Goldenberg scandal

The Goldenberg scandal was a political scandal where the Kenyan government was found to have subsidised exports of gold far beyond standard arrangements during the 1990s, by paying the company Goldenberg International 35% more (in Kenyan shillings) than their foreign currency earnings. Although it notionally appears that the scheme was intended to earn hard currency for the country, it is estimated to have cost Kenya the equivalent of more than 10% of the country's annual Gross Domestic Product [BBC News: [http://news.bbc.co.uk/2/hi/africa/3495689.stm Moi 'ordered' Goldenberg payment] ] , and it is possible that no or minimal amounts of gold were actually exported. The scandal appears to have involved political corruption at the highest levels of the government of Daniel arap Moi. Officials in the current government of Mwai Kibaki have also been implicated.

Background

Similar to most countries, Kenya encourages international trade by granting tax-free status to commercial enterprises involved in the export of goods and sometimes subsidizes these exports. The Goldenberg scandal was based on the fact that exporters who deposited U.S. dollar earnings with the Kenya central bank received in exchange the equivalent in Kenyan shillings plus 20 percent.

However, gold mining represented a tiny portion of Kenya's GDP, with only one operational gold mine (at Kakamega). Goldenberg International therefore developed a scheme of smuggling gold into Kenya from Congo, so that it could legally export it more than the export price from the government.

Details

The chief architect beyond the scheme was a relative of the Kenyan businessman Kamlesh Pattni. However, it was Pattni who established Goldenberg International to implement the scheme. [East African Standard [http://www.eastandard.net/hm_news/news.php?articleid=35939 Faces behind the Goldenberg scam] ] The very large sums involved (600 million dollars) indicate that the senior government officials were at least complicit. Almost all the politicians in the Moi government and a considerable percentage of the current Kibaki government have been accused. The judicial system also appears to have been deeply involved, with twenty three of Kenya's senior judges resigning after evidence indicated their involvement [ [http://www.theindependent.co.zw/news/2004/February/Friday20/2089.html Corruption conventions lack clout] ] .

The scheme began in 1991, almost immediately after the Kenya government introduced measures to reform the economy and increase international trade and investment, and seems to have stopped in 1993 when it was exposed by a whistleblower, David Munyakei. As a result of this, Munyakei was fired from his position at the Central Bank of Kenya, and spent the next decade of his life poor and largely unemployed. He died in August of 2006, leaving three daughters and his wife. [ [http://www.mamboafrica.com/index.php?id=1031&option=com_content&task=view Mambo Africa - Death of a Whistle blower] ] There have been two investigations on the scam, one under the Moi government and the other under the current government. The gold was likely imported from Democratic Republic of the Congo, and therefore probably helped finance the war that raged (1997-2002) in that country.

Bosire report

On February 3, 2006 A report by Mr Justice Bosire [ [http://news.bbc.co.uk/1/low/world/africa/4676690.stm Moi 'knew about' Kenya gold scam] ] recommended that current Education Minister George Saitoti should face criminal charges for his actions and that former President Daniel arap Moi should be further investigated. Saitoti was both vice president and finance minister under Moi in the early 1990s. On 13 February Saitoti's resignation was announced by President Kibaki in a television address. [BBC News: [http://news.bbc.co.uk/2/hi/africa/4710138.stm Kenyan 'graft' ministers resign] ]

The report said that records presented at the inquiry showed that Lima Ltd, which is associated with Mr Gideon Moi, Mr Nicholas Biwott, and two other people received Sh6.3 million from Goldenberg and that none of the four had explained to the commission what the money was meant for.

The report also said Sh158.3 billion of Goldenberg money was transacted with 487 companies and individuals. A list of exhibits compiled by the commission puts Goldenberg International Ltd at the top of the primary recipients of the money, at Sh35.3 billion. The directors of Goldenberg were named as Mr Pattni and Mr Kanyotu. Although Mr Kanyotu was the director of the Special Branch and a director of First American Bank, he described himself as a farmer in Goldenberg documents. President Moi was named by Mr Pattni as having been a shareholder of GIL by nominee.

Travel restrictions

Shortly after, Saitoti along with 20 several others suspected to be involved in the scandal were prohibited from leaving the country and ordered to surrender any weapons they possessed. Among those named were

* Gideon Moi, Retired President Moi's son, also the Baringo Central MP
* Mr Philip Moi Retired President Moi's son
* Mr Moi's lawyer, Mr Mutula Kilonzo
* Mr Moi's former personal assistant, Mr Joshua Kulei

* former Central Bank of Kenya governor Eric Kotut
* former Central Bank of Kenya deputy governor Eliphas Riungu
* former Central Bank of Kenya employee Job Kilach.
* former Central Bank of Kenya employee Tom Werunga
* former Central Bank of Kenya employee Michael Wanjihia
* Philip Murgor, the former director of public prosecutions
** Mr Murgor's law firm represented the Central Bank of Kenya during the two-year public inquiry headed by Mr Justice Bosire.

* Former Treasury permanent secretary Charles Mbindyo
* former Treasury permanent secretary Wilfred Karuga Koinange
* former Treasury permanent secretary Joseph Magari

* Prof George Saitoti, who resigned as Education minister.
* Goldenberg architect Kamlesh Pattni
* Pattni's business partner and former Special Branch chief James Kanyotu
* former commissioner of Mines and Geology Collins Owayo
* Mr Arthur Ndegwa, senior mining engineer in the Commissioner of Mines Nairobi office

* former commissioner of Customs and Excise Francis Cheruiyot.
* former Kenya Commercial Bank general manager Elijah arap Bii

Former president Moi himself was not listed.

The Law Society of Kenya chairman Tom Ojienda criticised Police Commissioner Hussein Ali’s move to seize travel documents. He described the decisions as "a total violation of the law and the Constitution". Ojienda regretted that individuals had been charged, tried and convicted by the court of public opinion and the media or through political statements. He commended three Cabinet ministers who resigned to pave way for investigations into the Anglo Leasing and Goldenberg scandals. "The resignation of three members of Cabinet signifies the maturity of our democracy, where leaders whose reputations are besmirched would opt to resign pending investigations to clear their names rather than hold the Government hostage. Such resignations are no pointers to guilt." [East African Standard: [http://www.eastandard.net/hm_news/news.php?articleid=36571 LSK criticises minister on graft assets] ]

Prosecutions

Two transactions stand out - one for Sh5.8 billion from the Central Bank to Goldenberg International in 1993, personally authorised by then-president Daniel Arap Moi, and another for Sh13.5 billion. The then CID director Joseph Kamau told reporters on March 9 2006 that files on Pattni, Kanyotu, Koinange, Kotut, Bii, Riungu and Werunga had been passed to attorney-general Amos Wako. Wako has been attorney-general since 1991, when Moi was in power.

Wako is recommending that the country's chief justice consider overturning a previous court order exempting Mr Saitoti from prosecution. All except Werunga are to be charged. [BBC: [http://news.bbc.co.uk/1/low/world/africa/4808276.stm Kenyans facing Goldenberg charges] ] The prosecution hopes that Werunga will be their witness. [The Standard: [http://www.eastandard.net/hm_news/news.php?articleid=37978 AG orders prosecution of Goldenberg suspects] ]

In August 2006 it was reported that a constitutional court had ruled that Saitoti could not be charged. [ [http://www.guardian.co.uk/kenya/story/0,,1836018,00.html Former vice-president escapes graft charges] "The Guardian" ] The Kenyan media reacted negatively to the decision. The Kenya Times saw political motives behind it [ [http://www.timesnews.co.ke/29aug06/insight/ins5.html Kenyan Judiciary struggles to pass the integrity test] ] , while The Daily Nation editorialised that the "War on graft is, indeed, lost". [ [http://www.issafrica.org/index.php?link_id=5&slink_id=3050&link_type=12&slink_type=12&tmpl_id=3 Goldenberg: Constitutional Court Ruling a Blow to Kenya’s Anti-Corruption Rhetoric?] ]

ee also

* Corruption in Kenya
* Anglo Leasing Scandal
* John Githongo
* Nicholas Biwott

External links

* [http://news.bbc.co.uk/1/hi/world/africa/3733489.stm BBC]
* [http://news.bbc.co.uk/2/hi/africa/3495689.stm A short story on Goldenberg]
* [http://minerals.usgs.gov/minerals/pubs/country/2002/keugmyb02.pdf USA government study of Kenya's mineral industry(pdf)]
* [http://www.globalpolicy.org/nations/corrupt/kenya.htm Document attempt by government to place blame on a Canadian]
* [http://www.corpwatch.org/article.php?id=9429 Forensic accountants traces goldenburg transaction]
* [http://www.worldpress.org/Africa/1499.cfm This article may explain Goldenburg in a different style]
* [http://www.cnn.com/WORLD/africa/9908/28/kenya.corruption/ CNN report on deportation of Canadian]
* [http://www.cpj.org/protests/99ltrs/Kenya26August99.html Involvement of judges in Goldenburg scandal]
* [http://news.bbc.co.uk/2/hi/africa/4704656.stm Graft evidence stuns Kenyan MPs]

References