Thursday, July 10, 2008



July 10, 208
DaILY Nation

Clearly, Finance minister Amos Kimunya is not the only one that should step aside to pave the way for investigations into the controversial sale of the Grand Regency Hotel.

The Grand Regency Hotel which is at the centre of a controversy after it was irregularly sold to a Libyan company. Among the people he said should also step aside are Central Bank of Kenya officers, including governor Njuguna Ndung’u and Attorney–General Amos Wako. I agree with him.

It would appear that the CBK officials and the AG should shoulder greater blame over the sale. This does not mean that Mr Kimunya did not do wrong.

He remains blameworthy for having failed to ensure that the Privatisation Act was followed. It seems, however, that he also acted on bad legal advice from the Public Procurement Oversight Authority, CBK and the AG.

Last week, the Central Bank placed advertisements explaining the legal position on which the bank acted. With respect to the governor who signed it, the legal reasoning is so untrue it verges on the fraudulent.

First, the governor says that Central Bank did not sign the consent and that the consent could not vest any legal right to the bank. But Kamlesh Pattni unconditionally gave the hotel to CBK.

Sign transfer

His action was so unequivocal that he even agreed to sign all necessary transfer documents so that the hotel can vest in CBK.

He went further to agree that if he doesn’t sign the documents, the deputy registrar of the High Court may sign them on his behalf.

So why would CBK want to argue against a consent that grants it the hotel? Why would it not forward the transfer to Pattni to execute, and if he failed, to forward it to the High Court for the deputy registrar? Why would it keep insisting that the hotel does not belong to it?

I believe it is because CBK was aware that the effect of Pattni’s transfer of the hotel to it immediately turned Grand Regency Hotel into public property. Once that happened, the provisions of the Privatisation Act applied to the hotel.

It is for this reason that the Kenya Anti-Corruption Commission wrote to the bank on April 22 informing it that the bank could only sell the hotel in the manner prescribed by the law.

But CBK was determined to sell the hotel by private treaty and therefore continued to insist on the false legal position that it did not own the hotel because the law prohibits it from engaging in commercial activities.

Once it is established that Pattni had divested himself from ownership of the hotel and had transferred it to CBK, then everything else CBK did after that was fraudulent.

For instance, it was fraudulent for the bank to claim that it was exercising its statutory power of sale under the charge.

After the hotel was transferred to CBK, it continued to maintain a charge over its own property and eventually the bank auctioned itself. All this was done as the bank consistently refused to accept the correct legal position taken by KACC.

If the bank could proceed to sell the property by exercising its statutory power of sale, why hadn’t it done so before? This charge had been registered in 1993 and the bank had been unable to act on it.

Clearly then, something changed that enabled the bank to sell the hotel this year. And what changed is that Pattni agreed to withdraw his objections and give the hotel to CBK to do as it wished.

If Pattni was now cooperating, how can the bank pretend that it was taking the hostile action of exercising its statutory power of sale against him?

The bank, in any event, still failed to act diligently in the way it chose to proceed. It sold the land and buildings for Sh1.85 billion and the plant and machinery for Sh1.1 billion.

But how much was the business itself sold for? CBK says that the hotel was sold as “a going concern” to secure the jobs of the 400 workers yet there is no price placed on the value of the hotel as a business.

The Grand Regency is one of the top class hotels in Kenya. Some opinions say it is more than “Five Star” in its grading. It has been operational for close to 20 years.

It has a clientele that pays a premium to use its facilities. That is worth something. CBK did not seek to be paid for the goodwill. Why?

The second set of questions regarding the sale needs to be answered by the Attorney-General. According to the consent signed by KACC, the commission was acting under section 56B of the Anti-Corruption and Economic Crimes Act.

On its website, KACC says that its opportunity came when section 56B was added to the Act by the Statute Law (Miscellaneous Amendment) Act 2007.

This section was to provide KACC power to enter into recovery negotiations with persons suspected of corruption. Under this section, KACC can accept the return of property from a suspect in return for the settlement of civil claims against that person.

The commission can also give a criminal amnesty to a suspect in return for a civil settlement.

But when one goes back to the history of section 56B, it appears that it never became law. First, this section had been proposed by the Statute Law Miscellaneous Amendment Bill that was published by the Attorney-General.

The Hansard shows that the Bill came up for debate on September 13, 2007, under the chairmanship of Mr Kirugi M’Mukindia.

MP Cheboi moved a motion on that day in which he urged the House to delete the proposed section 56B. He argued that there should be no option for commencing civil recovery proceedings without criminal investigations.

Cabinet minister Martha Karua objected and supported the Attorney-General in the proposal that the section be passed. The Hansard says that the matter was put to the House and it reports: “The proposed Section 56B deleted.”

When the Act went to the President for his assent, he rejected to assent to the Act because of among other things the blanket amnesty it was proposing to give.

The President asked the section on amnesty be removed. But he argued for section 56A which had also been rejected by the House and deleted. This section had sought to give KACC power to appoint a receiver over the property of a suspect.

The President however never argued for section 56B and was in agreement with Parliament that it remains deleted.

Hansard shows that the President‘s recommendations went to the House for debate on October 4, 2007. The amnesty clause was removed and section 56A reinstated.

Section 56B remained deleted. But when the AG published the Act and commenced it on October 15, 2007, section 56B was part of our laws. Why?

Corruption cases

How did this happen? When did it happen? Is it possible that we have a section of our laws which Parliament had rejected now being used to settle corruption cases?

How is it that the AG published into law something expressly rejected by Parliament? And how come the Ministry of Justice and Constitutional Affairs has never realised this problem and advised the Cabinet accordingly?

When the Section 56B was rejected by the House on September 13, 2007, Mr Justice Aaron Ringera issued a statement against the action of the House.

He therefore knew on September 13 that this section was not part of our laws. How then could he use the same deleted section to enter into a consent with Pattni?

At what point does Mr Justice Ringera believe section 56B found its was back to our laws?

Mr Kimunya is justified to feel that everyone wants to quickly get rid of him. It is because his continued counter-attack is revealing new and embarrassing mistakes committed by other officials.

Many more people have a case to answer over this saga.