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Fears NYS probe may not go for high profile public officials

The omission of high profile public officials, bank managers, a cabinet secretary and directors of some companies that were paid in excess of Sh1 billion in the latest scandal to rock the National Youth Service has raised fears of selective prosecution.

Conspicuously missing from the list of those questioned or arrested is Ms Sicily Kariuki, who was the Cabinet Secretary for Public Service, Gender and Youth when the plunder took place.

Since 2006 when the Public Accounts Committee of Parliament demanded that ministers take political responsibility for the actions of officers under their supervision, bureaucrats at the ministerial level been required to step aside when a scandal in their ministries is unearthed.

The tough test of integrity for ministers was established by President Uhuru Kenyatta, then the chairman of the PAC during its investigation of the Anglo Leasing scandals.


The PAC, and especially Mr Billow Kerrow, argued persuasively that it would not be possible to fight corruption if cabinet secretaries did not take responsibility for the conduct of officers in their ministries.

Ominously, State House seems to have softened the integrity standards, indicating that only those who were “directly implicated” in investigations will be required to leave office, according to a May 18 statement.

But it would a world-first for a country to assume that a leader has no responsibility for misconduct in the organisation or agency he or she leads.

It means cabinet secretaries can turn a blind eye to corruption without fear of consequences.

Although her name does not feature in the list released by Director of Public Prosecutions Noordin Haji, Ms Kariuki has opted to remain silent in the face as the NYS storm rocks the government.

Since the scandal was first reported by the Nation two weeks ago, Ms Kariuki has refused to answer any queries regarding her failure to detect and stop the pilferage of public funds.


A crackdown on top officials at the ministry and the institution is ongoing, but it might not reach her.

The reason she is not facing the same pressure that saw Ms Anne Waiguru quit in the wake of the Sh791 million scandal at NYS is not clear, though a State House statement — issued on the day Dr Richard Ndubai and Ms Lillian Mbogo-Omollo resigned as NYS director-general and Youth Principal Secretary respectively — appeared crafted to give her a lifeline.

Plucked from the Tea Board of Kenya where she was the CEO to become the Agriculture PS, Ms Kariuki was later promoted to CS for Public Service and Youth before she was moved to the Health docket on January 26.

When she was appointed to the ministry of Public Service after President Kenyatta’s first purge on his Cabinet two years ago, Ms Kariuki inherited the Youth docket, previously under Devolution when Ms Waiguru was in charge.

Ms Kariuki had promised to clean up the institution of the corruption cartels that had made NYS their playground, but it seems her efforts, if any, were ineffective.

Questions are also being asked about Flagstone Merchants, which is said to have received more than Sh1 billion in the latest scandal.


The firm was the second highest recipient, after Firstling Supplies, which got nearly Sh1.5 billion.

After being denied anticipatory bail by the courts last week, Firstling director James Thuita Nderitu was among those arrested Monday and is due to appear in court today.

Not so for Flagstone Merchants and more than 20 other companies. Despite investigating agencies trying to persuade the public that the probe is wider than the actions publicised, fears persist that there could be sacred cows.

On Monday, investigators and officials from the Office of the Director of Public Prosecutions said Flagstone will be in the second wave of investigations, expected to cover transactions worth more than Sh8 billion.

Another cloud hanging over the investigations is how institutions charged with preventing economic crimes such as the Treasury, Central Bank, the Financial Reporting Centre and commercial banks failed to detect and flag the payments from the NYS which were being transferred via electronic means as is required, only to be withdrawn in cash in millions of shillings hours later.


The owner of Flagstone is listed on LinkedIn as Edward Mwangi, but the phone number that is given is of a Peter Kariuki.

When the Nation called the number last week, it was picked by a woman.

She claimed we had called a wrong number, and that she did not know the companies or people we were looking for.

Documents seen by the Nation show NYS paid Firstling Supplies and Flagstone Merchants Sh1.7 billion between November and December 2017.

A detective said they appeared to be double payments. In one case, four payments were made for the same voucher, each worth Sh46 million, with slight variations in the actual figure. In another, the same amount was paid, but only one voucher could be found for scrutiny.

It is not the first time Firstling and Flagstone Merchants dealings with government agencies have come under the spotlight.


In 2012, Auditor-General Edward Ouko queried how the firms and two others — Interpon and Interscope Tech & Services — were paid Sh31 million by the Transport ministry for the supply of earthquake monitors to the Met department.

“The evidence we obtained indicates that the payments were not valid as they were either supported by fabricated documentation or none,” said Mr Ouko.

They eventually returned the money, which was irregularly placed in a suspense account from where it was then stolen by State officials. The audit recommended the assets of the firms and directors frozen.

Banking regulators are also hard-pressed to explain why no action has been taken on financial players who handled the irregular payments.

Under banking regulations, amounts more than Sh1 million cannot be withdrawn by cheque or in cash without a written explanation from the parties to the transaction. In the case of NYS, tens of millions of shillings were being moved in cash.


Preliminary findings show that multiple payments were authorised from the Integrated Financial Management Information System to the companies’ accounts at intervals, releasing the whole amount in less than an hour after it was asked for. Ifmis is controlled by the Treasury.

In August 2016, the Central Bank of Kenya said it had slapped three commercial banks with a Sh3 million fine for failing to report suspicious transactions relating to the Sh791 million scandal.

The three were Family Bank, Faulu Microfinance and Sidian Bank. It also forced Family Bank, through which the bulk of the money stolen from National Youth Service (NYS) was paid to Ms Josephine Kabura through 20 companies, to sack nine managers.

The three banks were accused of ignoring a red flag raised by Guaranty Trust Bank on Sh86.4 million that was wired to Out of the Box Solutions Limited, a firm that ended up receiving a total of Sh218 million from the NYS.

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