Gov't sues Niko Insurance over LC bicycles

By Edward Anyoli

The Attorney General has taken Niko Insurance to court, demanding over sh1.1b in damages over an aborted deal to supply bicycles to parish and village council chairpersons.

Government awarded Amman Industrial Tools and Equipment a contract to supply 70,000 bicycles in this regard.

Niko Insurance affirmed   that they would be guarantors up to a total of U$489,650 (about sh1.161, 580,019) in case of breach of contract on the part of Amman Industrial Tools Ltd.

Last year, the ministry of local government wrote to the managing director of Niko Insurance informing him that his client Amman Industrial Tools and Equipment Ltd had failed to supply the 70,000 bicycles.

As such, the insurance company was instructed to pay as per the contract signed on November 25, 2010.

"It shall be illustrated that Amman Industrial Tools and Equipment Ltd did  default on their obligations  to supply  and to-date the defendant (Niko Insurance) has no defense  to this suit but has since failed or refused  to make good their obligations," the suit reads in part.

Niko's advocates declined to honour their obligation as the performance guarantor for Amman Industrial Tools.

They said the investigations by parliamentary committee on local government unearthed evidence that implicated government officials in a fraudulent transaction in connection to the supply of bicycles.

Apart from the civil suit, there are criminal charges against John Kashaka Muhanguzi, the interdicted Permanent Secretary; Henry Bamatura, assistant commissioner; Sam Emorut, principal procurement officer; Robert Mwebaza, internal auditor and Hellen Owechi.

They are currently facing charges of abuse of office, causing financial loss, neglect of duty and uttering false documents in which government incurred a loss of sh4.3billion at the Anti-Corruption Court.

Niko argued that there was collusion between implicated government officials and Amman Industrial Tools and Equipment Lt with intent allegedly defraud.

In a suit filed at the Commercial Court last week, the Attorney General argued that the performance bond was executed in favour of Amman Industrial Tools and Equipment Ltd.

The bond was issued on November 25, 2010 and Niko accepted to be guarantors in case of breach of the contract, which subsequently was breached.

Through MMAKS and Company, Niko has however denied claims of refusing to pay on grounds that the performance bond is vitiated by fraud perpetuated by the officers of local government who initiated and supervised the faulted procurement process with intention to defraud the government.

Niko argued that the process was deliberately flawed with irregularity upon issuance of the performance bond by the government officials whose case is still in court.