Insurer says fraud halted sh1.1b LC bicycle payment

By Andante Okanya

NIKO Insurance has reiterated that suspicions of fraud halted payment of sh1.1b that it undertook to pay as performance guarantee bond to Government in the supply of 70,000 bicycles meant for LC officials.

The insurer’s chief executive officer, Ronald Zaake, voiced the firm’s stance Tuesday afternoon at the Commercial Court in Kampala. He was in court presided by Justice Christopher Madrama.

Government sued the firm  in June last year demanding sh1.1b for purported breach of contract when the company acted as guarantor to the firm that was supposed to supply the 70,000.

Moses Adriko appeared as lawyer for the insurer, while state attorney George Kalemera represented the Attorney General (AG).

Asked by Kalemera to explain the reason for the firm’s reluctance to pay the sh1.1b, Zaake said media reports citing fraud halted the process.

“We had started the process to pay the money but media reports on suspicions of fraud by Government officials made us halt payment,” he said.

Court documents show that Amman Industrial Tools and Equipment Limited was contracted to supply the bicycles worth sh4.2b meant for chairpersons of parish and village councils.

Asked by Adriko whether the firm maliciously declined to effect payment, Zaake said the insurer had a bonafide intention to pay the performance bond.

The insurance firm undertook a Performance Guarantee Bond of sh1.1b in favour of Amman on November 25, 2010, to be paid in event of breach of contract.

Government is also demanding general damages with a 28% annual interest from the date of judgment till payment in full. It also wants costs for the suit in addition to a 28% annual interest on the $489,650 from May 24, 2011 till full payment.

Court documents show that on November 26, 2010, the Local Government ministry awarded Amman the contract to supply the bicycles. The Performance Bond was to be valid from November 25, 2010 to May 24, 2011.

However, the AG states that on May 10, 2011, indicted Local Government ministry permanent secretary John Muhanguzi  Kashaka, who is on trial at Anti-Corruption Court, wrote to the managing director of the insurance firm informing him that Amman had failed to deliver the bicycles.

The AG notes that Amman had agreed to deliver the bicycles by February 25, 2011. He claims that although the deadline was extended to May 25, 2011, the company still failed to comply.

The AG subsequently wrote to the company on May 23, 2011, informing it that the bond's expiry date was May 25, 2011. A  bank payment advice form was attached to the letter. Subsequently, in a letter dated August 4, 2011, the insurance firm's claims manager wrote to the AG, and informed him that the firm had started the process of paying the bond.

But the AG asserts that in a letter dated September 11, 2011, the firm drew his attention to a Parliamentary  probe when the subject of the LC bicycles became a stormy topic of debate. The firm stated that Government officials  had been implicated in the  purported fraud.

Court documents show that on October 4, 2011, AG Peter Nyombi expressed discontent when the firm introduced new conditions like the Parliamentary probe, which were not part of the agreed terms.

 Court reconvenes on July 8, when it is expected to schedule a judgment date.