How CBK boss made it easy for Libyans to buy hotel

By James Anyanzwa

Central Bank Governor Njuguna Ndung’u deliberately deceived institutions and the public in all aspects of the sale of the Grand Regency Hotel.

The Cockar report says the Governor denied other parties (local or foreign), the opportunity to bid for the hotel.

The CBK eventually sold the hotel to the Libyan African Investment Company (Laico) at Sh2.9 billion, an offer which then Finance Minister Amos Kimunya said was ‘too good’ to refuse.

The commission, however, established that Prof Ndung’u had no acceptable reason for his determination to sell the hotel to Laico only.

The hotel has since been renamed Laico Regency.

The commission indicated that Ndung’u was dishonest and lacked good faith, credibility and transparency in the disposal of the hotel, initially owned by businessman Kamlesh Pattni.

Board not briefed

The commission’s mandate was to investigate the roles played by Mr Kimunya, Ndung’u, CBK’s legal secretary Ken Abuga and other persons in the transaction.

The commission noted that although events towards the sale started in September 2007, the Governor did not brief the CBK Board.

It was evident that the Governor invited Kacc to a meeting in January last year ostensibly to explore a proposal for settlement regarding the hotel from Mr Pattni.

The discussions led to the registration of the settlement in April last year, resulting in the handover of the hotel to CBK.

In the meantime, the Governor wrote to valuers on January 21 last year to value the hotel for accounting purposes. But although negotiations over the sale were progressing between the Governor and Laico, the commission discovered that none of these developments had been brought to the attention of Kacc, who at that time, engaged with CBK in discussions with Pattni.

Ndung’u wrote to Laico on March 25, last year accepting their offer to buy the hotel for US$45 million.

On March 27 last year, he also wrote to Muthoni Gichohi and Company Advocates, instructing them to act for CBK in the sale of the hotel. "None of these developments was brought to the attention of Kacc," says a report on the commission’s findings.

"None of these developments seem to have been shared with the CBK Board either."

Ndung’u also suggested that the hotel be sold through the Uhuru Highway Development, owned by Pattni arguing: "CBK considers that it will be strategic and of national interest.... that UHDL sells the hotel."

This position taken by CBK, however, resulted in differences with Kacc.

While CBK’s confidential brief forwarded to Kacc on April 21 last year argued strongly against selling the hotel on the basis of the statutory power of sale, the commission established the Governor ‘proceeded to do just that.’

He abandoned his proposal that the sale of the hotel be made through UHDL and instead insisted that it had been through the CBK’s charge of the hotel.

Kacc director, on his response dated April 22 last year to the Confidential Brief, informed the Governor that upon the registration of settlement dated April 9, the ownership of the hotel vested in the CBK and so it could be disposed of only under strict adherence to the provisions of the Public Procurement and Disposal Act 2005.

Kacc also told Ndung’u that since the hotel had been recovered by CBK, it was no longer open to the bank to exercise its statutory power of sale.

Power of sale

The Governor, however, on April 29 last year in HCCC No.589 of 1999, caused consent to be recorded, purporting to allow CBK to exercise its statutory power of sale.

The Governor seemed to have been well satisfied by imperfect information from the Public Procurement Oversight Authority (PPOA) in a letter dated April 30 last year to the effect that since the hotel was charged to CBK for outstanding debts, its title was not held by CBK but by a private entity and so its disposal was not within the ambit of the Public Procurement and Disposal Act.

"This advise by PPOA was based on incomplete information relating to the charge and ownership of the hotel supplied by the Governor in his letter of April 28, 2008," says the report.

"To us, this apparent clearance from PPOA was nothing more than an exercise in public relations by CBK."

Although the Governor had presumed that the sale of the hotel to Laico was a Government-to-Government transaction, he did not bother to seek advise from the Attorney-General, particularly in view of his disagreement with the views of Kacc director over the method to be used in the disposal of the hotel.

"The need to consult the AG was even more compelling in view of the undisputed public interest in the hotel," says the report.

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