Mugoya Woes: Mugoya Construction in receivership (January 2007)

Published on January 9, 2007, Standard

By John Oyuke

Kenya Commercial Bank (KCB) has placed Mugoya Construction and Engineering Company under receivership over unpaid debts amounting to more than Sh3 billion.

The bank has appointed PricewaterhouseCoopers as the receiver managers.

Well-placed sources within the bank said the pre-eminent construction company of the 1990s was put under receivership effective January 2 this year. The firm had earlier filed a notice through its advocates Oluoch Olunya & Company to wind up its business as stipulated by the Companies Act.

During its heyday Mugoya, owned by high profile and politically well-connected Ugandan, Mr James Isabirye alias Mugoya, contracted for virtually all major construction projects running into billions of shillings and put up many landmark buildings around Kenya.

The formal receivership comes as Isabirye faces prosecution in his home country over allegations of bribery. Isabirye is accused of offering a bribe to National Social Security Fund (NSSF) officials to influence them award a construction tender to his firm. He is charged with former NSSF boss, Mr Leonard Mpuuma and former minister Me Zoe Bakoko Bakoru.

According to Ugandan media reports Isabirye last month petitioned the Constitutional Court, arguing that his prosecution at the Buganda Road Court was illegal. He is seeking orders to stop the proceedings.

Uganda’s Inspector General of Government Justice Faith Mwondha said the prosecution was provided for by the Constitution and the Inspectorate of Government Act. Mwondha described Isabirye’s appeal as "an abuse of court process, frivolous, ill-founded, incompetent, misconceived and vexatious". She argued that the law did not require her to seek approval before prosecuting anyone, as demanded by Isabirye. The Attorney General, agreed that there was reasonable evidence to implicate Isabirye.

The Nairobi-based Mugoya featured prominently in the list of debtors prepared for Mr Gareth George, a former Kenya Commercial Bank Managing Director, by fellow directors for a board meeting. The list, famously referred to as the ‘Bad bank’, included names of some of the country’s top political and business elite.

Mugoya was said to owe the bank a staggering Sh2.9 billion - nearly 30 per cent of the total of non-performing loans at the time.

Though details of the take-over were still scanty, it is expected that the receivers would undertake management of the firm and help the bank recover the debt. A receiver manager is appointed when a company is in financial difficulties in order to actually manage the running of the company’s business.