Mugoya Woes: Building magnate’s fortunes dwindle as his empire crumbles (July 2007)

Story by DAVID OKWEMBAH, Nation
Publication Date: 7/29/2007

Not many people have met Mr James Abiam Isabirye Mugoya, the construction magnate now being sought by the police in Kenya and Uganda.

Mr Mugoya is discreet and maintains a low profile. Two weeks ago, police in Kenya and Uganda had to put advertisements in the newspapers without his picture. And his former employees and associates will not talk about him, especially after the Criminal Investigations Department (CID) said the man was wanted for questioning.

Mr David Ndinya Yuko, who was the Mugoya services manager between 1994 and 1997, had consented to an interview with the Sunday Nation last week but backed out at the last minute.

Mr Yuko was responsible for design, drawings and site supervision for all the projects by Mugoya. He is now the Executive Director of the Institute of Research in Sustainable Energy and Development in Nairobi.

A contractor closely associated with him failed to show up for an interview at a Nairobi hotel on Thursday morning. His phone has since been switched off.

Mr Mugoya’s fortunes seem to have plummeted since Narc came to power in 2002. During the previous regime, he was a powerful man with connections in high places.

Mr Mugoya enjoyed unlimited access to State House. His firm, Mugoya Construction and Engineering Company, was awarded the contract to construct Kabarak High School and Kabarak University.

The institutions stand on land owned by former President Moi’s family in Baringo District. It was rumoured that a State House operative at the time was a director in the company.

He shared an office block with Baringo Central MP Mr Gideon Kipsiele Towett Moi, a son of former President Daniel arap Moi, at the Prudential Assurance building in Nairobi. And when President Moi fell out with politician and businessman Mr Cyrus Jirongo after the 1992 General Election, it was Mr Mugoya who was awarded the tender to complete the Hazina Estate houses for Sh1.6 billion.

This was despite the fact that Mr Jirongo’s company, Sololo Outlets, had done about 80 per cent of the work and only required Sh600 million to complete the estate on behalf of the National Social Security Fund (NSSF). It is said that the company made Sh20 billion from the NSSF.

Mr Jirongo went to court seeking to be paid his Sh600 million. This week, he angrily termed the payments made to Mugoya a rip-off. He says the land on which Hazina Estate stands belonged to Sololo who had charged it at the Postbank credit as security.

“More than 13 years since this estate was snatched from me, the matter is still pending in court,” Mr Jirongo told the Sunday Nation.

Mr Mugoya’s tentacles spread to parastatals such as the Kenya Commercial Bank and Kenya Posts and Telecommunications Corporation, the Department of Defence and the Central Bank of Kenya.

A Ugandan citizen, Mr Mugoya was known to flaunt his wealth in his country and at the wedding of Ronald Muwenda Mutebi, he was only one of a few donors who gave more money than President Yoweri Museveni. He contributed US$13,793 (Sh1million) while Museveni gave US$6,895 (Sh500,000).

Born 57 years ago in Bulubandi village in Iganga District, Uganda, he is the eldest of Mr Samson Mugoya’s four children. He attended schools in Iganga before joining the prestigious King’s College, Budo in Uganda and the University of Nairobi for his degree in engineering. He met John Mark, one of former President Moi’s sons, at the university, and they struck up a friendship.

Things changed for Mr Mugoya after the 2002 General Election when two road contracts he had been awarded were cancelled by the new Narc government.

The repair works on the Nyeri-Marua loop in President Mwai Kibaki’s home district and the Thika-Gatanga road in Maragua District were given to other companies.

Months after the contracts were cancelled, Mugoya was among six major companies in the roads sector that were recommended for blacklisting and asked to refund Sh307.8 million by a ministerial committee headed by a former Roads minister Eng Andrew Kiptoon. The Committee was set up by Mr Raila Odinga, the then Roads minister.

In May 2005, the NSSF threw the company out of its housing project in Embakasi and sought a Sh3 billion refund. Mr Mugoya decided to cut his losses and run. He sold off his offices and factory in Embakasi to Kenya Airways for Sh360 million.

The national carrier converted the space to a training centre that it officially launched last week.

Early this year, Mugoya Construction and Engineering Company was placed under receivership by the Kenya Commercial Bank over a Sh3 billion debt. The staff moved into its Embakasi premises and stripped it bare. All stock in trade and all movable assets were also removed from the premises.

Landmark buildings

In its 26-year history, Mugoya Construction and Engineering Company enjoyed a monopoly in the multi-billion shilling construction industry. Among the landmark buildings it put up are the 36-storey Times Tower and the 24-storey Social Security Fund House in the city.

For Times Tower the company was paid Sh2.8 billion. No details have been made available on the NSSF building, which was expected to rise to 36 storeys but stopped at 24. Also uncompleted is a parking lot which was to rise to six floors.

At the Department of Defence, Mugoya is credited with putting up the Mariakani barracks in Mombasa, staff quarters at the Gilgil barracks and similar structures at the Kahawa barracks. From DoD, Mugoya landed yet another lucrative deal to put up the Gilgil Telecommunications Factory. In Kitengela, the construction company was awarded the contract to put an office block and godowns for the Export Processing Zone Authority (EPZA).

When the US Embassy in Nairobi was bombed in 1998, and the neighbouring Co-operative House needed rehabilitation, the American government awarded the contract to Mugoya in 2001.

Last year, the company was awarded the contract to pull down the buildings that collapsed near OTC in downtown Nairobi for Sh32.7 million. This was the last contract the company got before it sank into financial woes.

Mr Mugoya was accused of exaggerating contracts and in some instances revising them upwards, never delivering on time and cutting corners. The Embakasi project, whose contract the company secured despite having been one of the highest bidders, began in 1993.

Mugoya gave the cost of the project as Sh11 billion for the housing units, but after doing only half of the job the firm claimed the money was finished, and the NSSF was forced to pump in an extra Sh2 billion. But after doing 2,700 units, again Mugoya claimed it had exhausted the funds and abandoned the project.

The contract was in three phases, with the first phase comprising 1,156 units, the second 2,037 units and the final phase 1,581 units. But with more than Sh13 billion paid out to Mugoya, only one phase was ready while the remaining two phases were 40-60 per cent complete. Frustrated by the firm’s inability to finish the work and demands for more money, NSSF put out an open tender for the remaining phases to be completed at the cost of Sh3.7 billion. The houses were sold last month.

The company had sent a proposal to the NSSF board of trustees seeking to complete the housing project. It sought to be paid Sh3 billion over and above the Sh13.6 billion for the completion of the remaining 3,618 housing units. Mr Mugoya had proposed to take over the project through one of his companies, Reality Brokers Ltd.

The contractor sought to use the NSSF documents to borrow money from a financial institution to complete the housing units and sell them for Sh16 billion. The company expected to pay NSSF its money and make a cool Sh6 billion from the deal. But the NSSF board declined to deal and demanded a refund of more than Sh3 billion.

The matter ended up in court and is under arbitration. In Kitisuru, Mugoya put up an exclusive estate for the NSSF at a cost of Sh13 million each. But two years after the houses were completed, NSSF could not get buyers and was forced to sell them at throw away prices.

Mr Mugoya’s attempt to replicate the Kenya NSSF project in his home country ended disastrously when he was accused of offering a bribe to NSSF officials to influence them award a construction tender to his firm. He was charged with former NSSF boss, Mr Leonard Mpuuma and former Labour minister Ms Zoe Bakoko Bakoru. He was accused of giving Mr Mpuuma $350,000 (Sh24m) to induce him to skew a joint venture with NSSF in his favour.

His arrest warrant, together with that of the former Labour minister and Mr Mpuuma, was issued in February after the trio defied court summons thrice.

Former NSSF board chairman Mr Onegi Obel and Mr Mpuuma have since been charged, leaving Mr Mugoya and Ms Bakoko, who have failed to appear in court. Their arrest warrants are still in effect.