Identifier
Created
Classification
Origin
08SCTION02OF04NAIROBI1373
2008-06-04 12:39:00
CONFIDENTIAL
Embassy Nairobi
Cable title:
KENYA CORRUPTION UPDATE - LOOKING BACK, LOOKING FORWARD
how-toVZCZCXRO0957 RR RUEHRN DE RUEHNR #1373/02 1561239 ZNY CCCCC ZZH R 041239Z JUN 08 FM AMEMBASSY NAIROBI TO RUEHC/SECSTATE WASHDC 5969 INFO RUEHLMC/MILLENNIUM CHALLENGE CORP RUEATRS/DEPT OF TREASURY WASHDC RUEHXR/RWANDA COLLECTIVE RUEHLO/AMEMBASSY LONDON 2834 RUEHFR/AMEMBASSY PARIS 2759
C O N F I D E N T I A L SCTION 02 OF 04 NAIROBI 001373
SIPDIS
DEPT FOR AF/E, AF/EPS, EB/IFD/OMA
USAID FOR AFR/DP WADE WARREN, AFR/EA CARRIE THOMPSON AND
JULIA ESCALONA
MCC FOR MALIK CHAKA
LONDON AND PARIS FOR AFRICA WATCHERS
E.O. 12958: DECL: 05/29/2028
TAGS: KCOR PREL ECON EFIN KE
SUBJECT: KENYA CORRUPTION UPDATE - LOOKING BACK, LOOKING FORWARD
but the essential facts are that Kamlesh Pattni, the central figure
in the Goldenberg scandal, borrowed KSh 2.5 billion (around $40
million at the time) to build the hotel in 1993. Pattni never repaid
the loan, and when the lending bank later went belly up, the Central
Bank of Kenya (CBK) put the hotel under receivership in an attempt to
recover the loan. But the CBK never achieved operational control
over the hotel during the following 15 years of protracted legal
battles waged by Pattni to maintain control over the hotel and its
revenues.
4. (SBU) It thus came as a surprise to Kenyans when on April 9, KACC
and Pattni jointly announced that the latter would cede all interests
and control over the hotel and transfer title to the CBK as security
against the original unpaid loan. The KACC hailed the deal as "a
landmark in its assets recovery efforts." The hotel had been valued
at KSh 2.1 billion in 1997 and is believed to be worth over KSh 7
billion today. The KACC said that Pattni did not receive commitments
from the government to drop outstanding criminal investigations in
exchange for ceding the hotel. Pattni, a recently born-again
Christian now nicknamed "Brother Paul," commented to the press: "For
what does it benefit a man to gain the world and then lose his
soul... I can build ten more hotels like this with the wisdom from
God."
5. (SBU) It all looked too good to be true, and sure enough,
allegations of scandal hit the press before the KACC could open the
champagne to celebrate its victory. Two allegations emerged: First,
that Pattni himself was paid off by someone in the government to give
up control of the hotel. The second more damning allegation came
from a group of private sector watch-dog lawyers, who claimed to have
evidence that the hotel had already been secretly sold to a Libyan
concern for a throw-away price of KSh 1.6 billion. Given the warming
state of relations between Libya and the Kibaki administration in
recent years (including persistent rumors that Libya contributed
large sums to Kibaki's re-election campaign),the charge had a
certain narrative logic.
6. (SBU) True or not, the allegations of a second scandal involving
the hotel had beneficial results. Both the KACC and the CBK quickly
issued statements providing the facts of the case. The CBK pledged
it would dispose of the hotel at the earliest opportunity and that
the sale would be conducted in accordance with the law. Finance
Minister Amos Kimunya followed up by publicly denying the Libyan
connection and stating that the hotel would shortly be sold in a
transparent legal manner to the highest bidder to maximize taxpayer
payback. That said, we have also heard from hotel sources that
Pattni cronies continue to control day-to-day management of the hotel
and are draining it for cash and using it for favors. Parliament has
announced its intention to more fully investigate the case
7. (C) Mission comment: As is so often the case, it's hard to know
what really happened here. Pattni's about-face seems too good to be
true, so we suspect there was an attempt at some point during the
process on the part of someone to illegally profit from the deal.
The Libyan connection is speculative, but can't be discounted either.
But in any event, thanks to alert watchdogs and the press, whatever
conspiracy might have been unfolding appears to have been exposed and
nipped in the bud.
--------------
Kingpin Kamani Comes Home
--------------
8. (C) Suspicions that Pattni had made a deal to escape future
prosecution for his crimes were further fueled in mid-May, when the
press extensively reported on the return to Kenya of Deepak Kamani.
Second only to Pattni in terms of infamy for having fleeced Kenyans
over the years (together with GOK officials),Kamani was the private
sector mastermind behind several of the 18 security-related
procurement scams that spanned both the Moi and Kibaki
administrations and collectively became known as the Anglo-Leasing
cases. The term "Anglo-Leasing," in fact, comes from the name of a
company that received substantial payments from the Kenyan government
without delivering any goods or services in 2003-04. Much of the
money was returned after the scandals were exposed in mid-2004. Upon
investigation, Anglo-Leasing turned out to be a paper company without
a physical presence registered in the UK in the name of Kamani's
relatives.
9. (SBU) Kamani left the country under a cloud of suspicion in 2006
and was made ineligible for a U.S. visa in May 2006 under Section
212(f) of the Immigration and Nationality Act (INA). At that time,
the KACC was offering a KSh 100,000 reward for anyone who assisted in
SIPDIS
DEPT FOR AF/E, AF/EPS, EB/IFD/OMA
USAID FOR AFR/DP WADE WARREN, AFR/EA CARRIE THOMPSON AND
JULIA ESCALONA
MCC FOR MALIK CHAKA
LONDON AND PARIS FOR AFRICA WATCHERS
E.O. 12958: DECL: 05/29/2028
TAGS: KCOR PREL ECON EFIN KE
SUBJECT: KENYA CORRUPTION UPDATE - LOOKING BACK, LOOKING FORWARD
but the essential facts are that Kamlesh Pattni, the central figure
in the Goldenberg scandal, borrowed KSh 2.5 billion (around $40
million at the time) to build the hotel in 1993. Pattni never repaid
the loan, and when the lending bank later went belly up, the Central
Bank of Kenya (CBK) put the hotel under receivership in an attempt to
recover the loan. But the CBK never achieved operational control
over the hotel during the following 15 years of protracted legal
battles waged by Pattni to maintain control over the hotel and its
revenues.
4. (SBU) It thus came as a surprise to Kenyans when on April 9, KACC
and Pattni jointly announced that the latter would cede all interests
and control over the hotel and transfer title to the CBK as security
against the original unpaid loan. The KACC hailed the deal as "a
landmark in its assets recovery efforts." The hotel had been valued
at KSh 2.1 billion in 1997 and is believed to be worth over KSh 7
billion today. The KACC said that Pattni did not receive commitments
from the government to drop outstanding criminal investigations in
exchange for ceding the hotel. Pattni, a recently born-again
Christian now nicknamed "Brother Paul," commented to the press: "For
what does it benefit a man to gain the world and then lose his
soul... I can build ten more hotels like this with the wisdom from
God."
5. (SBU) It all looked too good to be true, and sure enough,
allegations of scandal hit the press before the KACC could open the
champagne to celebrate its victory. Two allegations emerged: First,
that Pattni himself was paid off by someone in the government to give
up control of the hotel. The second more damning allegation came
from a group of private sector watch-dog lawyers, who claimed to have
evidence that the hotel had already been secretly sold to a Libyan
concern for a throw-away price of KSh 1.6 billion. Given the warming
state of relations between Libya and the Kibaki administration in
recent years (including persistent rumors that Libya contributed
large sums to Kibaki's re-election campaign),the charge had a
certain narrative logic.
6. (SBU) True or not, the allegations of a second scandal involving
the hotel had beneficial results. Both the KACC and the CBK quickly
issued statements providing the facts of the case. The CBK pledged
it would dispose of the hotel at the earliest opportunity and that
the sale would be conducted in accordance with the law. Finance
Minister Amos Kimunya followed up by publicly denying the Libyan
connection and stating that the hotel would shortly be sold in a
transparent legal manner to the highest bidder to maximize taxpayer
payback. That said, we have also heard from hotel sources that
Pattni cronies continue to control day-to-day management of the hotel
and are draining it for cash and using it for favors. Parliament has
announced its intention to more fully investigate the case
7. (C) Mission comment: As is so often the case, it's hard to know
what really happened here. Pattni's about-face seems too good to be
true, so we suspect there was an attempt at some point during the
process on the part of someone to illegally profit from the deal.
The Libyan connection is speculative, but can't be discounted either.
But in any event, thanks to alert watchdogs and the press, whatever
conspiracy might have been unfolding appears to have been exposed and
nipped in the bud.
--------------
Kingpin Kamani Comes Home
--------------
8. (C) Suspicions that Pattni had made a deal to escape future
prosecution for his crimes were further fueled in mid-May, when the
press extensively reported on the return to Kenya of Deepak Kamani.
Second only to Pattni in terms of infamy for having fleeced Kenyans
over the years (together with GOK officials),Kamani was the private
sector mastermind behind several of the 18 security-related
procurement scams that spanned both the Moi and Kibaki
administrations and collectively became known as the Anglo-Leasing
cases. The term "Anglo-Leasing," in fact, comes from the name of a
company that received substantial payments from the Kenyan government
without delivering any goods or services in 2003-04. Much of the
money was returned after the scandals were exposed in mid-2004. Upon
investigation, Anglo-Leasing turned out to be a paper company without
a physical presence registered in the UK in the name of Kamani's
relatives.
9. (SBU) Kamani left the country under a cloud of suspicion in 2006
and was made ineligible for a U.S. visa in May 2006 under Section
212(f) of the Immigration and Nationality Act (INA). At that time,
the KACC was offering a KSh 100,000 reward for anyone who assisted in