CORRUPTION IN KENYA: ANGLO-LEASING COMBINES WITH

C O N F I D E N T I A L SECTION 01 OF 04 NAIROBI 000607 SIPDIS SIPDIS DEPT FOR AF/E, AF/EPS, EB/IFD/OMA USAID FOR AFR/DP WADE WARREN, AFR/EA JEFF BORNS AND JULIA ESCALONA MCC FOR KEVIN SABA AND MALIK CHAKA TREASURY FOR LUKAS KOHLER LONDON AND PARIS FOR AFRICA WATCHERS E.O. 12958: 02/10/2026 TAGS: ECON EAID EFIN KCOR PGOV PREL KE SUBJECT: CORRUPTION IN KENYA: ANGLO-LEASING COMBINES WITH THE GOLDENBERG REPORT Ref: A. Nairobi 527 B. Nairobi 494 C. Nairobi 395 D. Nairobi 284 Classified by Econ Counselor John Hoover for reasons 1.4 (B) and (D). ¶1. (C) SUMMARY: In an apparently transparent attempt to deflect public attention away from allegations of grand scale corruption within his own administration, Kenyan President Mwai Kibaki has officially accepted a long- awaited report into the Goldenberg affair, a huge scandal that took place over a decade ago. However, because the Goldenberg Report implicates the former president, as well as a key current minister, it offers little comfort as a diversion from the credible allegations now rocking Kibaki's embattled administration. Kibaki has yet to respond to the Anglo-Leasing allegations since they came out in public almost three weeks ago. It may not matter. Outside of government, a powerful momentum appears to be building in the media, in Parliament, and among the public for full disclosure and political accountability in connection with the Anglo-Leasing and similar scams. In the face of these demands, Kibaki may be forced to take additional action soon -- or else face disaster at the polls in 2007. END SUMMARY. ¶2. (SBU) Issues of high-level corruption, both past and present, continue to dominate political life at all levels of Kenyan society, prompting the country's largest daily to claim in a recent editorial, "Kenyans are at a momentous crossroads in our history." In the midst of the major furor over corruption and cover-up in the sitting government (reftels),President Mwai Kibaki on February 3 officially received the report of the Goldenberg Judicial Commission of Inquiry. -------------- What The Heck IS Goldenberg Anyway? -------------- ¶3. (SBU) The Goldenberg Report is the result of a 2.5 year inquiry ordered by Kibaki in February 2003. Carried out by a three-person commission led by Justice Samuel Bosire at a cost to taxpayers of $5.6 million, its purpose was to get to the bottom of the Goldenberg scandal, a complex set of illegal financial transactions that unfolded under the former regime of Daniel arap Moi between 1990 and 1993. The scam, allegedly masterminded by Kenyan businessman Kamlesh Pattni, began as a ploy to obtain export credits from Kenya's Treasury by Pattni's firm, Goldenberg International Ltd., for fictitious exports of gold and diamond jewelry. While the Goldenberg Report has not been made public, press sources claiming to have seen it say it estimates the scam cost the Kenyan Treasury $1.4 billion. This money, the report claims, has exited the country or is otherwise not traceable or recoverable. Bosire noted in delivering the report that the scandal was of sufficient magnitude that it caused "massive inflation and loss of foreign exchange from the country." While the prime suspects in the case have long been known, no one has yet been successfully prosecuted in connection with the Goldenberg scandal. -------------- Goldenberg Report: Suspicious Timing -------------- ¶4. (C) The Goldenburg Report was completed in the fall of 2005, and the GOK is widely believed to have received an advance copy at that time. But its official delivery to the GOK was put off to de-politicize its impact in the context of the referendum for a new constitution, held on November 21. Kibaki's claim on February 3 that he had not read the report and needed time to do so thus appear disingenuous. Further, the timing of delivery appears by all accounts to be a transparent attempt by Kibaki to distract attention away from allegations of similarly high- level, grand scale graft now rocking his own administration (reftels). The latter follow in the wake of the publication by the media starting January 22 of a summary dossier of evidence compiled by Kibaki's former anti- corruption advisor, John Githongo, now in self-imposed exile in the UK. The allegations contained in the Githongo NAIROBI 00000607 002 OF 004 dossier led to the unprecedented resignation February 1 of ex-Finance Minister David Mwiraria (ref B). -------------- Goldenberg-as-Smokescreen: A Risky Tactic -------------- ¶5. (C) The fact that most of the media and public have seen through the GOK's attempt to deflect attention away from present-day graft by taking delivery of the Goldenberg Report is only part of the problem for Kibaki, however. The Goldenberg Report itself presents its own set of difficult political dilemmas for the President. The report apparently recommends "further investigation and possible prosecution" of more than 70 people, most of whom were close to the Moi administration, but some of whom remain in positions of influence. Most notably, the report is believed to contain strong evidence against current Education Minister George Saitoti for his central role in the scam in his capacities as both Finance Minister and Vice President during the time the scandal unfolded. Former President Moi is also among those identified for further investigation and/or prosecution. -------------- - Anglo-Leasing and Other Scandals: Here to Stay -------------- - ¶6. (C) Moreover, Githongo's allegations surrounding the Anglo-Leasing and related scandals involving Kibaki's administration appear to have staying power. Predictably, Vice President Moody Awori and current Energy Minister Kiraitu Murungi both publicly announced on February 2 and 4 respectively an unwillingness to follow Mwiraria's lead in stepping down from their jobs to facilitate investigations. Both proclaimed their complete innocence in any wrongdoing, despite figuring prominently as the architects of the cover-up of the Anglo-Leasing scams in the Githongo dossier. Their protestations of innocence may come back to haunt, as events still unfolding at the end of the week of February 6 indicate that the allegations put forth in the Githongo dossier will not be easily wished away, no matter how explosive and distracting the details of the Goldenberg Report prove to be. -------------- Githongo Has More to Share -------------- ¶7. (C) First, Githongo himself has indicated a steely determination to press his case and put additional evidence into play. In a February 7 conference call from the U.S. Embassy, Githongo told the Ambassador, the World Bank Country Director, and four other Western diplomats that "additional evidence needs to be put forward." His BBC Television interview on February 8 was a brave next step. Githongo shared with the BBC part of a May 20, 2004 discussion he had secretly recorded with then Justice Minister, and current Energy Minister, Kiraitu Murungi. In the excerpt, Murungi apparently encourages Githongo to "go slow" on the Anglo Leasing investigation, and tacitly threatens Githongo's father with difficulty over a business loan if Githongo did not comply. Neither Murungi nor Kibaki have yet responded to this evidence, which is supported by information we've seen through other sources. [Note: On June 30, 2004 President Kibaki's closest advisors tried to move Githongo and the Office of Governance and Ethics out of the Office of the President and under Murungi's authority at the Ministry of Justice. This move was quickly reversed after massive outcry by civil society groups and leading donors. End Note.] ¶8. (C) During the February 7 call, Githongo also confirmed that he will provide fresh evidence during a meeting with Kenya's Parliamentary Public Accounts Committee (PAC) in the UK beginning February 10. On February 9, the Vice- Chair of the PAC, Hon. Joseph Lagat, told a special gathering of Kenya's World Bank-hosted Donor Coordination Group (DCG) that he expected Githongo to provide significant new evidence (and hinted that there might be additional recordings of Githongo's conversations with key government officials). Lagat promised that the PAC would call those implicated in Anglo Leasing and other scams to NAIROBI 00000607 003 OF 004 be questioned before the committee. ¶9. (C) While largely ineffective thus far in responding meaningfully to the Anglo-Leasing scandal (and other instances of alleged corruption),the PAC is nonetheless the legislature's official oversight body and thus an appropriate venue for the disclosure of, and further action on, the evidence at Githongo's disposal. In the February 7 telecon with Ambassadors, Githongo expressed faith in the PAC's ability to put together a comprehensive report after it received evidence and testimony from himself and others. To bolster PAC's case, Githongo also noted that "many of the answers to the questions now being asked" about the role of key Kibaki officials in the Anglo-Leasing scandals can actually be found in the written records of Parliamentary testimony going back to the period after April 2004, when Parliament began looking into the matter. ¶10. (SBU) By design, the chairperson of the PAC is the leader of the official opposition, in this case Uhuru Kenyatta. This essentially guarantees that the full force of the Anglo-Leasing allegations will remain alive in the public domain, through Parliament, for the foreseeable future. Because a number of NARC MPs from the PAC were moved into Kibaki's cabinet in December, the current PAC is dominated by Kanu MPs. -------------- Will The KACC Get Aggressive? -------------- ¶11. (C) Close behind Kenyatta and the PAC in pursuing Anglo-Leasing leads may be Aaron Ringera, Director of the Kenya Anti-Corruption Commission (KACC). The KACC under Ringera's leadership is itself at a crossroads. KACC had previously exonerated David Mwiraria of any wrongdoing in the Anglo-Leasing scams, and appeared last year to have washed its hands of the scandal. This and other indicators have raised serious doubts about Ringera's leadership in the war on graft and called into question KACC's independence from State House. Ringera's response to the current round of scandals will thus largely determine his legacy, and perhaps even the length of his tenure in office. ¶12. (C) In his February 7 telecon with diplomats, John Githongo indicated that he will be meeting with Ringera soon, and Ringera told another Western diplomat February 3 that he would be doing so in Amsterdam February 15-16. Githongo expressed a willingness to provide any/all information at his disposal to Ringera for the purposes of the KACC's re-investigation of the Anglo-Leasing and similar scams. ¶13. (C) The KACC is also generating at least the appearance of action on the home front. Two of Ringera's deputies met with Econ/C on February 3 to request USG assistance in either questioning or extraditing Amcit Merlyn Kettering, a consultant whose name figures prominently in the Githongo dossier as a shadowy broker behind a series of multi-million dollar security-related procurement scams, including Anglo-Leasing. (Note: Post still awaits the KACC's official written request in this matter. Once received, Post will communicate the request by septel or e-mail for Washington action. End note). ¶14. (SBU) Ringera has also made public his intention to launch investigations into the personal wealth of several Cabinet ministers or ex-ministers. In the past week, KACC has twice overcome court challenges from former Security Minister Chris Murungaru, who argued that in disclosing the sources of his wealth, his constitutional right against self-incrimination would be violated. Interestingly, Ringera is also investigating several ministers not implicated in the Githongo dossier, including Trade Minister Mukhisa Kituyi and Agriculture Minister Kipruto arap Kirwa. At the February 9 DCG, Ringera pointedly assured that the KACC "can and will prosecute ministers." -------------- GOK Reaction: What Reaction? -------------- NAIROBI 00000607 004 OF 004 ¶15. (C) Meanwhile, the Executive Branch has done little in response to the Anglo-Leasing allegations beyond Mwiraria's apparently self-imposed resignation on February 2. Nearly three weeks since the publication of the Githongo dossier, Kibaki has yet to speak to the public on the matter, creating a deafening silence. ¶16. (C) Attorney General Amos Wako, whose own reputation in prosecuting graft is far from stellar, announced February 5 that prosecutions in the Anglo Leasing scandal would begin the same week. Thus far, however, there is no evidence to support this claim. Wako's announcement was followed by a "secret" five-hour meeting involving Wako, Ringera, Director of Prosecutions Keriako Tobiko, Police Director of Criminal Investigations Joseph Kamau, and Justice Minister Martha Karua on February 6. Press reports described the meeting as being more concerned with following up the Goldenberg Report, however, further fueling public suspicions that the latter will be used to deflect attention away from the more immediate Githongo allegations. -------------- Comment -------------- ¶17. (C) We sense a potential turning point. Kibaki appears frozen, utterly incapable of grappling with the crisis or providing a modicum of leadership. The other splintered pieces in his fractured coalition are split between those scrambling to repudiate colleagues tainted by Anglo-Leasing, and those who are trying half-heartedly to defend Kibaki by deflecting attention onto the ancient Goldenberg affair. All of this is somewhat discouraging. ¶18. (C) We wonder, however, whether Kibaki's inaction will matter that much as the Githongo revelations continue to develop traction and take on a life of their own. In what is a compelling and completely Kenyan drama, the media, civil society, Parliament, and the public are all lining up together in calling for the truth and for political accountability from their leaders. We don't think Kenyans will let their government off the hook this time, as they appeared to do last year after Githongo's resignation. They will either force action from Kibaki and his dwindling cast of advisors now, or else badly punish them at the polls in 2007. Either way, we see hope for accountability. Bellamy