April 25th 2017

Media / Watchdog

Media Complaints Commission faces acid in case against Nation’s Sh5 billion scam report

The Nation could go for the Reynolds defence, a new jurisprudence developed in the case of Reynolds vs Times Newspapers Ltd, where the House of Lords ruled that, in matters of great public interest, a journalist had a duty to publish an allegation even if it turned out to be wrong.

By Free Press Reporternewsdesk@kenyafreepress.comSunday, 06 Nov 2016 17:03 EAT

Mr Joe Mucheru, the cabinet secretary for ICT.

The stage is set for a bruising legal battle between the government and the Nation Media Group over the media house’s coverage of the Sh5 billion scam at the Ministry of Health. The chairman of the Media Council, Charles Kerich, has told the Kenya Free Press that his office will hand over the complaint by the cabinet secretary for ICT, Joe Mucheru, to the Complaints Commission tomorrow or on Tuesday.

As phrased, the complaint is premised on two grounds: First, that the audit report on which the Nation Group based its coverage was an interim one, hence the media house was presumptuous to derive conclusions that money had been lost. “Interim audits are documents that raise queries for management to respond to or clarify and its only a final report that can be quoted for reference purposes,” the complaint held.

Second, that there was no mention in the report of Sh5.3 billion, which, by implication, the media house cooked to sensationalise the story. “Business Daily and NTV must be compelled to show where, in the interim report, it is stated that Health ministry officials stole more than Sh5.3 billion... We hope they will table any proof they have," the minister held.

Compared to previous complaints against the media by government officials (President Uhuru Kenyatta himself, First Lady Lucy Kibaki, etc), this case breaks new ground, brought as it is by a juridical person in no other form but the mighty government itself, which funds the operations of the Media Council and the Complaints Commission. At the core of it, the Complaints Commission will make a determination on what an audit is and at what stage of auditing can the media report on audit findings.

According to a leading audit firm, an audit is the “systematic and independent examination of the financial report of an organization in final books of accounts or in the course of operations, to ascertain how far the statements or disclosures present a true and fair view of the concern.” An audit report doesn’t have to be final for its contents to hold water. Since the Nation’s expose on the ‘Sh5.3 billion scandal’, the minister for health Cleopa Mailu and his PS Nicholas Muraguri have fended off allegations of financial loss, tabling figures they say the auditor either had not got or misunderstood. However, their eagerness to “set the record straight” seems at odds with the challenges the internal auditor faced in getting the information in question.

Mr Mucheru has taken offence at NTV story that labelled government officers as 'majambazi’ (thugs) and wants the Complaints Commission “to play its role as arbiter and regulator and compel Nation media outlets Business Daily and NTV to provide proof of theft by government officers as contained in their newspaper report.” But he pursues this line, other government agencies are now investigating the ‘scandal’. The Ethics and Anti-Corruption Commission has been on the work for a week, and the Treasury also just appointed a special audit team, which might imply that Mr Mucheru jumped the gun by accusing the Nation of missing its story.

According to Hassan Kulundu, a media and law expert, there is good ground for a reasonable person to make their opinion on the report, interim or not, that public funds were stolen. To begin with, the transactions questioned in the report bear resemblance to those at the National Youth Service, where the government lost billions of shillings, a scandal that was also initially denied by the government. In the NYS scandal, fraudsters registered a number of companies expressly for purposes of defrauding the government, and their transactions flew in the face of established procedures.

In the current case, one of the companies, Sundales International Limited, was registered in September 2013 by the president’s sister and cousin, and within a few months it had gotten business worth hundreds of millions of shillings from the government. The company had not done other business, yet the government had somehow determined that it had capacity to deliver on such expensive contracts. Some of the company’s contracts were given under restrictive tendering, showing the high level support its promoters enjoyed. Another firm named in the report, Estama Limited, won multimillion shilling deals despite not having filed statutory returns since its registration in 2008, according to information given about the company by the acting registrar of companies. This anomaly alone should have disqualified the company if government tendering procedures were followed.

Another red flag was the misapplication of government systems to increase equity. The president’s cousin has defended her company’s inclusion under a category of marginalized groups by saying she qualified as a woman. While she is indeed a woman, it is open question whether she is marginalized in the manner the targeted recepients of such tenders were deemed to be. Determining this, according to Mr Kulundu, would require the Commission to understand the legislative intendment of the equity provisions. For example, if, God forbid, President Uhuru or Raila Odinga were involved in a major accident that made him crippled, would he qualify for special consideration for government contracts for the disabled?

Away from specific facts of this case, according to experts, the Commission may be called upon to consider whether the high prevalence of corruption in government could lead the Nation to report the way it did. Two weeks ago, the president declared on national television that he was “frustrated” by corruption in government. A year earlier, he had asked Pope Francis to pray for him over corruption. He has also told an audience on a foreign trip that the country was known for corruption.

“Against these facts, if you are a journalist and you came across a government auditor laying questions about some transactions, and the auditor says he has faced trouble accessing material vital for his work, you can reasonably make the conclusion that money has been stolen,” said Mr Kulundu. The lack of cooperation accorded the internal auditor may lead a journalist to believe there was a scandal, according Dr Jared Obuya, a journalism lecturer at Moi University. The don says that the explanations since offered by Dr Mailu and Dr Muraguri came only after the Nation broke the story. “Was this information given to the internal auditor?” he posed.

According to the don, the Nation could also cite public interest journalism in its defence given that corruption is a cancer of Kenyan society. The don said he watched an interview in which the managing editor of Business Daily explained the steps they took to ensure their story was objective. If the steps are confirmed to have been followed, Dr Obuya said, the Nation could go for the Reynolds defence, a new jurisprudence developed in the case of Reynolds vs Times Newspapers Ltd, where the House of Lords ruled that, in matters of great public interest, a journalist had a duty to publish an allegation even if it turned out to be wrong.

To some experts, the case appears to be part of an effort to mazzle the press, an effort that has operated at two levels: On one hand, the government has co-opted media executives through close cooperation, appointment to public sector jobs and even bribery. The complaint reveals that the journalist who broke the story had a suspicious financial relationship with the minister, an allegation that has been obscured in light of the bigger issues in the case.

The second tactic has been explicit intimidation. This government has pushed legal amendments to hamstring the media, some of which were expunged only by the courts. Its heavy-handed approach to dealing with the media has created a climate of self-censorship, with media less active in the recent past than before. Even in complaint, the minister seemed determined to tarnish the Nation’s credibility by alleging that its reporting did not include funds received by the Nation itself. “If Business Daily, and by extension NMG, believes the payment made to Gazeti Limited, which was also listed in the report, was proper and done within the course of doing regular business, why would they accuse everyone else listed in the same report as having engaged in theft or fraud?” he had asked.

But in a statement, the NGM said: “It has come to our attention that a company called Gazeti Ltd which allegedly received payment under the interim audit report from Afya House, has been linked to Nation Media Group as one of its associate companies. We wish to clarify that Gazeti Ltd or its associate entities is not and has never been part of the NMG subsidiaries. It is a contracted third party.” Such a wrong attribution to the NMG of a company it doesn't own was likely meant to incite public ire against the company. The government has similarly used its increasing dominance in the advertising market to bring the media under check, creating last year a Government Advertising Agency that has centralised decision-making on advertising contracts throughout the government.

A loss by the Nation in this case would reverbarate throughout the media and constrain reporting on financial scandals since, given the lethargy in government operations, final audit reports are normally released long after the financial years for teh audited expenditures have lapsed.

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