Mugoya Woes: Why billionaire Mugoya is on police ‘Most Wanted List’ (August 2007)

NSSF Building, Mugoya Construction Company and Mugoya Estate may be household names locally. But, Kenyans hardly know the man, James Isabiriye Mugoya. He is the man who added the name billionaire to the local vocabulary in the days when Kenyans only talked about millionaires.

Why did police put him on the ‘most wanted list’ last week? Discover the high level connections in retired president Moi government that made him one of the most feared men in the country. Learn how he created other billionaires by stealing tax payers money.

For more than a decade during former President Moi’s regime, James Isabiriye Mugoya was the highflying and untouchable proprietor of the multi-billion, money minting, Mugoya Engineering & Construction Company.

He could walk in and out of State House at will. And every government official was at his beck and call. Not even the high and mighty in the country’s security docket were beyond his reach.

It used to be jokingly said that Mugoya chaired the state house committee that appointed permanent secretaries in the ministries that were critical to the success of his mega deals such as public works, treasury, internal security and labour. But today, James Isabiriye Mugoya had been on the run which earned him a place in the CID list of ‘Most Wanted’ with a generous bounty on his head. Mugoya has since been captured along State House Road apartments where he was been hidden.

But just what went so wrong for the reclusive multi-billionaire causing him to fall from grace with such a bang?

Mugoya’s early days in Kenya

According to those who knew him from early days, Mugoya, a Ugandan, first came to Kenya as a refugee in the 70s during the terror reign of the late Ugandan dictator, Idi Amin. He was enrolled at the University of Nairobi where he studied engineering. Upon graduation, Mugoya realized that political patronage was the lifeline of big business in Kenya especially in the construction industry where government and state corporations had the biggest budgets.

He first teamed up with a son of a top politician in the early 80s who introduced him to senior government officials and parastatal heads. The top politician’s son, who was also an ardent motor sport enthusiast, got substantial financial backing from Mugoya for his rallying in return for the useful business contacts and business deals he had facilitated.

However, as time went by, Mugoya discovered that the politician’s son was not as effective as initially thought. Soon, Mugoya was shopping around for someone else to chaperon him around the corridors of power where mega deals were decided in the Moi regime.

To do the ‘honours’ of showing Mugoya around was a top aide of the then president Moi. The aide was much more effective, indeed lethal, when it came to delivering business to Mugoya Engineering & Construction Company. The relationship between Mugoya and the Moi aide blossomed into what became the most lucrative business and political alliance in the last decade of the Kanu regime.

As one political operative envious of the relationship once put it: “It was a political-cum-business marriage that appeared to have made in heaven.” Well, that may have been the case, at least for the period when Moi was still in power and the word of the top aide in question was the law among parastatal chiefs and permanent secretaries.

A man of immense power

At the height of his power, Mugoya, though overly reclusive-few people knew how he looked like and even fewer have ever seen his photograph- was a person few dared to rub the wrong way.

He was the equivalent of what one would call a live wire. You touched it or tangled with it at your own risk. Although immensely rich, he was averse to ostentatious living preferring simple but decent clothes and driving in simple and nondescript cars. His favourite was an aged beige colour Peugeot 505 registration series KAB.

But this humble exterior bellied a ruthless operator who never let anything or anyone stand on his way to getting whatever he wanted.

He could get a permanent secretary, engineers or other top officials at the ministry of public works or ministry of labour (two ministries he mainly dealt with) transferred or even out rightly fired with just one phone call to state house reporting that so and so “is frustrating my work.”

Among those who disagreed with Mugoya and found themselves out of office include former PS in the ministry of public works, Dr Mohamed Isahakia, an engineer, one Rogo of the same ministry as well as politician Kipkalya Kones who was removed from the ministry of public works after a disagreement with Mugoya over some payments.

The art of the deal, Mugoya-style

If there is one parastatal that carries his name – Mugoya Engineering & Construction Company – thoroughly fleeced and nearly brought to its knees, it is the National Social Security Fund (NSSF).

Although he had done lucrative business with other state corporations as well as constructing infrastructure for the military and security facilities, it was at NSSF that Mugoya made the bulk of his billions.

An audit report of Mugoya’s financial shenanigans in NSSF (referenced Board Paper No.4/BAUD/2003) makes very interesting reading and sheds light on the operations of the company that James Mugoya founded.

Take for instance the controversial bottomless financial pit that became NSSF’s Nyayo Estate in Embakasi, Nairobi. This is how the deal that was to become NSSF’s waking financial and operational nightmare was hatched.

On November 21, 1994, one J.K. Chemogait,a n estate manager with a firm known as Beta Enterprise Ltd wrote to NSSF offering to sell plot LR 0042/179 in Embakasi for the nice round figure of Shs 1 billion. Those in the know will confirm that no one gives an offer to sell property at such a price without having done their homework. In such levels of business, there is nothing like a blind or random proposal. Everything is properly choreographed.

Just a week after the proposal, NSSF board of trustees met and directed that the Beta Enterprises offer as well as three others be valued awaiting further decisions. Lloyd Masika and Milligan & Co were contracted to do the valuation and came up with figures Shs 1.027 billion and Shs 980 million respectively.

The board decided to buy the plot at Shs 980 million and the then NSSF managing trustee, Samuel Muindi started the acquisition process. Between January and February of the following year treasury PS, Benjamin Kipkulei and his counterpart at the ministry of labour, Stanley Murage gave their approvals for the Embakasi land deal.

Interestingly the stipulation that such huge deals be given final approval by the minister for labour was never followed. Instead, a sales agreement was signed between NSSF chairman, M.M. Kisoso and the Fund’s managing trustee Muindi without bringing the minister in the picture.

Early 1996, Mugoya Engineering & Construction company was awarded the tender by NSSF to construct houses in the Embakasi plot at Shs 2.5 billion. The project was supposed to be completed in less than two years. By May of the same year, the then management of the fund entered into yet another contract with Mugoya for construction of phase two of the Embakasi housing project although even phase one had not taken off the ground.

It is an illustration of just how powerful Mugoya and his state house based backers were that the variations to the first contract were sealed without the approval or even knowledge of the NSSF board of trustees despite the fact that the Fund was going to cough a further Shs 5 billion for phase two of the project alone.

By this time, Mugoya had done little work on the ground but his firm had already been overpaid by a cool Shs 1.8 billion prompting the then PS in the ministry of labour, Stanley Murage to write to the NSSF boss rebuking him for the work variations and overpayments.

Despite the overpayment, in July of the same year, Mugoya sought and got a further Shs 381 million from the NSSF ostensibly as retention fee. Around the same time, the project was scaled down from 5,000 units to 4,700 units but the construction cost kept rising and had by then reached shs 10.7 billion.

In December 1996, Mugoya and his godfathers must have looked around and realized they needed some ‘little’ money for Christmas. What to do? Call NSSF of course. So six days before Christmas, the NSSF Boar of Trustees was prevailed upon to add Mugoya a further Shs 410 million ostensibly to offset the cost of connecting utilities to the estate.

It would appear that Mugoya had a voracious appetite for cash because besides getting almost limitless amounts of money from NSSF, he had also gotten a loan facility with the Kenya Commercial bank (KCB) for the same project that NSSF had already overpaid him for.

Through KCB, Mugoya was advanced a further Shs 1.3 billion as the country neared the 1997 general election.

And by March 2003, Mugoya engineering & Construction Company had pocketed a whooping Shs 12.4 billion for a project which had initially been budgeted to cost just Shs 2.5 billion.

It was on the basis of such issues as well as James Mugoya’s own – and his company’s- indebtedness to KCB that the firm that once strut across the country’s construction sites like the untouchable colossus it once was is now under receivership and its proprietor has been arrested.

In its recommendations, NSSF Board of Trustee, Naftali Mogere had justifiably apportioned blame for the Fund’s massive losses and at the same time made number of suggestions on how to deal with the Embakasi housing project aftermath.

Among the suggestions was the need for Kenya Anti Corruption Commission (KACC) to institute investigations to establish who the real force and beneficiaries behind Beta Enterprises – the firm that sold an overpriced plot to NSSF – were besides on J.K. Chemoigat. Other valuations had put the market price of the plot a maximum of Shs 500M although NSSF paid Shs 980M for it thus an overpayment of Shs 480M.

Will NSSF and others who lost their money through Mugoya’s over-inflated contracts ever recover their money? Will the real culprits behind the massive NSSF fraud ever be brought to book? Only time- and political willingness on the part of the government as well as anti-corruption bodies-will tell.