Kenya’s Corruption Scandals

Posted: March 8, 2014 in General

Political corruption in the post-colonial government of Kenya has had a history which spans the era of the Jomo Kenyatta and Daniel arap Moi’s KANU governments to Mwai Kibaki’s PNU government. In the Corruption Perceptions Index 2012 Kenya is ranked 139th out of 176 countries for corruption, tied with Azerbaijan, Nepal, Nigeria, and Pakistan.

It is estimated the average urban Kenyan pays 16 bribes per month. Most of these bribes are fairly small but large ones are also taken – bribes worth over 50,000 Kenyan shillings (€600, US$700) account for 41% of the total value. There is also corruption on a larger scale with each of the last two regimes being criticised for their involvement.

Despite market reforms, several business surveys reveal that business corruption is still widespread and that companies frequently encounter demands for bribes and informal payments to ‘get things done’ in Kenya. The public procurement sector in Kenya suffers widespread corruption. The use of agents to facilitate business operations and transactions in Kenya is widespread and poses a risk for companies, particularly at the market entry and business start-up stage.

Despite positive developments, the Kenya Anti-Corruption Commission (KACC) was disbanded in 2011 and replaced by the newly instated Ethics and Anti-Corruption Commission. Observers describe the new agency as superficial.

THE CHRONOLOGY

Before 1990

Between 1986 and 1991 the construction of the Turkwel Hydroelectric Power Station was riddled with claims of corruption. The dam was eventually built at three times the estimated cost, twice the allocated amount and producing energy significantly below capacity

1990–1999

The longest-running scandal is the Goldenberg scandal,where the Kenyan government subsidised exports of gold, paying exporters in Kenyan Shillings (Sh) 35% over their foreign currency earnings. In this case, the gold was smuggled from Congo. The Goldenberg scandal cost Kenya the equivalent of more than 10% of the country’s annual GDP.

In 1998, political scientist Mutahi Ngunyi’s NGO – Series for Alternative Research in East Africa (SAREAT) engaged John Githongo to edit a regional political economy magazine, East African Alternatives. The magazine folded after an audit instigated by the lead donor Ford Foundation found suspected misappropriation and collusion on the part of Ngunyi, who was executive director of SAREAT and Dr Jonathan Moyo, who was the programme officer at the Ford Foundation in charge of disbursing the resources to the NGO. They have both been sued and the matter is still in court. It is known that the Ford Foundation has accepted Githongo’s offer to be a prosecution witness in the case.

A Sh360 million helicopter servicing contract in South Africa. Military officers had argued that the contract was too extravagant and servicing the helicopters could be done locally. Kenya Air Force (KAF) went ahead to spend Sh108 million as a down payment for servicing the Puma helicopters, whose tail number is logged as 418 at Denel Aviation, a South African firm.

2000–2009

In 2003, military was split over plans to buy new Czech fighter jets. The plan to buy the jet fighters would have cost taxpayers Sh12.3 billion.

A Sh4.1 billion Navy ship deal. A Navy project was given to Euromarine, a company associated with Anura Pereira, the tender awarded in a process that has been criticised as irregular. The tender was worth Sh4.1 billion. Military analysts say a similar vessel could have been built for Sh1.8 billion.

Chamanlal Kamani had been involved in a supply contract, as Kamsons Motors. Kampsons tendered for the supply of Mahindra Jeeps to the Police Department in the mid 1990s for close to Sh1 million (US$13,000) each, at a time when showrooms would have charged customers a sixth of the price. Moreover, the vehicles were being bought for a government department and were therefore imported duty-free. Few of the more than 1,000 units that were imported over several years are in service today.

The Kamanis were also involved in a deal to build a CID forensic laboratory. On 7 June 2004 an amount of $4.7 million was wired back. The payment was a refund against the money paid for the Criminal Investigations Department forensic laboratory. Another euro 5.2 million was paid back in respect of the E-cop project, which involved computerisation of the police force and the installation of spy cameras in Nairobi by Infotalent Systems Private Limited.

The Prisons department lost $3 million after contracting Hallmark International, a company associated with Deepak Kamani of Kamsons Motors, for the supply of 30 boilers. Only half of the boilers were delivered – from India and not the United States as had been agreed.

The construction of Nexus, a secret military communication centre in Karen, Nairobi. The Government spent Sh2.6 billion (US$36.9 million) to construct the complex. Three years later, military personnel have not moved into the centre. A phantom company, Nedermar BV Technologies, which is said to have its headquarters in Holland, implemented the secret project situated along Karen South Road. Nedermar is linked to businessman Anura Pereira. However, Pereira has denied this. The tendering process for the Nexus project was circumvented as DoD’s Departmental Tender Committee. Funding for the project was made through the Ministry of Transport and Communications. The complex is currently headed by Colonel Philip Kameru. Nexus was first meant to be an ammunition dumpsite before it was turned into a military communication and operations centre. Construction continued without any site visits by either the DoD staff or Ministry of Public Works officials. The Nexus project was implemented during the tenure of General Joseph Kibwana.

In 2005 plans to buy a sophisticated £20 million passport equipment system from France, as government wanted to replace its passport printing system, created conditions for corruption scandal. The transaction was originally quoted at 6 million euros from François Charles Oberthur of Paris (a supplier of Visa and MasterCards) but was awarded to a British firm, the Anglo-Leasing and Finance Company Limited, at 30 million euros, who would have sub-contracted the same French firm to do the work. Despite the lack of competitive tendering Anglo Leasing was paid a “commitment fee” of more than £600,000. Anglo Leasing’s agent is a Liverpool-based firm, Saagar Associates, owned by a woman whose family has enjoyed close links with senior officials in the Moi regime. Company records show Saagar Associates is owned by Mrs Sudha Ruparell, a 47-year-old Kenyan woman. Ruparell is the daughter of Chamanlal Kamani, the multimillionaire patriarch of a business family that enjoyed close links with senior officials in the Moi regime. Anglo Leasing made a repayment of euro 956,700 through a telegraphic transfer from Schroeder & Co Bank AG, Switzerland on 17 May 2004.

The local chapter of Transparency International and the Kenya National Commission on Human Rights (KNCHR), a government body released a report in February 2006, stating that between January 2003 and September 2004, the National Rainbow Coalition government spent about $12-million on cars that were mostly for the personal use of senior government officials. The vehicles included 57 Mercedes-Benz, as well as Land Cruisers, Mitsubishi Pajeros, Range Rovers, Nissan Terranos and Nissan Patrols. The $12-million substantially exceeded what the government spent over the 2003/04 financial year on controlling malaria – “the leading cause of morbidity and mortality in Kenya”, says the report.

In late February 2006, the newspaper The Standard ran a story claiming that president Mwai Kibaki and senior opposition figure Kalonzo Musyoka had been holding secret meetings. On 2 March at 1:00 am local time (2200 UTC on the 1st), masked gunmen carrying AK-47s raided multiple editorial offices of The Standard, and of its television station KTN. They kicked and beat staff members, forcibly took computers and transmission equipment, burned all the copies of the 2 March edition of the newspaper, and damaged the presses. At KTN, they shut down the power, putting the station off the air. Initially, the Kenyan information minister claimed no knowledge of the raid, but it has since revealed that Kenyan police were responsible. The Ministry of the Internal Security later stated that the incident was to safeguard state security. “If you rattle a snake you must be prepared to be bitten by it,” John Michuki said. Three journalists at The Standard, arrested after the critical story was printed, are still being held without charge. The story now also features the bizarre case of two Armenian businessmen, mocked in the press for their taste for heavy gold chains, watches and rings, referred to as Mercenaries, who the opposition says led the raid and had shady dealings with Kibaki’s government.
In November 2006, the government was accused of failing to act on a banking fraud scam worth $1.5bn involving money laundering and tax evasion, reported by whistle-blowers as early as 2004. Investigators believe sums worth 10% of Kenya’s national income are involved. A recent auditor’s report says the scale of the operations “threatens the stability of the Kenyan economy”.

In November 2006, British Foreign Office minister Kim Howells warned, that corruption in Kenya is increasing the UK’s exposure to drug trafficking and terrorism. “People can be bought, right from the person who works at the docks in Mombasa up to the government. (…) This weakness has been recognised by drug-traffickers and probably by terrorists too.” Said Howells for the BBC.

On 31 August 2007, The Guardian newspaper featured on its front page a story about more than GBP 1 billion transferred out of Kenya by the family and associates of former Kenyan leader Daniel arap Moi. The Guardian sourced the information from the Wikileaks article The looting of Kenya under President Moi and its analysis of a leaked investigative document (“the Kroll report”) prepared for the Kibaki government in 2004 to try to recover money stolen during Moi’s rule.

On 2007-09-06 parliament passed the Statute Law (Miscellaneous Amendments) Bill, restricting investigations by the Kenya Anti-Corruption Commission to offences committed prior to May 2003, excluding the Goldenberg and Anglo-Leasing scandals and other major cases. The move was condemned by anti-corruption campaigners; Mwalimu Mati, former chief executive of the Transparency International Kenya Chapter, declared that “grand corruption has swallowed the government and parliament that Kenyans elected to fight it in 2002”. In response to public outrage generated by the move, President Kibaki announced that he would veto the bill.

In September 2007, Wikileaks released documents exposing a 500 million Kenyan shilling payroll fraud at Egerton University] and subsequent cover up, now the subject of ongoing legal dispute in the High Court.

On 28 September 2007, Wikileaks released 28 investigative documents] exposing a US$1.5 billion money laundering fraud by Charter House Bank Ltd. Re-reported in the Kenyan Standard newspaper.

In June 2008, the Grand Regency Scandal broke, wherein the Central Bank of Kenya is alleged to have secretly sold a luxury hotel in Nairobi to an unidentified group of Libyan investors for more than 4 billion Kenyan Shillings (approx US $60 million) below the appraised market value. Finance Minister Amos Kimunya negotiated the sale, and was censured in a near-unanimous motion by the Kenyan Parliament, though he vehemently denies the charges. This follows on the heels of the Safaricom IPO, overseen by Kimunya, which has been alternatively praised and questioned for possible corruption in the execution of the sale. Safaricom is the largest mobile phone service provider in Kenya, having operated with a near-government monopoly for many years. The government of Kenya sold its 50% stake in Safaricom in the IPO.

In January 2009,
a scandal became public over the sale of imported maize.

The 2009 Triton Oil Scandal regarding the unauthorised releasing of oil by Kenya Pipeline Company (KPC) without informing financiers became public in January 2009.

2010–Present

In October 2012, allegations surfaced that top Foreign Affairs ministry officials ignored land offered by Japan that could have saved the country loss of Sh1.1 billion. The scandal led to the resignation of the then Foreign Affairs Minister Moses Wetangula.

In October 2010, the Department of Defence uncovered a bribery scandal involving senior Kenya Defence Force Officers in the corrupt Sh1.6 billion purchase of armoured personnel carriers from South African company OTT Technologies (Pty) Ltd. Minister of Defence Yusuf Haji retired several high-ranking officers in January 2011 accused of taking bribes by OTT Technologies (Pty) Ltd, and the matter was referred for further investigation to Parliament. The September 2012 Report on Military Modernization Programmes by the Departmental Committee on Defence and Foreign Relations found that the irregular procurement of the PUMA M26 armoured carriers had violated multiple sections of the Public Procurement Act 2005, that OTT Technologies (Pty) Ltd’s business partners in Kenya had been identified by the US Government as being involved in international crime and drugs smuggling, and recommended that OTT Technologies (Pty) Ltd be barred from doing any business with the Government of Kenya in the future.

In 2013 President Uhuru Kenyatta led a delegation to China that obtained a loan to help in its projects .The controversy over Kenya’s second railway tender is expected to escalate following fresh revelations that the State Law Office had raised a stink over what it terms exaggerated construction costs.
In a comparative analysis of the cost of the railways Kenya and Ethiopia are building, the Attorney General Githu Muigai raised serious integrity questions about how the total cost rose from the initial Sh220, 921,502, 221.08 quoted by China Road and Bridge Corporation in its acceptance of the tender award letter dated July 2012 to the current Sh1.3 trillion. The variations are shaping the railway project into the country’s biggest financial scandal, beating the Goldenberg, Anglo-leasing and Triton frauds.
It also emerged that the company that was awarded the tender had already been blacklisted by the World Bank

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