How law firms are milking counties dry via legal fees

Law firms are ‘eating with a big spoon’ from blunders by the counties and the failure to honour court directives, a new audit had revealed.

New findings by the Auditor General Nancy Gathungu have unearthed just how counties prioritised paying out legal fees running into billions to the expense of other pending bills.

The Auditor raised concerns over these financial irregularities in multiple counties, highlighting anomalies in legal fee payments and infrastructure projects amounting to billions of shillings.

Despite the law setting a requirement for counties to establish the Office of the County Attorney to handle legal matters, most of the devolved units are yet to abide by this.

Even as these legal battles continue to cause a significant financial strain, with judgments against the County Executive resulting in mounting litigation costs and accruing interest.

The County Executives Report by the auditor general for 2023-24 shows that in some instances, legal fees totaling Sh483 million were paid to firms that were not selected through a competitive process, raising questions about accountability in county expenditures.

Kajiado Governor Joseph Ole Lenku is also in the Auditor General’s crosshairs as his administration is also being questioned over Sh79 million in legal fees, with the Auditor General demanding further clarification.

The audit revealed shocking irregularities in the payment of legal expenses by the County Executive, raising serious concerns over financial accountability.

According to the audit findings, a total of Sh79,130,505 was paid to various private law firms for legal services rendered to the County Executive.

However, glaring anomalies in the procurement and payment process cast doubt on the regularity and value for money in the expenditure.

“The executive incurred an avoidable expenditure of Sh1,468,651 in interest decreed by the court due to failure by the Accounting Officer at the Treasury to pay an advocate’s Mombasa Governor Abdulswammad Nassir Kilifi Governor Gideon Mung’aro Kajiado Governor Joseph Ole Lenku legal fee of Sh4,128,359 in a timely manner,” said Gathungu.

“By the time of the audit in November 2024, half of the amount had been settled, but the delay in payment could expose the County to further financial liabilities.”

An analysis of legal fees in the city-county of Nairobi uncovered that four advocates are owed a staggering Sh6.3 billion, accounting for 29 per cent of the total outstanding legal fees of Sh21.4 billion.

The bulk of the pending legal cases stem from disputes over unpaid claims for goods, works, and services delivered by contractors, unprocedural termination of employment contracts, irregular procurement processes, and poor contract management.

“Further, the pending legal fees amounting to Sh21,371,004,293 represents 11 per cent of the total County Executive’s pending bills.”

“It was noted that most of the Court cases related to issues such as disputes of unpaid claims for goods/ works/services completed by contractors, un-procedural termination of employment contracts, irregular procurement processes and poor contract management,” Gathungu noted.

In Mombasa, Abdulswammad Nassir’s administration is grappling with an unexplained payment of Sh67 million in legal fees.

The auditor says that examination of payments on legal fees for various cases against the County Executive revealed that the County liability continued to increase due to failure to honour court rulings.

“The County failed to settle the balance of Sh8 million with a motor vehicle sales Company which had accrued decretal sums, costs of the suit and interests totalling Sh. 68. Million,” added Gathungu.

Kilifi Governor Gideon Mung’aro is among the county chiefs under scrutiny. He is scheduled to appear before the Senate to respond to multiple queries raised by the Auditor General, including questionable civil works.

Auditor General has raised questions over civil works worth 672 million shillings, legal fees amounting to Sh71 million shillings, as well as Sh44 million shillings allegedly spent on emergency and relief but that could not be ascertained by auditors.

In Machakos, an amount of Sh38,807,957 was paid to four (4) firms as part of the prior year pending bill and current year payables. However, the relevant case files were not provided for audit, with Sh20.5 million legal fees remaining unreconciled.

In Kisumu, the audit raised concerns over unsupported legal expenses incurred by a County Executive, amounting to Sh46,078,251.

The funds were paid to legal firms handling various cases for the County, but significant documentation gaps have been identified.

“A review of the expenditure revealed that payments totaling Sh22,496,355 lacked crucial supporting documents, including lists of pending cases, outstanding fees, procurement records, case proceedings, and court attendance evidence.”

Additionally, there was no approval from the County Executive Committee to engage legal consultants, a violation of the Office of the County Attorney Act, 2020.

Uasin Gishu County on the other hand, incurred millions in legal expenses despite having an established Office of the County Attorney.

The County Executive spent Sh22.2 million on external legal representation, raising concerns over unnecessary expenditure.

According to the statement of receipts and payments, the county allocated Sh1.96 billion for goods and services, including Sh354.4 million in operating expenses.

Of this, Sh25.6 million was designated for legal costs, with a significant portion going to private advocates instead of utilizing in-house legal staff.

The revelation has raised accountability concerns, as auditors were unable to confirm the value for money in the Sh22.2 million spent on external legal services.

For instance, in Marsabit County, the devolved unit might have lost up to Sh4 million in a case that they were defending a Sh1 million suit.

The County Public Service Board procured legal services from a law firm to defend a civil case in Court where the plaintiff sued for an amount of Sh. 1,028,000 in damages arising from the unlawful detention of a motor vehicle.

The blunders saw the county Spend Sh10 million shillings in legal fees alone in 2024.

Further, the legal fee amount of Sh.2,820,000 in the fee note lacked a detailed breakdown to support how the amount was derived or to confirm compliance with the Advocates Remuneration Order of 2014.

“There was no evidence of the application of the Advocates Remuneration Order of 2014 for determining legal fees. The fees amount of Sh3.3 million was charged as legal fees for a compensation case, an amount disproportionate to the claimed damages of Sh1,028,000,” said Gathungu.