Grand Regency: Kenya's Next Corruption Scandal

Today, Amos Wako, the Attorney General stated that he was not consulted in the recent handover of the Goldenberg linked Grand regency Hotel. The hotel was handed over by Kamlesh Pattni the Goldenberg architect to the Aaron Ringera led Kenya Anti Corruption Commission (KACC). KACC later handed over the hotel to the Central Bank of Kenya (CBK). It is now purported that CBK has sold off the hotel to Libyan investors without following due process and at a throwaway price.

Amos Kimunya, the finance minister will be the man on the spotlight and heat is slowly increasing on his seat weeks after his ministry colluded to deny Kenyans the knowledge of Mobitelea and their irregular allocation of Safaricom shareholding.

Here is a collection of stories regarding Grand Regency:

Nation 19-04-2008: Is this another Goldenberg plot?

Fresh questions have emerged over the alleged sale of the Grand Regency Hotel, days after Goldenberg architect Kamlesh Pattni said he had surrendered the multi-billion shilling investment to the Central Bank of Kenya.

Central Bank Governor Njuguna Ndung’u and Kacc Deputy Director Fatuma Sichale at the hand-over ceremony of the Grand Regency Hotel. Photo/ ANTHONY KAMAU
According to sources familiar with the issue and documents in our possession, the hotel at the centre of Kenya’s biggest ever corruption scandal, Goldenberg, may have been secretly sold off to Libyan investors at a throw-away price of Sh1.6 billion against its market value said to be in the region of Sh7.5 billion.

The sources said the hotel may have changed hands or is in the process of being transferred to the Libyan company after Mr Pattni relinquished his rights over the property that has been under the statutory management of the Central Bank of Kenya since 1994.

However, when reached for comment yesterday, the CBK legal director, Mr Ken Abuga, denied reports of the sale.

“The truth of the matter is that the hotel is yet to be sold. As and when it is sold, details of the sale will be released to the public.”

But the Saturday Nation established that a group of lawyers was analysing documents relating to the surrender and alleged sale with a view to taking legal action against the CBK, the Kenya Anti-Corruption Authority (KACC), the Attorney General and Mr Pattni.

The group says it has documents that show the transaction even as they mention the lawyers involved in the deal who, ironically, are in private practice. The involvement ofprivate lawyers in the public transaction has raised eyebrows.

Ultimate disposal

At the centre of the controversy that Kituo cha Sheria executive director Ekuru Aukot calls “Goldenberg Two”, are concerns that the surrender and ultimate disposal of the hotel to the Libyans is irregular.

“Grand Regency is a public asset since Pattni allegedly stole the money that built it. It should thus revert to Kenyans,” says Dr Aukot.

The CBK had attached the hotel because it was built using funds stolen from the public coffers.

Indeed, during the handing over of the hotel to CBK last week, KACC director Aaron Ringera described the surrender as “the happiest day for the commission as we conclude this great recovery of an asset obtained fraudulently using public funds”.

KACC spokesperson Nicholas Simani yesterday promised to release a detailed statement highlighting the status of the hotel.

However, he said that the hotel was their biggest recovery of a public asset so far, placing its value at more than Sh3 billion.


“We handed over the hotel to the Central Bank after receiving from Mr Pattni,” Mr Simani said.

According to the Kituo Cha Sheria director, “it’s not clear to us about the recovery of this asset. The surrender of the hotel appears stage-managed. It is not clear at all”.

Other lawyers interviewed raised questions about the disposal of a public asset without regard to due process.

“The Procurement Act and the Privatisation Act provide that a public asset is disposed of through tendering. You cannot use single-sourcing to sell off a good that belongs to Kenyans,” said a former chairman of the Law Society of Kenya, in apparent reference to reports that CBK may have unilaterally sold the hotel to the Libyan firm. “Single-sourcing is fraudulent.”

According to the lawyer, the Attorney General, CBK and KACC had failed to explain their role in the transaction with Mr Pattni.

“Somebody somewhere is benefiting,” Dr Aukot said, noting that the Grand Regency now being sold for a “paltry” Sh1.6 billion was worth $230 million 15 years ago. “If you value it today it is worth Sh7.5 billion.”

“Kenyans may lose more money than happened during the Goldenberg scandal. Where has the Sh5 billion gone?” asked Dr Aukot. “This is Goldenberg Two.”

Documents made available to the Saturday Nation show an agreement between Mr Pattni and the CBK, in which the businessman seeks a government guarantee against further criminal cases relating to the Goldenberg scandal in which he is accused of making billions of shillings in a fake export compensation scheme.

Tourist hotel

Prior to the surrender, the luxurious tourist hotel in the heart of Nairobi was charged to CBK to secure a Sh2.5 billion debt as obligation to businesses owned by Mr Pattni, arising from his role in Goldenberg.

The hotel was owned by Uhuru Highway Development Company in which Mr Pattni is the principal shareholder.

Mr Pattni was the subject of a Commission of Inquiry into the Goldenberg scandal which started in February 2003 and ended in September 2004.

The commission recommended that he, alongside other beneficiaries, be prosecuted and made to pay back the money they stole.

In one of the new documents prepared by a Nairobi law firm, Mr Pattni resolves to relinquish to CBK “all my proprietary rights and interest”.

He then asks the Government to consider “withdrawing all civil and criminal cases revolving around me, affecting my rights and to enable myself (sic) adopt a fresh chapter in my life consistent with my new calling as a servant of God”.

Mr Pattni cites “negative perceptions in the minds of members of the public about the source of funds employed to construct the hotel” as part of the reasons he is relinquishing the property to the CBK.

Yet the documents show some discrepancy in the transaction. In one of them Mr Pattni promises to dispose of all property rights in the hotel in a bid to free himself of “any encumbrances”.

In another, he writes about his desire to dispose of “all my property rights in the (hotel by selling (it) jointly with Central Bank of Kenya to a buyer free of any encumbrances at market value determined by two reputable valuers…”

The document says the asset is worth Sh1.6 billion.

Yet it is not the hand-over that appears to trouble legal experts.

The manner in which it was done and the subsequent sale is.

Dr Aukot reads mischief in the manner in which the two parties, Mr Pattni and CBK, exchanged the asset.

“For Pattni to just release the hotel without telling Kenyans why and how he is giving it up raises many questions. The surrender is fake; it is stage-managed.”

The Kituo Cha Sheria executive director says the CBK and KACC (whose directors were at the hand-over ceremony) and Attorney General Amos Wako owe Kenyans an explanation on the surrender and subsequent sale.

“The hotel is a public asset, it belongs to Kenyans so we should be told the conditions in which it was surrendered and sold.”

About status

He reads “complicity” between KACC and CBK, the Attorney General in what he terms an irregular deal.

“Is KACC giving corruption a clean bill of health? Are State agencies complicity to corruption?”

He says the receivers, KACC and CBK, should have informed the public about the status of the hotel at the time of surrender by Mr Pattni.

“Kenyans should have been told about the hotel’s turnover, its assets and liabilities. The hotel belongs to Kenyans and they should be thus informed about its status before it changes hands,” said Dr Aukot.

Our efforts to get a comment from Mr Pattni failed. An aide who answered his phone and gave his name as Mr Joye promised to call us back but had not done so by the time we went to press.

Nation (22-04-2008): Uproar over Pattni amnesty plea

The status of cases against Goldenberg architect Kamlesh Pattni remained unclear as lawyers questioned the rationale of a blanket amnesty sought by him.

The businessman, who “gave up” the five-star Grand Regency hotel two weeks ago and sought amnesty, has at least three pending cases relating to the multi-billion Goldenberg scandal, the Nation learnt.

Mr Pattni’s plea read in part: “I hereby humbly petition the Government of the Republic of Kenya in the spirit of reconciliatory treatment to consider withdrawing all civil and criminal cases revolving around me, my associate companies and the Grand Regency Hotel and any other disputes related thereto affecting my rights and to enable myself adopt a fresh chapter in my life consistent with my new calling as a servant of God,” he says.

The surrender

The plea is contained in a document drawn by a city law firm for Mr Pattni.

The revelation drew sharp criticism from lawyers who described the request as amounting to erasing everything that was Goldenberg in which the country lost billions of shillings in fake exports of gold and jewellery under the defunct export compensation scheme.

“Are we bringing Goldenberg to a stop? asked Dr Ekuru Aukot, the executive director of Kituo cha Sheria. “Is KACC giving corruption a clean bill of health? Kenyans should be worried about the consequences of the deal.”

Dr Aukot wondered why the sale should be shrouded in mystery.

“We want to know the circumstances in which the deal was arrived at. Was Pattni paid for the hotel? Was it a blanket amnesty? What about the co-accused? Will they be subject also to such unilateral arrangements?”

Former Law Society of Kenya chairman Abdulahi Ahmednasir said it would be difficult to prosecute the co-accused once the graft watchdog and the AG remove the principal (Mr Pattni) from the equation. He said the amnesty was irregular and sets a bad precedent in the war on graft.

“What KACC is saying is that if you want to steal, steal big,” he said. “It appears the policy of Kenya is to prosecute pickpockets and bhang smokers. If you steal Sh100 million, you will get immunity and walk away freely.”

A commissioner with the State-funded Kenya National Commission on Human Rights, Mr Hassan Omar, said: “There are fundamental issues which should be dealt with before amnesty is granted.

What kind of amnesty? Who considers the amnesty? Is it by a private individual or a panel? What do we do with the net gains of corruption, given that the hotel has been in business for over 15 years? Should amnesty guarantee absolute freedom from prosecution?”

Father Gabriel Dolan of the Catholic Justice and Peace Commission also questioned the rational of the amnesty. “There is a lot that KACC and CBK have to tell Kenyans,” he said.

Mr Pattni’s pending cases include one in which he is accused with former Treasury PS Wilfred Koinange, former Central Bank governor Eric Kotut, former Kenya Commercial Bank general manager Elijah arap Bii and his deputy Eliphas Riungu. They are charged with conspiring to steal Sh5.8 billion from the Government.

Another pending case is the dispute over ownership of Grand Regency Hotel. The case is between Central Bank and Uhuru Highway Development Company.

Sources at KACC told the Nation that Mr Pattni entered into an agreement with the commission to surrender the hotel. It was on this agreement that Mr Pattni allegedly gave up the hotel to the Central Bank of Kenya two weeks ago.

The Nation also learnt that the Sh5.8 billion criminal case against Mr Pattni might not be part of the deal.

In October 2006, Mr Pattni requested the Government to settle out of court the Sh5.8 billion corruption case against him. The request was turned down.

Yesterday, KACC’s Nicholas Simani referred us to the AG’s office when asked whether he was aware of Mr Pattni’s request to drop all charges against him.

He said all the commission did on behalf of Central Bank was to take over the hotel from Mr Pattni and give it back to its rightful owners.

Business Daily: 08-06-2007: Libyans open talks to buy Grand Regency

In what is the clearest indication yet of how deep Kenya’s involvement with Libya runs, a group of Libyan investors have opened talks with Treasury to buy the Grand Regency Hotel-- Nairobi’s multi-billion shilling Five Star hotel that is under the management of government-appointed receiver managers.

Mukhisa Kituyi, the Trade and Industry minister, told journalists that the Libyans had made their intentions known during President Kibaki’s recent visit to Tripoli. Kibaki’s three day trip to Libya culminated into the signing of a series of economic partnerships agreements aimed at boosting trade between the two countries.

Grand Regency, which is Nairobi’s top end hotel and the latest to grace Nairobi’s landscape, was built in the early 1990s and has been the subject of a lengthy legal spat between businessman Kamlesh Pattni and the Government -- its construction having been linked to the country’s mega financial scam, Goldenberg.

The 220 bed hotel is under Central Bank of Kenya-appointed receiver managers, whose brief is to recover money it lent to Uhuru Highway Development Limited -- the developers of the facility, formerly owned by collapsed Pan African Bank.

Pan Africa is one of the banks that collapsed in the wake of the Goldenberg -- the export compensation that was engineered by Mr Pattni leading to the loss of Sh17 billion in public funds.

The Central Bank’s involvement in the hotel is linked to the Sh2.5 billion it loaned Pan African Bank’s property development arm Uhuru Highway Development Limited whose ownership was transferred to Mr Pattni after he bought the bank.

Libya, a member of the Common Market for Eastern and Southern Africa (Comesa) has been tightening its involvement with Kenya since last year and is one of the countries that signed the treaty for the creation of a customs union that is due to beome operational in December next year.
Until Kibaki’s latest trip to Tripoli, Libya’s interest in Kenya has mainly been in the oil industry where it had bought out Exxon Mobil’s assets in the country and won a lucrative contract to extend the Kenya’s oil pipeline to the Ugandan capital, Kampala.

Dr. Kituyi told journalists that a major investment group had bought prime plot in Nairobi where they plan to build a 600 bed ultra-modern hotel. Indications are that the land, which is situated along Kenyatta Avenue opposite Nyayo House, has been bought by Libyans.

A statement released by the Presidential Press Service at the end of Mr Kibaki’s visit to Tripoli indicated that Libyan investors had expressed interest in building a Six Star hotel in Nairobi and a confrence facility in Mombasa.

If the facility that insiders have described as a magnificent piece of architecture is built on the said piece of land, it would turn the area into a large hotel complex including the Regency that is only separated from it by a 10 metre-wide road.

The emergence of such a complex in the centre of Nairobi would be in line with the government’s goal of positioning tourism as one of the drivers of economic growth in the country.

Asked why the hotel could not be sold to Kenyans, Dr Kituyi responded “I’d like Kenyans, especially the ones in the Diaspora to come home and build new hotels not to buy the ones already built.”

The minister said the Government was interested in increasing investment in the hotel sector to help cope with neck-break growth in the tourism sector.
Dr Kituyi said the sale of Grand Regency Hotel could only be discussed by Central Bank which put the hotel under receivership in 1994.

“I cannot release details regarding the interest expressed by Libyans to purchase Grand Regency. The hotel is under receivership and any interested buyer should speak with the Central Bank, who is the official receiver” said Dr. Kituyi at a news conference yesterday.

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