Details also emerged on Monday that the taxpayer could eventually foot the bill for the loss of Sh7.6 billion after corrupt KPC officers illegally released 126 million litres of oil products to the troubled Triton Oil Company.
Triton was only entitled to 2.2 million litres, according to minutes of an emergency board meeting held on January 7 this year. And as a result four financial institutions among them Kenya Commercial Bank (KCB) stand to lose Sh7.59 billion in what reads like another Anglo Leasing scandal. KCB has already taken Triton to court (see separate story).
"As of December 23, 2008, Triton's entitlement was only 2.2 million litres. If Triton failed to honour its obligations with the financiers, it will not be possible to recover the volume of 126 million litres,'' says the minutes obtained by The Standard on Monday.
The board made an effort to ensure information on the scandal does not leak out. The board instituted such measures as directing that communication on the matter should not be sent through email.
The board noted that KPC risks being liquidated if any of the financiers took it to court as it has no way of settling such large debt'. We received reports on Monday indicating that the international financiers were considering suing the government to recover their money.
Letter
Energy minister Kiraitu Murungi has written a letter to the Kenya Anti Corruption Commission (KACC) calling for urgent probe into the scandal.
The letter details how junior KPC staff released 126 million litres valued at Sh7.59 billion to Triton without written authorization from the financials as set out in the agreement. And what is worse is that Triton did not acknowledge receipt of the oil products, leaving KPC  and by extent the Government  badly exposed.
KCB with 30 million litres released without authorization stands to lose Sh1.8 billion. On Monday, KCB Managing Director Oduor Otieno met Murungi at his office in Nairobi but it was not immediately clear what they discussed.
The other financials whose products held in trust by KPC and which were released fraudulently including Glencore of UK (38 million litres valued at Sh2.2 billion), Fortis of France (15 million litters worth Sh900 million) and ENOC (42 million litres worth Sh2.5 billion.) Triton sold the products to various oil-marketing companies according to a Ministry of Energy brief on the scandal.
KCB, Fortis of France and Glencore UK have lodged their claims and only Emirates National Oil Company (ENOC) is yet to contact KPC, according to minutes of KPC's emergency board meeting held Wednesday.
The board blamed officers in its Operations Department headed by P M Mecha who has since been suspended from work incidentally over the closure of the oil pipeline in December 31, 2008.
Okungu informed the Energy ministry on Monday last week that a large volume of petroleum products had been released to Triton illegally by certain employee.
Kiraitu has suggested that the KACC conducts the investigations together with the CID.
Investigation
KACC is expected to investigate the parties involved in the illegal release of products to Triton and their disposal. He wrote the letter on January 8 this year a day after KPC held a board meeting to discuss the oil scandal.
Murungi copied the letter to the PM Raila Odinga, Head of the Civil Service Francis Muthaura, Energy PS Partick Nyoike and Joseph Kinyua PS Ministry of Finance.
Others are Police Commissioner Hussein Ali, CID Director Karanja Gatiba among others.
Triton Petroleum had in 2004 entered a Collateral Financing Agreement (CFA) with the KPC. Through the arrangement KPC signed collateral financing agreements with several local companies importing oil including Triton.
According to the agreement, KPC that held the collateral in trust for the financial would only release it through a written authorization by the financiers. This clause was abused and millions of litres released to Triton without authorization of the financiers.
Murungi says the agreement went smooth until late November last year when financiers and suppliers began demanding statements on stock inventories.
False information
He says upon receiving falsified information, which appeared to give them comfort that their funds were safe, the financiers asked KPC not to release any more products to Triton.
It was then that KPC undertook an audi. "The audit revealed that the stocks which ought to have been held in trust had released to Triton between November 2007 and November 2008 without authorizations,'' says the Ministry of Energy brief.
KPC wrote back to the financiers informing them that there were no stocks held in trust as they had all been released to Triton. At that point KCB wrote to KPC threatening to take legal action with a view of recovering losses.
After Okungu informed Murungi, KPC called a special board meeting where it was resolved that it should not at the time being accept any liabilities. It was also agreed that KPC should work closely with financiers to get Triton to pay back outstanding claims.
The board noted that there were serious lapses in management and administration of the CFA and that its operation was chaotic. It further noted that there was a likelihood of collusion by the banks and oil companies.
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