Monday August 25 2014

Katosi road: UNRA skipped vetting Eutaw

President Museveni flags off the construction

President Museveni flags off the construction of the Mukono-Katosi road recently. file Photo. 


Latest details on the botched Mukono-Kyetume –Katosi road tender process indicate that Works Minister Abraham Byandala relied on legal advice provided by the roads agency’s legal director, Mr Marvin Baryaruha to approve the deal.

UNRA did not engage the services of the Solicitor General or Attorney General, the principal legal advisers of government, according to minutes of one the several meetings of the Contracts Committee held on July 18, 2013.

Documents obtained by this newspaper over the weekend also indicate that the Uganda National Roads Authority (UNRA) did not conduct due diligence.

A storm has been brewing since Shs24.7 billion was paid to Eutaw, the firm that won the tender to upgrade the road. The Inspector General of Government said it was not a genuine company.

Asked about the flaw yesterday, Mr Baryaruha told Daily Monitor his legal opinion was not binding, adding: “The executive director takes the final decision and he too was directed by the minister.”

Internal correspondences show the UNRA Contracts Committee appointed Mr Baryaruha and director internal audit, Mr Peter Kirimunda, to travel to the US to carry out due-diligence.

“It has been agreed that a team travels to the United States to carry out a due-diligence on this company. I will be travelling together with director internal audit to carry out this assignment.

The purpose of this memo is to request for facilitation of our travel and also our per diem of approximately seven days including a contingency fee of $3,000 each for inland travel,” Mr Baryaruha wrote on December 4, 2013.

Money approved
Money was subsequently approved for the trip but the duo never travelled to the US.
However, yesterday Mr Baryaruha passed the buck to the Contracts Committee, claiming it blocked his planned travel.

“We were stopped from travelling and I can’t discuss much but also read David Luyimbazi’s letter (director planning). We were stopped from travelling for due-diligence but we have just revived it because we are supposed to do it. We were not given money and if you have any receipts then, they are forged,” Mr Baryaruha said.

On his part Mr Luyimbazi insisted he approved the travel to the US. “Obviously that letter seems not to have been delivered as nobody came back to me and the rest I don’t know how things happened,” he told Daily Monitor.

Mr Ssebbuga told this paper yesterday him being an engineer, he entirely relies on Mr Baryaruha – the legal director’s advice.

“As an accounting officer, I am an engineer and therefore, I rely on his for anything that involves law. And so, I couldn’t object to what he said,” Mr Ssebbuga.

Questions on the contract first emerged when it was observed that the unit cost for Mukono –Katosi-Nyenga and Kanoni-Sembabule were high hence the need for retendering.

But this was flatly rejected by two members of the UNRA Contracts Committee who said because of the urgency of the road, it wouldn’t be retendered.

On November 8, 2013, a report was submitted highlighting several issues on the identity and authority of the contractor representatives and legal establishment of the company.

There appeared to be another firm called Eutaw Construction Company in Mississippi with the address of St109 W, Aberdeen Mississippi, US and incorporated in 1980 as per the bid submission but this was not the case with Eutaw of 622 Beach Land, Florida 32963 registered in 2010 with directors and secretary that do not appear on the official websites sampled.

In trying to establish the correct company, an employee at UNRA wrote an email to Eutaw Mississippi director John Bond, inquiring about the matter, who replied that they were indeed the true company but denied knowledge of the Eutaw in Florida.

Not indicated
“Following the supplementary negotiations held on October 2, 2013, the Negotiation Committee reported that the company’s website, does not reflect Mr Michael W. Olvery as the company secretary who granted powers of attorney to Mr Richard Pratt and Mr Tim McCoy to represent the bidder at pre-contract negotiation,” one of the internal memos reads.

Thus the Negotiation Committee recommended that due diligence be conducted on the bidder prior to signing the contract.

After the Contracts Committee had said that UNRA conducts due-diligence, on November 14, 2013, the Executive Director wrote to head of Legal team Mr Baryaruha seeking advice on the next course of action.

However, on November 14, Mr Baryaruha wrote back to the ED and copied all directors indicating that the contract could be signed as due diligence continues.

Mr Baryaruha, in his letter, further said Eutaw had established a sister corporation in Delaware so as to limit the exposure and liability of the parent company in Mississippi.

He said it was incorporated in Delaware due to reasons of taxation.
“You recall that Mr McCoy further explained that most US companies are usually restricted by their banking and stock market requirements not to expose their core businesses to liability outside the US. To that end, I have given copies of a letter addressed to you from a Mr Rodney Hartwell from Eutaw as a company resolution to open a special purpose vehicle Eutaw Construction Company in Delaware USA. These documents attempt to explain the connection between the parent company in Mississipi and its Delaware sister,” Mr Baryaruha wrote.

“I therefore, advise that the contract with Eutaw can be signed and due diligence can continue if the entity deems it necessary,” he added.

Contract signed
On November 15, 2013, the same day the legal advice was issued, Mr Byandala wrote to the UNRA ED acknowledging that due diligence was still ongoing but directed that due to the urgency to construct the road, the contract between UNRA and Eutaw could be signed and on November 15, the contract was signed in the presence of Mr Byandala.

“I am aware that you are carrying out due-diligence on the above company to ascertain and verify whether indeed the company that bidded and was awarded this contract is the one going to sign it.

I am advised that if it is found that the people currently in Kampala are not really bonafide directors or employees of the company as they are representing you, the contract can be repudiated,” Mr Byandala wrote.

“Due to the need to implement the project very urgently, I am directing you to immediately sign the contract while due diligence is carried out by your technical team. Please treat this matter as urgent,” he added.

Acting executive director David Luyimbazi wrote to Mr Thomas Elmore, the chief executive officer of Eutaw Construction Company, notifying him of the impending travel of two UNRA officials to the US to do due diligence. However, this team didn’t travel to the US for due diligence.

UNRA hire lawyer to conduct due-diligences

In an internal memo this paper has seen, on July 14, 2014, Mr Baryaruha wrote to acting ED asking for facilitation of $22,000 (about Shs57m) for Mr Karoli Ssemwongerere’s to travel to the US.

UNRA hired Marble Law firm to carry out an independent due diligence. “Reference is made to the above subject matter, as you are aware UNRA agreed that an independent consultant be assigned the role to carry out the due-diligence on Eutaw.
Management later assigned the role to Mr Karoli Ssemwogerere from the Marble Law Firm,” reads a one of the correspondences. “Mr Karoli intends to travel on July 28, 2014 for this assignment and will be in US for one month.

The purpose of this memo is to request for facilitation for his travel and stay in the US. Below is the breakdown of the facilitation required for his travel,” the memo reads further in part.