates of origin is not authentic,” reads the letter.
It adds: “The purpose of this letter is therefore to inform you that the documents are not in strict compliance with LC terms and to seek your guidance on whether payment should be effected despite the above discrepancies.”
Sources said the 40 per cent down payment was $1,719,454 (Shs4.8b) but why it was raised to $1,842,000 was not explained. However, on March 3, Mr Muhanguzi and his principal accountant Henry Bamutura wrote to BoU, saying the final destination is Kampala /Uganda instead of parishes and village councils.
And on the same date, Mr Muhanguzi wrote to AG confirming that the goods and services for which the LC was opened were rendered. He co-signed the letter with Mr Bamutura and Ms Hellen Owechi Jenny on behalf of the head of internal audit in the Local Government Ministry. The letter was to facilitate the writing of an audit clearance by Finance before payment is done.
On March 15, payment of $1.7m was made by BoU to Amman. And on March 25, the Commissioner for Internal Audit in the Finance Ministry kick-started the process of clearance by writing to Mr Muhanguzi asking for a packing list. On April 1, Mr Muhanguzi wrote back attaching a photocopy of the packing list, saying the original was with BoU. And on April 5, he wrote another letter confirming that the goods and services had been rendered.
On the same date, Mr Bwoch and the Internal Audit chief, Dr Fixon Okonye, wrote to the director of banking at BoU, saying: “The Ministry of Local Government has confirmed that goods and services for which a Letter of Credit was opened have now been rendered. My staff in Ministry of Local Government has verified the documents pertaining to the supplies and the Letter of Credit can now be honoured.” However, their authorisation was meaningless as the payment they were clearing was done on March 15.
Speculation is rife over the botched procurement, with some technical people alleging that it was political from inception as the ruling NRM party reportedly needed bicycles to induce local council officials to vote and mobilise other voters for President Museveni’s re-election in February 18. They say when the bicycles delayed, the money was instead channeled through individuals and used to fund the campaigns.
On Wednesday, NRM deputy spokesperson Ofwono Opondo said the party has no connection to the shady procurement. “There should be evidence that the money was paid to the party account either in Bank of Baroda or Standard Chartered bank to any party official,” he said.
Mr Ofwono said the idea to buy bicycles for LCs was proposed in the 2008/9 financial year and that already some LC3 chairperson had been given motorcycles.
