Business Daily (Nairobi)
Albert Muriuki
24 April 2008
Nairobi — At the 15 year-old Grand Regency Hotel in Nairobi, the automatic doors slide open as you enter the freestanding monolith that graft built. In the evening, the well-lit parking lot is usually full of limousines as power brokers and seekers congregate at The Summit, a top floor exclusive bar and restaurant, where the who-is-who in Nairobi meet.
Of late the 12-storied facility was getting neglected and early this year a leaking roof at the main lobby saw management place a container to gather the dripping water.
And then came the shocker of the week that saw knives drawn as the Grand Regency took centre stage in the diplomatic fights between Indian and Libyan investors.
Kamlesh Pattni, the man who built this facility, had all of a sudden lost interest in it and was handing it back to the Central Bank of Kenya citing "conscience" as his main reason. The departure of Mr Pattni from the Grand Regency has re-opened debate and a vicious behind-the-scenes battle between the various interests as the facility goes up for grabs.
A group comprising Libyan investors trading as Libyan Arab African Investment Company is pitted against another one of Indians who recently bought a vacant plot next to the hotel. The Indian group boasts of the fifth richest man in the world, Mukesh Ambani, who early last month partnered with an Arabian real estate firm, Arrow Webtex, to form Delta Resources Limited and bought a number of plots close to the hotel. At the Central Bank of Kenya, Governor Njuguna Ndung'u sounds like a worried man.
This week, he was forced to deny that CBK had sold the hotel to Libyan interests. Prof Ndung'u threw several spanners in the works including an allegation that CBK had not received a penny from receivers appointed by the High Court. That not only opened a new battle ground, but left many questions unanswered on the whereabouts of billions of shillings that the hotel earned since 1999. That CBK was taking the battle to the High Court was interesting but not entirely new.
When retired justice Samuel Oguk quit the bench in 2003, the main charge facing him was that he had fraudulently obtained Sh520,000 from a former receiver-manager of Grand Regency, Mr PV Rao.
Mr Oguk happened to be the judge who allowed the eviction of a CBK receiver manager who by the time he departed the bank had recovered Sh460 million. After that the CBK was involved in an unending tussle, and whether the judiciary was compromised will never be known since Mr Oguk opted to retire rather than face scrutiny.
He blamed his fall over the Grand Regency on two people: Gideon Moi and Joshua Kulei. But there was more to it that tainted the judiciary, which has yet to explain the fate of the billions that its appointed receivers got.
Ponangippali Venkata Ramana Rao, once a receiver at Grand Regency, is the man who blew the top on the judiciary. In a sworn affidavit, now a court document, he accused Justice Oguk of irregular involvement in the facility alleging that the judge and his nephew ran, but did not pay, high entertainment bills at the hotel. The employees were surcharged and they informed the then KACA which investigated Mr Oguk. He denied obtaining the money fraudulently but opted to retire instead of face a tribunal that was to be set up to try him.
Years later, the Grand Regency is still claiming more victims as the Goldenberg saga continues to dominate the scene. Apparently, this was the scenario that Prof Ndung'u appears to have been painting as he went to protect CBK from blame and as he put the Kenyan judiciary on the spot. But this time round he also pulled in the anti corruption fighting body - the Aron Ringera run Kenya Anti Corruption Commission.
Seemingly, whatever Mr Pattni touches erupts into a cloud of controversy and intrigue that now seem to be pulling in CBK, KACC, receiver managers appointed by the High Court and interested parties who want to clinch the hotel valued at Sh2.7bn in 1997 by the CBK.
Prof Ndung'u was willing to spill blood: "Since 1999 when the bank's (CBK) appointed receiver manager Joseph Kittony was removed by the High Court and replaced with receivers appointed by the High Court, the Central Bank has not received a single penny from the hotel. During Mr Kittony's term as receiver manager, the Central Bank recovered a sum in excess of Sh460m from the operations of the hotel."
Through court orders and injunctions, Prof Ndung'u says, the Central Bank has over the years been totally locked out of the control and management of the Grand Regency. So, was somebody benefiting illegally from the hotel? Who?
Since 1999, the Grand Regency has on a conservative estimate made Sh2.3billion that has apparently disappeared into thin air and cannot be accounted for. Numerous calls made by Business Daily to the offices of the current receiver managers were not returned.
Consequently, the books of accounts for the past 10 years could not be obtained. The two receiver managers, Peter Ndaa and H. W. Gichohi, were appointed through mutual agreement between Mr Ringera's KACC and Mr Pattni's Uhuru Development Company Limited in 2004.
"The Central Bank of Kenya being the chargee was not consulted or involved in the appointments," said Prof Ndung'u, while accusing the two joint receiver managers of having "spent most of their time fighting each other instead of professionally managing the hotel". These grave allegations put KACC and the judiciary in the spotlight.
"Actually, 2.3 billion is a conservative estimate as there were years that were so good for hotels in Nairobi that probably the Grand Regency made in excess of Sh300m a year," said a lawyer versed with the issue and who declined to be named. During the judicial commission of inquiry into the Goldenberg affair, the chairman of the tribunal, Court of Appeal judge Samuel Bosire, openly questioned some of the actions of former President Daniel arap Moi in meddling in the judiciary irrespective of the manner in which Mr Pattni was using it to defeat justice.
The delays and the multiplicity of cases that gave Mr Pattni and other accused persons the perfect excuse to dodge justice started way back in the 90s, creating a perfect avenue to ensure that the Grand Regency continued being a cash cow. The details, though, are missing and the links can only be drawn with dotted lines.
By September 1999, these criminal cases were still pending while one was heard before Unita Pamela Kidula, who was then a chief magistrate, and prosecuted by Bernard Chunga, who was the then Director of Public Prosecutions. Mr Chunga was personally prosecuting the Goldenberg cases. But a twist occurred on 13 September 1999 when Mr Moi appointed Mr Chunga to the position of Chief Justice and in turn put the magistrate who was hearing the case, Mrs Kidula, in Mr Chunga's former position as Director of Public Prosecutions.
"This was a strange and curious reversal of roles. In our view the President should have known and understood the critical role of these two lawyers in the hearing and prosecution of at least the part-heard Goldenberg case," said Justice Bosire. "He must have understood that his action would completely disrupt those proceedings and would, after seven years of waiting, mean that the case would need to be commenced afresh," he added in his recommendations presented to President Kibaki.
While he noted that it was speculative to imply that Mr Moi's appointment of the two was meant to derail the Goldenberg prosecutions, "this was nevertheless the effect," he said. In its draw, the scam pulled in two senior officials of the CBK, a governor and his deputy, Eric Kotut and Elphas Riungu, a former head of intelligence, the late James Kanyotu, and a commissioner of mines, Collins Owayo.
But it was not only the government that the Goldenberg's tentacles entangled. The doyen of opposition politics in Kenya, the late Jaramogi Oginga Odinga, the late Michael Kijana Wamalwa and the outspoken former Kabete MP Paul Muite were also mentioned in it.
During the Goldenberg hearings, the issue was raised about a company called Multiphasic, which received Sh20m from Mr Pattni for seemingly no goods or services rendered. Multiphasic was allegedly "closely associated" with Mr Muite. Mr Pattni gave no evidence as to why he gave the firm the money, only saying it was not related to Goldenberg. But Justice Bosire and his team thought otherwise.
The ongoing saga, playing on after the transfer of ownership of the hotel to the CBK, is erringly characteristic of the intrigues and side shows that always follow Mr Pattni's money and the Goldenberg saga that Justice Bosire concluded cost Kenya at a minimum Sh25billion. According to, Prof Ndung'u, CBK has hired audit firm Ernst and Young as receiver managers for the hotel as it prepares to dispose off the hotel and recover its money.
But if the intrigues coming to the fore are anything to go by, vested interests that have been skimming the public and taking the profits of the hotel for the past 10 years are not happy. The automatic doors may close them in.
CAST OF CHARACTERS THAT HANDLED 'GRAND' SAGA
Mr Amos Wako
Attorney-General
Kenya 's longest serving Attorney. He has never been able to bring a single suspect of the Goldenberg scandal to book. Claimed that he was not in the know about the transfer of ownership of the Grand Regency hotel from Mr Pattni to the CBK.
RTD JUSTICE Samuel Oguk
Presiding Judge
He presided over the appointment of Grand Regency's receiver-managers. He was later accussed of receiving over Sh500,000 from one of the receievers, P V Rao. He denied the allegations but decided to step down rather than face a tribunal set up by President Kibaki to try him.
Mr Kamlesh Pattni
Businessman
The architect of Goldenberg scam, built the Grand Regency Hotel with funds stolen from the Central Bank of Kenya. Mr Pattni, deftly used the courts to frustrate justice. Initially a British citizen and the son of a gold dealer in Mombasa, he was named by the Justice Bosire lead commission of inquiry into the Goldenberg affair as one of the principal persons whom the Attorney General was to look into for possible criminal and civil prosecution.
JUSTICE samuel bosire
Former presiding judge
A Court of Appeal judge, Mr Bosire was the head of the commission of inquiry into the Goldenberg affair. His commission questioned the shuffling of lawyers handling the Goldenberg cases by former Presidnet Daniel Moi, calling it a "a strange and curious reversal of roles".
Mr Paul Muite
Lawyer to Pattni's foe
He was once a lawyer to Ibrahim Ali, Mr Pattni's nemesis, and has been working to clear his name over allegations he received Goldenberg money. "We think this was Goldenberg money and the circumstances and the suspect manner indicate that the parties (Muite and Pattni) were aware that this was Goldenberg money," the Bosire lead commission said.
Gibson Kamau Kuria
Lead Counsel
Served as the lead counsel in the Goldenberg Commission. He was embroilled in controversy over the appointment of his relative as a joint receiver. Mr Kuria admitted that his relative was working at the hotel, but that he had not been involved in his appointment.
CHRONOLOGY OF EVENTS TO DATE
1993: Grand opens doors
The Grand Regency opens its doors for the first time. It was the newest, most modern and luxurious hotel in Kenya . Although placed under receivership soon after, the managers claimed to strive to "build and run a first rate international hotel that would be a source of national pride and a flag bearer for our all important tourist industry. In the circumstances, it is worth reminding ourselves that, thorny side issues notwithstanding, The Grand Regency continues to be fully operational as a hotel without any compromise whatsoever to acknowledged professional standards," they said in a paid up advertisement in the media.
1997: Grand value set
Grand Regency is valued as a going concern and valued to be worth Sh2.1billion at the time. Pattni is charged in court once again in relation to the Goldenberg and Grand Regency.
1999: LSK and Raila file suit
The Law Society of Kenya (LSK), together with Raila Odinga, start a private prosecutions against Pattni and two others. The AG is spurred into action by the private prosecutions and takes over them. "But even after charging the suspects which it had selected the Attorney General's office appears to have proceeded with the case in a most haphazard and lethargic fashion." Said the Commission of inquiry into the Goldenberg affair about the new prosecutions.
2003: Oguk retires
Justice Samuel Oguk retires from the Judiciary. Having been accused of fraudulently obtaining Sh520, 000 from a former receiver-manager of Grand Regency, Mr Rao, Justice Oguk denied the charges but opted to retire instead of facing a tribunal set up to try him.
2003: Inquiry commences
The judicial commission of inquiry into the Goldenberg affair is created by a gazette notice. Justices Samuel Bosire, Daniel Aganyanya and lawyer Peter Le Pelley are appointed to be the commissioners of the inquiry by President Kibaki. In October, the appointment of Justice Daniel Aganyanya is revoked and Nzamba Kitonga is appointed to replace him.
2003: KACC files suit
The Kenya Anti Corruption Commission files a suit on behalf of the Central Bank of Kenya for the purposes of recovering the Grand Regency Hotel. During the tenure of the case, the hotel is placed under the management of two receivers appointed by the Court after consent of the KACC and Uhuru Highway Development Ltd, owned by Pattni.
2006: Commission hands over report
Three years after it was created, the commission of inquiry into the Goldenberg affair hands over the report on its findings to the president in a function at the State House.
2008: KACC registers consent
The Kenya Anti Corruption Commission (KACC) registers consent to the effect that Mr Kamlesh Pattni and Uhuru Highway Development transfer ownership and all their rights and interests in the Grand Regency together with all improvements including fixtures to the Central Bank of Kenya. "The Commission views the recovery of the Grand Regency Hotel as a landmark in its asset recovery efforts," says the Director of KACC, Rtd Justice Aron Ringera.
2008: CBK boss says no funds receieved
Professor Njuguna Ndungu claims that since 1999, the Central Bank of Kenya has not received a single cent from the receiver managers of the Grand Regency.
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