Thirty years later, multi-billion shilling Goldenberg scandal still a riddle wrapped in a mystery

Deepark Kamani, former head of debt management at the Treasury David Onyonka and former PS Interior, Dave Mwangi, at a Milimani court. [Collins Kweyu, Standard]

It is Winston Churchill who, 84 years ago, described Russia as "a riddle wrapped in a mystery inside an enigma". He went on to say Russia plays by "own rules usually to the detriment of those who choose more open regulations."

To the people of Ukraine - and many other people of goodwill - Churchill's description rings true today as it did at the time he lived.

In Kenya, the Goldenberg scandal is one of the riddles wrapped in a mystery inside an enigma. It is now 30 years since it first exploded in the media in February 1993.

Earlier on, an Auditor General report had hinted to the fraud. But then as now, Auditor-General reports in Kenya are treated with same casualness one takes a crime fiction or movie! Goldenberg balloon first leaked when David Munyakei, a clerk at the Central Bank of Kenya noted some voodoo arithmetic regarding export compensation paid to a company by name Goldenberg International for gold and diamonds exported from the country, which was all fiction.

On raising questions, the young man didn't know what hit him as he suddenly found himself jobless, penniless and finally killed by a "sudden" death. At that early stage, the Goldenberg scandal was understood to have been a fraud involving just payments by the Central Bank to a company that pretended to export gold and diamonds when all it had done is to sell what Chief Justice Martha Koome would call 'hot air'!

It isn't until over decade later when a judicial commission of inquiry established that "export" compensation was just a tip of the iceberg in a complicated web of inter-related thieving schemes.

While only Sh355 million was established to have been paid through the export compensation scheme, the commission of inquiry concluded that Sh158.3 billion vanished in the entire Goldenberg criminal enterprise, which was equivalent to more than 10 per cent of the country GDP at the time.

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Experts thought the commission only got part of the story and that much more was carted away by conspirators in the heist.

Three decades later, negative effects of the scandal still reverberate in the country. Suffice it to mention that before Goldenberg, the furthest Kenya Shilling had sunk was Sh25 to a dollar. In the aftermath of the scandal, the shilling was whipped three times over and has never recovered!

But let's begin at the beginning. In early 1970s, the Kenya government had come up with the Export Compensation Scheme as a way of giving incentives to exporters who were earning the country much-needed foreign exchange in hard currency. The idea was that for every foreignexchange brought into the country, the Central Bank would pay 15 per cent above the equivalent worth in Kenya shillings.

The incentive had legal grounding in the Export Compensation Act, which listed specific items for which export compensation would be paid. Gold and diamonds weren't in the list for the simple reason that Kenya doesn't have commercially viable deposits of either gold or diamonds.However, gold and diamonds smuggled from outside the country have always changed hands in Kenya's 'black' market.

Enter George Saitoti

It wasn't until 1985 when then Assistant minister in the Office of the President John Keen presented to the Ministry of Finance a proposal in which he said he was in position to scavenge for the little gold available in Kenya and legally export to earn the country foreign exchange.

He wanted assurance that he too would be paid export compensation if he did so. Finance minister at the time was Prof George Saitoti, a friend to Assistant minister John Keen. Both happened to come from Kajiado North constituency where they were elected MPs at different times.

But so as not to appear to favour his friend and neighbour in Kajiado, minister Saitoti instructed technocrats in his office to go through Keen's proposal and give him their honest opinion. They returned a verdict of "rejected" and that was end of it.

There lies a story. Many years later, I interacted John Keen, now deceased. One day I asked him what his proposal to export gold was all about. He dismissed the subject with a wave of hand as he said: "It was never my idea. It was Saitoti's," he told me.

On further probing, he told me Saitoti and those "who had sent him" wanted to test the waters but on rejection by experts at the Treasury, they got cold feet and retreated. But not for long......They would return.

Keen declined to disclose to me who it is who had sent Saitoti to "test the waters" on what eventually became the genesis of the Goldenberg scandal. In a different matter, it would be recalled that at the onset of the campaign for multi-partyism, Keen as an Assistant minister in the Office of the President, tabled in Parliament what was called a "shadow cabinet" allegedly formed by multi-party crusaders with intention to topple the government. Many thought it was all cock-and-bull story.

Months later, Keen who had since rebelled against the government and sacked from his position, made a confession that he had nothing to do with the "shadow cabinet" list which he described as "some rubbish I was instructed to take to Parliament!"

Ghost returns

Five years after experts rejected Keen's proposal, the ghost resurfaced in different form and face. Kamlesh Pattni, then 26, appeared at the Treasury with an almost carbon copy of what Keen had brought forward.

Only that, unlike the indifferent Keen who didn't care less whatever the experts said, the fast-talking Pattni wasn't only passionate about the project but dropped a few names here and there to intimidate bureaucrats at Treasury.

The name of the person Pattni gave as co-director with him in the proposing company, Goldenberg International, though listed as "ordinary farmer" was the type that sends shivers down the spine. It was James Kanyotu, then director of the dreaded national spy organ, the Directorate of State Intelligence then popularly known as the "Special Branch" later renamed National Intelligence Services (NIS).

Not your mother's money!

Once again Prof Saitoti, still the Finance minister but now promoted to double as Vice President, played the same charade he did when Keen appeared before him with similar proposal.

He pretended not to have prior knowledge of the goings-on, let alone know who Kanyotu was in the scheme of things.

He instructed Pattni's proposal be forwarded to experts in his office for an opinion. Years later, a senior official at the Treasury told me that as Saitoti gave the instructions he saw "a shift to different forest by same monkeys!"

Not to be intimidated, experts at the Treasury returned a "reject" verdict on Pattni's proposal. Then night telephone calls came demanding to know whether the money Treasury wanted Pattni denied "belonged to anybody's mother!"

At that point, Prof Saitoti hurriedly recalled Pattni's proposal and on the covering note wrote: "Approved" and initialed "G.S." The rest is history.