The Big Story in Nairobi’s Business Daily reports the “closing yet another window for recovering billions of public money lost through the fraudulent gold export scheme” Goldenburg.

The newspaper has reviewed the reporting of the Central Bank of Kenya and discovered that it has written off Sh1.5B that remained due from a loan secured solely by the former Grand Regency Hotel.

The Business Daily reveals that the Cockar Report–delivered to President Kibaki but yet to be made public–concludes that the sale process was “flawed”, “secret” and “hasty”. The price received appears to reflect a gross undervaluation in that it could have been realized 13 years earlier–who thinks this hotel in downtown Nairobi was worth the same in the early 90s as in the late 00s?. Further, it appears that the Cockar Reports identifies a bidder who would have paid significantly more than the Libyan firm Laico–in fact an amount that would have paid the debt to the CBK in full!

The context: “Another commission, headed by Justice Samuel Bosire, concluded in a 2006 report that Kenya’s economy could have lost a total of Sh158 billion in the Goldenberg Scandal through a web of transactions that involved 487 companies and individuals.”; “Mr Kamlesh Pattni, who was named as a key player in the scam is understood to have surrendered Grand Regency to CBK in a ploy for amnesty from prosecution in the Goldenberg cases.”

Kudos to Business Daily Africa for diligence and solid reporting. Let’s hope they follow-up (in spite of the pressure I am sure they will receive not to).

Since I was working in Nairobi while this was ongoing, I can say that it was an open and obvious scam just from the basic issues that are apparently identified in the Cockar Report: secrecy, haste and an inexplicably low price.

The next question: Why? (in other words, who benefited?). Was this just a charitable impulse to transfer wealth from the Kenyan public to a group of private Libyan investors? Hard to imagine! What reason would the CBK have for selling to Laico for an amount that left a deficiency on the Pattni loan of Sh1.5B if another bidder was willing to pay the full amount and the hotel was probably worth even more? This would benefit neither the creditor nor the debtor. Did the buyers really pay more, in cash or other interests–just to someone else? Why the “haste” after so many years? Certainly the rumors at the time where that the dealmaking was wrapped up in the non-transparent financing of election expenses.

And why do we not have answers now?

As far as Pattni himself goes, it was interesting to see Pattni seem to spend quite a lot of money on his own Parliamentary campaign in Nairobi while getting few votes–and also see his “party” active elsewhere.

A basic rule of financial fraud that I have observed over many years is that if you want to steal and maximize your chances of keeping a whole lot of it if you get caught is that you should steal so much that you have plenty to spread around to “buy peace” afterwards. Sort of “the audacity of greed”.