Goldenberg scandal
Encyclopedia
The Goldenberg scandal was a political scandal
where the Kenya
n 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 shilling
s) 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
, 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.
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.
. However, it was Pattni who established Goldenberg International to implement the scheme. 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.
The scheme began in 1991, almost immediately after the Kenya government, following directions from the IMF, 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 2006, leaving three daughters and his wife. 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.
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.
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. However, the Commission concluded that in respect of Nicholas Biwott, who had not been in government at the time, “no moneys of Goldenberg were involved”, the matter was outside the terms of reference and the commission could enquire into it.
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.
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."
, 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. The prosecution hopes that Werunga will be their witness.
In August 2006 it was reported that a constitutional court had ruled that Saitoti could not be charged. The Kenyan media reacted negatively to the decision. The Kenya Times
saw political motives behind it, while The Daily Nation
editorialised that the "War on graft is, indeed, lost".
Political scandal
A political scandal is a kind of political corruption that is exposed and becomes a scandal, in which politicians or government officials are accused of engaging in various illegal, corrupt, or unethical practices...
where the Kenya
Kenya
Kenya , officially known as the Republic of Kenya, is a country in East Africa that lies on the equator, with the Indian Ocean to its south-east...
n government was found to have subsidised exports of gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
far beyond standard arrangements during the 1990s, by paying the company Goldenberg International 35% more (in Kenyan shilling
Kenyan shilling
The shilling is the currency of Kenya. It is divisible into 100 cents.-Coins:The first coins were issued in 1966 in denominations of 5, 10, 25 and 50 cents, and 1 and 2 shillings. Twenty-five cents coins were not minted after 1969; 2 shillings coins were last minted in 1971...
s) than their foreign currency earnings. Although it notionally appears that the scheme was intended to earn hard currency
Hard currency
Hard currency , in economics, refers to a globally traded currency that is expected to serve as a reliable and stable store of value...
for the country, it is estimated to have cost Kenya the equivalent of more than 10% of the country's annual Gross Domestic Product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
, and it is possible that no or minimal amounts of gold were actually exported. The scandal appears to have involved political corruption
Political corruption
Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...
at the highest levels of the government of Daniel Arap Moi
Daniel arap Moi
Daniel Toroitich arap Moi was the President of Kenya from 1978 until 2002.Daniel arap Moi is popularly known to Kenyans as 'Nyayo', a Swahili word for 'footsteps'...
. Officials in the current government of Mwai Kibaki
Mwai Kibaki
Mwai Kibaki is the current and third President of the republic of Kenya.Kibaki was previously Vice President of Kenya for ten years from 1978–1988 and also held cabinet ministerial positions, including a widely acclaimed stint as Minister for Finance , Minister for Home Affairs and Minister for...
have also been implicated.
Background
Similar to most countries, Kenya encourages international tradeInternational trade
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...
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
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
earnings with the Kenya central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
received in exchange the equivalent in Kenyan shillings plus 20 percent.
However, gold mining
Gold mining
Gold mining is the removal of gold from the ground. There are several techniques and processes by which gold may be extracted from the earth.-History:...
represented a tiny portion of Kenya's GDP, with only one operational gold mine (at Kakamega
Kakamega
Kakamega is a town in western Kenya lying about 30 km north of the Equator. It is the headquarters of . The town has a population of 73,607 ....
). Goldenberg International therefore developed a scheme of smuggling gold into Kenya from Congo
Democratic Republic of the Congo
The Democratic Republic of the Congo is a state located in Central Africa. It is the second largest country in Africa by area and the eleventh largest in the world...
, 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 PattniKamlesh Manusuklal Damji Pattni
Kamlesh Mansukhlal Damji Pattni is a Kenyan businessman implicated in the Goldenberg scandal. Since 1990 he was the chairman of Goldenberg International Ltd,Kamlesh Pattni was born in Mombasa, Kenya...
. However, it was Pattni who established Goldenberg International to implement the scheme. 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
Mwai Kibaki
Mwai Kibaki is the current and third President of the republic of Kenya.Kibaki was previously Vice President of Kenya for ten years from 1978–1988 and also held cabinet ministerial positions, including a widely acclaimed stint as Minister for Finance , Minister for Home Affairs and Minister for...
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.
The scheme began in 1991, almost immediately after the Kenya government, following directions from the IMF, 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
Whistleblower
A whistleblower is a person who tells the public or someone in authority about alleged dishonest or illegal activities occurring in a government department, a public or private organization, or a company...
, 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 2006, leaving three daughters and his wife. 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
Democratic Republic of the Congo
The Democratic Republic of the Congo is a state located in Central Africa. It is the second largest country in Africa by area and the eleventh largest in the world...
, 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 recommended that current Education Minister George SaitotiGeorge Saitoti
Prof. George Kinuthia Saitoti is a Kenyan politician and mathematician who was Vice President of Kenya from 1989 to 1997 and again from 1999 to 2002. He has been Minister for Internal Security since 2008 and Acting Minister for Foreign Affairs since 2010.-Biography and education:George Saitoti is...
should face criminal charges for his actions and that former President Daniel arap Moi
Daniel arap Moi
Daniel Toroitich arap Moi was the President of Kenya from 1978 until 2002.Daniel arap Moi is popularly known to Kenyans as 'Nyayo', a Swahili word for 'footsteps'...
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.
The report said that records presented at the inquiry showed that Lima Ltd, which is associated with Mr Gideon Moi, Mr Nicholas Biwott
Nicholas Biwott
Kipyator Nicholas Kiprono arap Biwott is a Kenyan businessman, politician and philanthropist. Biwott has served as a civil servant, Member of Parliament and government minister, during which time he has held eight senior ministerial positions, worked alongside Kenya’s first three presidents – Jomo...
, and two other people received Sh6.3 million from Goldenberg. However, the Commission concluded that in respect of Nicholas Biwott, who had not been in government at the time, “no moneys of Goldenberg were involved”, the matter was outside the terms of reference and the commission could enquire into it.
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 KilonzoMutula KilonzoMutula Kilonzo is a Kenyan politician and Senior Counsel, currently serving as Minister of Justice after having previously served as the Minister for Nairobi Metropolitan He belongs to the Orange Democratic Movement-Kenya and was elected to represent the Mbooni Constituency.Educated at Mbooni...
- 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 SaitotiGeorge SaitotiProf. George Kinuthia Saitoti is a Kenyan politician and mathematician who was Vice President of Kenya from 1989 to 1997 and again from 1999 to 2002. He has been Minister for Internal Security since 2008 and Acting Minister for Foreign Affairs since 2010.-Biography and education:George Saitoti is...
, who resigned as Education minister. - Goldenberg architect Kamlesh PattniKamlesh Manusuklal Damji PattniKamlesh Mansukhlal Damji Pattni is a Kenyan businessman implicated in the Goldenberg scandal. Since 1990 he was the chairman of Goldenberg International Ltd,Kamlesh Pattni was born in Mombasa, Kenya...
- 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."
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 MoiDaniel arap Moi
Daniel Toroitich arap Moi was the President of Kenya from 1978 until 2002.Daniel arap Moi is popularly known to Kenyans as 'Nyayo', a Swahili word for 'footsteps'...
, 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
Amos Wako
Hon. S. Amos Wako served as th Attorney General of the republic of Kenya for 20 years .Wako was born in Kenya...
. 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. The prosecution hopes that Werunga will be their witness.
In August 2006 it was reported that a constitutional court had ruled that Saitoti could not be charged. The Kenyan media reacted negatively to the decision. The Kenya Times
Kenya Times
The Kenya Times was an English language newspaper published in Kenya published from 1983 to 2010.It was first published on April 5, 1983 and was founded by KANU, then the only legal political party in Kenya. The paper was originally known as the Nairobi Times...
saw political motives behind it, while The Daily Nation
Daily Nation
The Daily Nation is a Kenyan independent newspaper. It is the most influential newspaper in Kenya with a daily circulation of about 205,000 copies. The total readership is likely to be higher as each copy is read by a large number of people...
editorialised that the "War on graft is, indeed, lost".
See also
- Corruption in KenyaCorruption in KenyaPolitical 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 the Mwai Kibaki's NARC government. In the Corruption Perceptions Index 2005 Kenya is ranked 144th out of 159 countries for corruption...
- Anglo Leasing Scandal
- John GithongoJohn GithongoJohn Githongo is a former Kenyan journalist who investigated bribery and fraud in his home country and later, under the presidency of Mwai Kibaki, took on an official governmental position to fight corruption. In 2005 he left that position, later accusing top ministers of large-scale fraud...
- Nicholas BiwottNicholas BiwottKipyator Nicholas Kiprono arap Biwott is a Kenyan businessman, politician and philanthropist. Biwott has served as a civil servant, Member of Parliament and government minister, during which time he has held eight senior ministerial positions, worked alongside Kenya’s first three presidents – Jomo...
External links
- BBC
- A short story on Goldenberg
- USA government study of Kenya's mineral industry(pdf)
- Document attempt by government to place blame on a Canadian
- Forensic accountants traces goldenburg transaction
- This article may explain Goldenburg in a different style
- CNN report on deportation of Canadian
- Involvement of judges in Goldenburg scandal
- Graft evidence stuns Kenyan MPs