Introduction

Could an old US federal law introduced by Abraham Lincoln be used in the fight against corruption? Last month we reported on the Kenya False Claims Bill (“the Bill”), a piece of draft legislation which, if enacted, would provide the right for private persons to take legal action to sue for corruption and be rewarded for doing so where the state fails to initiate any proceedings of its own despite being put on notice. The Bill is based on the US False Claims Act 31 USC § 3729 (“the US Act”) which was originally introduced during the American Civil War to combat dishonest contractors who sold the Union Army horses and mules in ill health, faulty rifles and ammunition, and rotten rations. Please read our previous blog here.

It is widely accepted that the greatest bar to recovering the proceeds of corruption is the lack of genuine political will to pursue the assets. Political will means the desire to bring proceedings, the resolve properly to resource asset recovery efforts and the courage to bring claims. All too often states are unwilling to bring proceedings because the wrongdoers are still in Government or are protected by Government. This continuing trend has led to a debate as to whether the ability to bring proceedings to recover the proceeds of corruption should not just rest with the state but also with private citizens in certain circumstances. However, widening the scope of potential claimants could be problematic and may be abused; it may conflict with longstanding traditional legal principles for establishing standing and loss, and gives rise to the question of how recoveries should be dealt with. But perhaps corruption, with its devastating effects on all aspects of life, should be an exception to conventional legal rules.

We contacted the lawyer who led the team that drafted the Bill, Mr Wamuti Ndegwa of Ndegwa, Muthama & Katisya Associates Advocates & Commissioners for Oaths in Mombasa, Kenya, to discuss his motivation for drafting the Bill, how it would work in practice and some of the difficulties one might envisage in handing over a right of action to civil society. Mr Ndegwa kindly agreed to be interviewed (below) and shared with us the text of the Bill, which can be viewed here[1].

Draft False Claims Bill

Although inspired by the US Act, the Bill, if approved, would appear to be the first of its kind to create a statutory right for private citizens and civil society to initiate proceedings against corrupt government officials, as well as dishonest contractors that make false claims in relation to public property. Section 2 of the draft Bill defines the acts constituting false claims and provides that: “Any person who—

  1. Knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval,
  2. Knowingly delivers, or causes to be delivered less money , property, works, or service in quantity and or quality than is due to the government or a public entity,
  3. Knowingly makes or delivers a certificate or other document certifying delivery of works, property ,money, goods or service to government or any public entity knowing that the information on the certificate or document is not true in any material particular,
  4. Knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim,
  5. Knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the a public entity , or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to a public entity ,
  6. Knowingly buys, or receives or otherwise acquires registered ownership or possession of a public property from an officer, employee, or agent of a public entity in violation of any law regulating release or disposal of any money, property, or property interest owned or in possession of a public property.
  7. Obtains any benefit or confers any benefit to another person from a public entity in circumstances prohibited by any law written law of Kenya,
  8. Conspires to commit a violation of subparagraph (a), (b), (c), (d), (e), (f) and (g),

is liable to the state for a civil penalty of not less than Kenya shillings five million plus three times the amount of damages sustained by the public entity from the act of that person or to the fine prescribed by the Anti-corruption and Economic Crimes Act No.4 of 2003 whichever is greater.”

All the offences listed at (a) to (f) mirror the offences outlined in the US Act. The offences listed at (g) and (h) appear intended to extend the Bill beyond the scope of the US Act so that government officials are possible defendants to proceedings[2]. Any person found liable for a “false claim” is required under the Bill to pay a civil penalty of not less than 5 million Kenya shillings (nearly £40,000) plus three times the amount of the damages sustained by the public entity caused by the unlawful act. What Mr Ndegwa and his team have created is novel in the sense that they are seeking to hand power to civil society and private citizens to bring civil recovery proceedings against public officials.

In a similar way to the US Act a person would have the right to bring civil claims (in relation to the offences committed under the Bill), but that person must first serve a copy of the claim and all supporting documents on the Attorney-General who has thirty days (extendable on application to court by a further thirty days) during which time the Attorney General may:

  1. Intervene and proceed with the claim. In this event, the action shall be conducted by the state or,
  2. Notify the person issuing the notice and the court that the Government declines to take over the action. In this event the complainant shall have the right to conduct the action.

The Bill provides (at Section 14) that if the Attorney-General intervenes, the state will have primary responsibility over the claim and the person who initiated the claim will have the right to continue as a party to the action, subject to certain restrictions.

Whistleblowing claimants

If enacted, the legislation will depend on the will of the Kenyan public and civil society to blow the whistle and initiate proceedings potentially at their own cost. However, there is a financial incentive for doing so. Whistle-blowers stand to gain at least 15% of the amount recovered if the Attorney-General decides to intervene and 25% to 30% of the amount recovered if the Attorney-General declines to intervene[3]. There is of course also the philanthropic incentive to bring proceedings for the greater public good which may be the prime motivator for claimants such as NGOs. As Mr Ndegwa points out in his petition to parliament enclosing the Bill: “members of the public have no legal authority to institute legal action for asset recovery despite being the real victims of corruption and often possessing information, the evidence, and having the passion and resources needed to undertake asset recovery by civil proceedings.

Whistle-blowing requires courage and can come with unforeseen and negative consequences. The issue of whistle-blowing is at the very centre of a number of recent front page headlines in the UK: Edward Snowden and US internet and telephone surveillance; the alleged smear campaign of Stephen Lawrence’s family; and a series of NHS whistleblowers and allegations of attempts to silence them in order hide the truth. The difficulties in making a public interest disclosure, for example, have led to a forthcoming change in the law in the UK under the Enterprise and Regulatory Reform Act 2013. Later this year, the law will be amended to make an employer vicariously liable for the conduct of its employees if they subject a whistleblowing employee to detrimental treatment as a result of a protected disclosure. This new measure was established in direct response to the treatment of Helen Donnelly, the whistleblowing nurse in the Mid Staffordshire Trust scandal about high mortality rates, who told the Francis Inquiry of how she was physically threatened by colleagues after raising concerns about the standards in the accident and emergency department. Whistle-blowing, where it involves serious wrongdoing by public officials, carries even greater pressures on individuals and they will need protection.

Can private citizens and civil society make an impact?

The proposed legislation has the potential to animate Kenya’s fight against corruption. If the Bill is passed, Kenya could serve as an inspiration to civil society in other jurisdictions to lobby for similar legislation. Private citizens and civil society can certainly have a vital role to play in seeking to recover the proceeds of corruption. In France, civil society recently had a victory when France’s Supreme Court held that that Transparency International could be a valid party to a civil complaint in respect of proceedings brought against the former heads of state of Congo, Equatorial Guinea and Gabon in respect of alleged corruption. The ruling has allowed Transparency International to file further civil complaints triggering investigations against corrupt individuals.

In the US, the US Act has been seen as a success against fraudulent companies contracting with the Government. The financial incentive offered by the US Act has motivated hundreds of private individuals to blow the whistle, generating over US$36 billion for the US Government since 1986, with whistle-blowers benefiting from 15%-25% of the recovered amounts. For example, as recently as May 2013, US Renal Care agreed to pay a US$7.3 million settlement out of court in respect of false claims submitted in which the amount of medication admitted to patients was allegedly overstated. The private citizen that filed the lawsuit, Laura Davis, received US$1,314,000, 18% of the settlement figure.

In the UK, however, qui tam actions, where a private citizen can bring a claim (on behalf of the Government and himself/herself) and receive a cut of the damages awarded by the Court, have been phased out. They historically were treated with a great deal of scepticism. Attempts to introduce a UK version of the US Act in 2007 appear to have been abandoned, but arguably there is not such a pressing need to revive qui tam rights in the UK.

Challenges

As we have indicated, the biggest challenge to this initiative in Kenya, like most anti-corruption and asset recovery initiatives, is political will. Firstly, it remains to be seen whether the Kenyan Parliament will be bold enough to enact the Bill into law. This year the Kenyan Treasury reported that nearly 300 billion Kenya Shillings (approx. £2.25 billion) is lost annually to corruption networks through the public procurement process. The opportunity to obtain compensation for this wrongdoing while having members of the public foot the bill of the proceedings should incentivise the Government to seriously consider the proposal; on the other hand, it is obvious why certain members of the Government will be fearful of the proposed legislation and will wish to oppose it. A second challenge will be judicial will. The independence and integrity of the judiciary will be paramount to the initiative’s success, as will executive enforcement of judgments.

If Kenya can overcome these challenges and the Bill is passed through Parliament, the Government could perhaps be transformed from one with a poor reputation in relation to tackling corruption, to one that is finding innovative ways to lead the fight in conjunction with civil society. This may be an opportunity for the country as a whole to embrace a new way of combating corruption.

We asked Mr Ndegwa some questions about the proposed Bill, whether he thinks it will be implemented and how he believes it will work in practice. His responses are below:

Q&A with Wamuti Ndegwa

  1. What is the objective of the Bill and what motivated you to draft it?

The objective of the Bill is to provide a self-help remedy for ordinary members of the public because they are the real victims of corruption. This is because the state agencies tasked with asset recovery do not have the will, courage, or the resources to undertake asset recovery proceedings especially against officers of the present or the past governments.

  1. How did you come up with the idea for the Kenya False Claims Bill 2013?

The idea of the Bill came up in the course of my PhD research study. My research topic is, ‘Regulating Exercise of Prosecutorial Discretion; (A Case Study of Prosecution of Corruption Offences in Kenya)’. I observed that while the discretion of the state leans in favour of not instituting criminal proceedings in corruption offences, it equally leans against instituting proceedings for asset recovery. I thought that asset recovery may never be effective so long as it pits state agencies against influential officers of the current or past governments. It is then that I thought of introducing a natural predator that can feed on corruption. I could not see a better natural predator than a private person who stands to make a personal gain by exposing and recovering assets on behalf of the public. In effect, the Bill would privatise and commercialise asset recovery.

I also took a cue from Article 157 of the 2010 Constitution of Kenya. While conferring prosecutorial powers on the DPP, sub-article (2) provides that Parliament may enact legislation conferring prosecutorial powers on authorities other than the DPP. The apparent intention of sub-article (2) is to de-monopolise state’s prosecutorial powers. To give effect to the said provision, the recently enacted law Office of the Director of Public Prosecutions Act 2013 provides that, ‘Notwithstanding any provision under this Act or any other written law, any person may institute private prosecution.’[4] Government’s willingness to liberalise prosecution powers to private persons suggests a willingness to open up asset recovery.

  1. How can an individual in Kenya petition the Kenyan Parliament to introduce new legislation, such as the Kenya False Claims Bill?

As noted in the Bill, Article 119 of the 2010 Constitution gives every person a right to petition parliament to consider any matter including enacting any legislation. To give effect to the right, Parliament enacted the Petition to Parliament (Procedure) Act No 22 of 2012. Section 4 of the Act provides that Petitions shall be submitted to the Clerk of either House and provides the procedure to be followed by the clerk thereafter[5].

  1. What are the prospects of the Bill being passed by the Kenyan parliament, given that the Bill was not acknowledged following the initial petition on 5 September 2012? Do you envisage resistance to the Bill from members of Parliament?

There are reasonable prospects that the Bill will be passed. This is because the President appears eager to implement initiatives that can reduce corruption. It also appears that while the government may not be willing to go after its own who are involved in corruption, it will not go out of its way to protect them. I believe that when the Bill gets the attention of the President, the President will welcome an arrangement where corruption is fought without the legal action being politicised against the government.

I would attribute the failure to acknowledge to low appreciation of the rights and duties created by the 2010 Constitution and the Act rather than resistance to the Bill. Most public officers are yet to read let alone appreciate their responsibilities under the new constitution. The Clerk is no exception when it comes to private persons’ Bills and petitions.

  1. What has been the reaction to the Bill in Kenya so far?

On 21st June 2013, the Petition was stamped as received by the Clerk of the National Assembly. Taking 21st June 2013 as the date when the National Assembly officially received the Petition, Section 4(3) of the Petition to Parliament Act requires that the Clerk will within seven days of receipt of the Petition review the Petition to ascertain whether the Petition meets the requirements of the Act. If he thinks it doesn’t, he may give directions on amendments. If he thinks it does, he is required by section 5 to forward it to the Speaker of the House for tabling in the House.

So far, we have not received any comment on whether it is approved or not approved for forwarding to the Speaker. However, I note that the Act does not set time lines for the speaker’s decision upon considering. However, we are waiting for a reasonable time to lapse from the 21st June 2013. Thereafter, we will be entitled to remind and/or make demands. However, we are also lobbying for support in the hope of avoiding a confrontation.

  1. Who is a possible claimant under the proposed Bill? Would it include ordinary citizens, charities and NGOs located in Kenya? What about Kenyan law firms and companies?

The Bill is primarily intended to empower a private person. The intended claimant is therefore an ordinary private person. Ordinary citizens, charities and NGOs, would have an automatic right because the Bill and any claim brought under it would essentially be an exercise of Article 258 of the 2010 Constitution. The Article provides that every person has the right to institute court proceedings claiming that the constitution has been contravened. The provision goes on to provide that a person includes an individual person, a person acting as a member of, or in the interest of, a group or class of persons, a person acting in the public interest, or an association acting in the interest of one or more of its members. Corruption and loss of public assets is a contravention of Chapter 6 and 12 in the least. The Chapter deals with Leadership and Integrity of public officers. Chapter 12 deals with Public finance and the principles of public finance. Of particular interest is Article 226(5) which provides that a holder of a public office who directs or approves the use of public funds contrary to the law or instructions is personally liable for any loss arising and shall make good the loss whether he remains in office or not. The Bill and the legal action is therefore primarily an enforcement of the Constitution.

Companies on the other hand would have difficulties because in a recent decision, the High Court held that a Media Company is not entitled to enforce the right to information provided in the Constitution[6]. The decision appears to be a bit renegade. It contradicts many other decisions by other judges upholding the rights of corporate persons to enforce constitutional rights and obligations. However, it is a good indicator of the kind of legal technicalities companies may run into.

Law Firms under Kenyan law have no independent legal existence outside the partners. A suit by a Law Firm would for all purposes be a suit by the individual partners acting jointly.

  1. Do you anticipate that Kenyans will take advantage of the power that the Bill gives them to initiate asset recovery proceedings? How will private citizens fund such actions?

I believe Kenyans are eager to take advantage. Kenya has a very active civil society. What is lacking is the legal standing.

Experienced lawyers are way too expensive for ordinary Kenyans to afford. Financing research will also be a challenge. However, the new Constitution has shown that many Kenyans will sacrifice their own resources for public good. In addition, the element of reward will create a genre of lawyers who will risk their own resources in expectation of sharing the proceeds. This is what happens in personal injury claims where most claimants cannot afford legal fees. The challenge with that is that the quality of legal services will be no match for the rich defendant’s legal team.

  1. Should private citizens and civil society be allowed to reap a reward in respect of wrongdoing by public officials as a result of instigating proceedings? Sceptics and opponents of the Bill might argue that it could in fact lead to a new industry for law firms to bring claims and ultimately pocket or share the reward – what is your response to such comments?

The mere involvement of civil societies is a challenge to enactment of the Bill. Governments in Africa fear the imaginary hand behind the civil societies. However, the constitutional foundation of the right to take action against violation of the Constitution expressly accepts civil societies.

It is not possible for the law firms to pocket the reward because Part IV of the Bill envisages the court supervised reward with notice and participation of the Attorney-General. In addition, the Attorney-General is entitled to appear in any civil action and pursue the government interest. The procedure cannot be an industry for lawyers because as indicated above, in Kenya, a law firm cannot sue without a client. If lawyers take advantage of the proposed procedure, they would have to do it in their personal capacity as claimants to which they are entitled because they too are Kenyans. The correct view is that the proposed procedure would be a private-public partnership in fighting corruption and asset recovery.

  1. What is the meaning of ‘benefit’ in section 2(g) and what situations did you have in mind when you drafted that subsection?

A benefit within the meaning of section 45(1)(a) of the Kenya’s Anti-Corruption and Economic Crimes Act 2003. It provides that a person is guilty of an offence if the person fraudulently or otherwise acquires public property or a public service or benefit. Further, section 46 which establishes the crime of abuse of office. It provides that a person who uses his office to improperly confer a benefit on himself or to anyone else is guilty of an offence.

In Kenya, charges of improperly conferring benefit have been in situations where a person has obtained or conferred a benefit in violation of the Public Procurement Act. Records of the Public Procurement Oversight Board (Tribunal for public procurement disputes) are full of situations where multinationals have corrupted or short-circuited the public procurement rules to win multi-billion shilling contracts. In addition, from time to time the media exposes such cases of violation of public procurement laws. This is the “benefit” envisaged by the Bill. Whereas the breach of public procurement laws and the consequential loss of public funds are exposed, it is extremely rare to hear of any attempt by the government to recover the lost asset.

  1. How would the penalty mechanism under the Bill work in the context of bribes to public officials, where it might be argued, the bribe itself cannot amount to loss suffered by the State?

The claim is pegged on actual loss or damage suffered. The Bill did not envisage pursuit of a bribe where no actual loss or damage to the public can be demonstrated.

  1. How do you envisage any recoveries obtained by a private citizen being returned to the Government?

Under section 5, the action shall be brought in the name of the Republic. Accordingly, the judgment creditor will be the Republic. The proceeds will be paid to the government less the award to the claimant. This again rules out the possibility or accusation that lawyers will pocket the proceeds. Out of court settlements are also subject to court approval.

  1. Do you anticipate that the Kenyan judiciary will be intrepid enough to make orders against individual members of the Executive who are proven to have made false claims or otherwise illegally gained assets at the expense of the Kenyan public purse?

Since the vetting of judges and judicial reforms started about two years ago, Kenya‘s judiciary has become unusually independent. Judges are under extreme public scrutiny. The mood in the Kenyan judiciary is that of a competition to demonstrate independence and progressive interpretation of the law. This does not mean that the government does not have pockets of gate keepers in the judiciary. They are few and scared however. In all probability, claims will be determined upon facts and the law.

  1. Compared to ten years ago, how would you describe the current anti-corruption landscape in Kenya? Is there movement in the right direction?

Corruption no longer has any coordinated protection by the government as an entity. This is perhaps because a number of government ministers and permanent secretaries in the last government lost their positions due to public pressure or corruption charges. However, the public is largely unaware of this fact. The country therefore has failed to take advantage of the new laws and favourable situation for claims.

What is remaining is individualised corruption. When exposed, other government officers quickly distance themselves from the suspect. Whereas the state agencies will be very slow and even unwilling to act on the expose, no officer will risk involvement in the scandal in attempts to protect a suspect. Even the attempts to cover up are individualised. This scenario has created an opportunity for the members of the public to eliminate or minimise corruption by attacking the vulnerable beneficiaries with civil claims to recover the assets. In my assessment, the mere absence of coordinated action by the government to protect corrupt individuals is a giant step in the right direction.

  1. How are whistle-blowing claimants protected under Kenyan law?

There is no special protection for whistle blowers. To qualify for protection one has to bring their situation within the Witness Protection Act. Witness protection is limited to persons who have recorded statements with the authorities in respect of criminal offences or are witnesses in criminal offences. The wording of the Witness Protection Act appears to exclude witnesses in civil claims.

Final thoughts

The UK has historically shied away from introducing legislation that rewards whistle-blowing. However, in the US, the US Act has been seen as very successful albeit there are inevitably critics. The US Act was introduced to deal with a pressing need to combat corruption. Kenya faces a similar problem and, to date, there has been a shortage of solutions. The Bill, if enacted, may signal a new change in approach. It would allow civil society to step in where historic Governments have failed and where the new one will need assistance. Perhaps the Bill has missed a trick on not seeking to make express provision for the recovery of bribes paid to public officials to win contracts or favours, but that might be a step too far if the initial goal is to try to garner support for the Bill’s passage. Further, the value of the bribe might be recoverable through the likely resulting inflation in any contract price (amounting to a form of loss to the Government). It may be that the gap can be plugged by future changes to the Bill in the same way the US Act has been subsequently supplemented and amended since is enactment in 1863.

It is no surprise that Kenya scored lowly in Transparency International’s 2013 Global Corruption Barometer released a few days ago. However, the results of the 2013 Global Corruption Barometer reveal that 61%-80% of Kenyans interviewed believe in the power of ordinary people to make a difference in tackling corruption, with a large number saying they regard joining anti-corruption organisations as the most effective way for an ordinary citizen to fight corruption. Kenyans certainly possess the will to take a stand against corruption and perceive civil society organisations as effective vehicles through which corruption can be tackled. However, the will of the people is not enough. The Bill also depends on the will of parliament to enact it into law, the will of the judiciary to hear claims impartially and independently and the will of the executive to support the initiative rather than cover up corrupt practices. Mr Ndegwa is optimistic, however, and has pointed to changes in Kenya over the past few years that signal that the draft Bill might become a reality.

A lack of political will is forcing private citizens and civil society to look to other ways of combating corruption and to recover stolen public assets; not just in Kenya but around the world. The US was not afraid to give private citizens the right to bring private actions on behalf of the Government against dishonest public contractors. A Kenyan lawyer now wants Kenya to go one step further and find a way for citizens to be able to pursue those individuals in public office who abuse their public function, as well as dishonest contractors. Perhaps Mr Ndegwa should allow Honest Abe’s words to inspire him: “Always bear in mind that your own resolution to succeed, is more important than any other one thing.”