As tourism yields to terrorism, Kenyan government moves to pay Anglo Leasing “ghost companies” for security deals that never materialized, to clear way for more borrowing

Yesterday it was two explosions in the Nairobi’s crowded Gikomba market, one reportedly on a bus and another in a stall. Perhaps a dozen killed and 70 injured.

Two British companies loaded up roughly 400 tourists in Mombasa and flew them home early. U.S. Ambassador Robert Godec told the Associated Press that the American Embassy has increased security measures–more security personnel are being brought in and other staff reduced.

Since the Westgate attack in September, there have been a dozen of these bombings.

In the meantime, Kenyan president Uhuru Kenyatta had directed to pay almost 💲17M to two sketchy entities for claims for financing bogus security acquisition contracts in the Anglo Leasing scam uncovered by John Githongo. After Githongo’s whistleblowing Kenyatta himself as leader of KANU as the official opposition identified the claims as bogus. Kenyatta now claims that the Attorney General dropped the ball and allowed these entities to successfully sue and take judgements in court in the UK. He has directed that payment be made to clear Kenya’s credit to undertake large new borrowings on through the “Eurobond” market. The Law Society of Kenya says that the Government is lying and did not lose in court but rather agreed to pay.

The UK and US criticized the corruption of Anglo Leasing back when it was revealed in 2005-06. Neither the whistleblowing, nor many millions of dollars spent on alleged “good governance” programs seem to have deflected the ultimate success of the scam. . . .

Kenya’s persistent national security corruption continues to burden Somali endeavors

In the wake of the incomprehensible looting at Westgate, Ben Rawlence, Open Society fellow and former Human Rights Watch researcher has published a candid look at the context in “Kenya’s Somali Contradiction” at Project Syndicate:

. . . if the Kenyan government’s aim was, as it claimed, to destroy al-Shabaab, the intervention has been a spectacular failure . . . In fact, retaliation against the militant group was little more than a convenient excuse to launch the so-called Jubaland Initiative, a plan to protect Kenya’s security and economic interests by carving out a semi-autonomous client state . . .

. . . the United Nations monitoring group on Somalia and Eritrea reported in July that Kenya’s Defense Forces have actually gone into business with al-Shabaab.  .  .  . [T]he Kenyan state’s endemic corruption constantly undermines its policymakers’ goals.  Indeed in Kismayu, Kenya’s officials have reverted to their default occupation — the pursuit of private profit. . . .

Read the full piece.

if the Kenyan government’s aim was, as it claimed, to destroy al-Shabaab, the intervention has been a spectacular failure. But there is much more to the story. In fact, retaliation against the militant group was little more than a convenient excuse to launch the so-called Jubaland Initiative
Read more at http://www.project-syndicate.org/commentary/kenya-s-contradictory-strategy-in-somalia-by-ben-rawlence#rC0Jau4qyOYbHqeO.99

Going back to my time in Kenya during the 2007 presidential campaign, it is well to remember that the multimillion dollar Anglo Leasing scandal that was subject to John Githongo’s whistleblowing involved corrupt contracts that were to have provided for the purchase of passport security technology, a forensic lab, security vehicles and a Navy vessel, among more than a dozen national security procurements.

Ultimately the exposure of the scandal proved to be a huge missed opportunity for the U.S. and the international community as a whole to address a pervasively corrupt security apparatus that we have continued to help underwrite.  While everyone was grateful for Githongo’s courage, we didn’t match it with courage of our own to take risks for reform and we ended up letting the Kenyan people rather than the Kibaki administration bear the burden.  See my post “Part Five–Lessons from the Kenyan 2007 election and new FOIA cables”.

Unfortunately corruption does not fix itself.

Uganda Debt Network

Leaders

Furthermore, contrary to claims that securing Kismayo put al-Shabaab at a disadvantage, the United Nations Monitoring Group on Somalia and Eritrea reported in July that the Kenyan Defense Forces have actually gone into business with al-Shabaab. The group’s profits from illicit charcoal (and possibly ivory) exported from Kismayo have grown since Kenya took control.

CommentsView/Create comment on this paragraphThis highlights a fundamental problem: the Kenyan state’s endemic corruption constantly undermines its policymakers’ goals. Indeed, in Kismayo, Kenyan officials have reverted to their default occupation – the pursuit of private profit. Instead of working to achieve the diplomatic objective of defeating al-Shabaab, Kenya’s military, politicians, and well-connected businessmen have been lining their own pockets.

Read more at http://www.project-syndicate.org/commentary/kenya-s-contradictory-strategy-in-somalia-by-ben-rawlence#rC0Jau4qyOYbHqeO.99

if the Kenyan government’s aim was, as it claimed, to destroy al-Shabaab, the intervention has been a spectacular failure. But there is much more to the story. In fact, retaliation against the militant group was little more than a convenient excuse to launch the so-called Jubaland Initiative,
Read more at http://www.project-syndicate.org/commentary/kenya-s-contradictory-strategy-in-somalia-by-ben-rawlence#rC0Jau4qyOYbHqeO.99

Why would we trust the Kenyan IEBC vote tally when they engaged in fraudulent procurement practices for key technology?

It has been clear for many months that the IEBC’s procurement of BVR kits was irregular.  It is now quite clear that even after Kenyan civil society called the IEBC on the carpet on that problem, the IEBC engaged in clear misconduct in buying the “poll book” system.  When they were caught, the procurement was allowed to go through because of the limited amount of time before the election.  The “poll book” book system largely failed and on election day polling stations used a wholly manual system–a printout on paper.

See the details on the fraudulent bidding here from the today’s Standard: “Minutes reveal how IEBC bought faulty gadgets”:

A review of the tendering procedure by the public procurement regulator found out the tender to supply poll books was awarded to the South African firm, which participated in the Anglo Leasing scandal, on September 29 last year, three weeks before the technical evaluation among the shortlisted bidders.

In other words, the bidding was a sham, because the “winner”, which never could produce a working system, was selected in advance, before the evaluation of which  systems worked–and thus the working systems never had a real rather than a pretend opportunity to be selected over the non-working system.

Getting down into details, the failure of this key procurement left a situation in which much of the presumed value of the Biometric Voter Registration was lost because there was no ability to use any automated voter list at the polls.  The use of the paper print out opens a big window for fraud because one would have to obtain and verify each of the individual print outs from more than 33,000 polling stations to know whether what was used on paper matched up with the central voter registration list in Nairobi (leaving aside the fact that the IEBC never finalized and published a uniform voter registration list as required, which makes the issue doubly important).

I have no way to know whether the IEBC was simply corrupt in its procurement practices resulting unintentionally in the failure of the poll book system, or whether there was some deliberate intent within the IEBC to avoid the application of the electronic system.

Assuming for the sake of argument that no one at the IEBC deliberately wanted to undermine the intended voting systems, it remains quite clear that the IEBC engaged in conduct that clearly violated the public trust in preparing for the election.  So how can we simply trust the same body on the vote tally itself?

Corruption Opportunties . . . [updated]

“Fight Corruption with Social Entrepreneurship”–award/grant competition from the Ashoka Foundation with Transparency International.  Three awards of £5,000 pounds each are available to support innovative initiatives, with submissions due by October 1, 2012.

Speaking of corruption, news today from the United States about Bradley Birkenfeld, possible Anglo Leasing suspect/witness.

Who is Bradley Birkenfeld?  Here is the link to the 2009 Mars Group post “The Bradley Birkenfeld Dossier: Amos Wako: Guess what?  President Obama could solve Anglo Leasing and he has a suspect in custody.”  After Birkenfeld was arrested in the U.S. in 2008, Kenya did request U.S. assistance with Birkenfeld for investigation of Anglo Leasing through a letter to Ambassador Ranneberger in March 2009.  Beyond that the situation is typically muddy as to what has transpired.

Today, the U.S. Internal Revenue Service confirmed that it has paid Birkenfeld $104MM as his “whistleblower” share of recoveries from massive tax fraud at UBS in Switzerland. Here is the Washington Post story.

From Star March 1, 2012:

THE Swiss government has frozen three bank accounts associated with Anglo Leasing suspect Deepak Kamani and opened money laundering charges against him and two Britons.

“The Swiss government has delivered on the requests regarding the money trail of Anglo Leasing suspects as requested by the Kenya government. The Swiss authorities believe that it was a case of money laundering. They also believe that the suspects infringed on the laws of Switzerland. The accounts that have been frozen belong to three individuals. The individuals are among those who set up the financial structure,” said Swiss ambassador Jacques Pitteloud in Nairobi yesterday. The two Britons were not named.

An unconfirmed report says that Kamani-associated companies may have had US$160 million (Sh13.6 billion) in accounts in Geneva with HSBC, Schroders, UBS and Pictet. In 2009 US national Bradley Birkenfeld was sentenced to 40 months for helping clients hide their money in a multibillion dollar international tax fraud over Swiss private banking. Bradley was intimately connected with the Kamani brothers – Deepak and Rashmi – who controlled 13 of the Anglo Leasing companies whose accounts Bradley managed when he worked for UBS.

Bradley’s private residential address was listed as the office of Midlands Finance and Securities Ltd which received 36 irrevocable and negotiable promissory notes worth euros 49.6 million for a sham loan that Kenya never received as part of the Anglo Leasing scam. Bradley also signed one of the 18 Anglo Leasing contracts on behalf of Info Talent to computerise the police force at a cost of $59.7 million (Sh5.1 billion). . . .

So, as of today, Birkenfeld is out of prison but serving the remainder of his sentence for assisting clients evade taxes in home detention in New Hampshire.  He has plenty of money.  His lawyers say they will seek a presidential pardon.  Sounds like a perfect opportunity for the governments of Kenya and the United States to cooperate on obtaining the details of the Anglo Leasing fraud from Birkenfeld and pursuing prosecutions and recovery of funds.

 

Part Five–Lessons from the Kenyan 2007 elections and the new FOIA cables

Getting back to the narrative, I also remember Tuesday, December 18, 2007, the date that Ranneberger wrote the second of the cables that I received recently through a 2009 FOIA request.

That morning’s Standard featured a big, full page exclusive interview with Ambassador Ranneberger, nine days before the election.  For me this article was something of a benchmark in terms of my “no more b.s.” from the Ambassador instructions.  There are several reasons I found the article troubling, part related directly to the independence of  our IRI election observation mission, and part related to the Kenyan campaign itself,  in particular the corruption issue.  On corruption:

[From “Envoy Predicts Free and Fair Election”, The Standard, December 18, 2007–an interview with U.S. Ambassador Michael Ranneberger nine days before the Kenyan election]

Q: What are your views on corruption?

A: Lots of people look at Kenya and say lots of big cases have not been resolved because of Anglo Leasing and Goldenberg. I always point out that we have lots of corruption even in the US. These cases take a lot of time to bring to justice. We had the famous Enron case. It took over four years to resolve in a system that works efficiently, yet only a couple of people were convicted. These things take a long time.

There has been substantial effort to fight corruption in Kenya and the award the country won for Civil Service reform [from the World Bank] is a pointer to that effect. The fact that the Civil Service is more professional than ever before is progress as are the new procurement laws recently put in place and the freedom of the Press to investigate and expose corruption. More, of course, needs to be done.

The economy has grown by 7 per cent. How much of that has actually trickled down to the people will again be determined by time.

A career diplomat, Ranneberger has been in Kenya for close to one-and-a-half years, and has served in Europe, Latin America and Africa.

This was a full page “exclusive” feature interview in The Standard nine days before the 2007 Kenyan election.

During previous days The Standard had been running new revelations about corruption in the Kibaki administration from documents from exiled former Permanent Secretary for Ethics and Governance  John Githongo. Rumor had it that Githongo wanted to be able to return to Kenya and might want to be able to return to government after the election, although I had no knowledge one way or the other about whether that was true. Githongo’s personal adventure trying to address corruption in the Kibaki administration is the subject of Michela Wrong’s It’s Our Turn to Eat. Wrong rightly noted in her book that stealing the election was the ultimate corruption.

Githongo had previously alleged that the Anglo Leasing scandal that Ranneberger referred to was intended to fund the campaign to re-elect Kibaki. See this from BBC News, January 26, 2006, “Kenya ‘safe’ for anti-graft czar”:

On Wednesday, the World Bank urged Kenya’s president to take tough action against any cabinet ministers found to be corrupt.

The warning came as the World Bank approved a new $25m loan to help fight corruption – a decision slammed by former UK Kenya envoy Sir Edward Clay.

Sir Edward, who has condemned Kenya for not tackling graft, said the new loan would feed the “pig of corruption”.

‘Insensitive’

“The Anglo-Leasing cases represent an excellent opportunity for the authorities to invoke the disciplinary provisions of the code of conduct signed by the new cabinet weeks ago,” said World Bank Kenya director Colin Bruce.

“I believe that this is an historic moment for the government to signal where it stands on the issue of political accountability,” he said.

Kenyan President Mwai Kibaki

President Kibaki is under increasing pressure over corruption

President Kibaki was elected in 2002 on a pledge to fight corruption.

Some donors, including the UK, have suspended some aid to Kenya over concerns about corruption and Sir Edward, who retired last year, thought the World Bank should have sent out a tough message.

“How can the World Bank be so insensitive and hapless to announce new loans to Kenya?” reports the Guardian newspaper.

“They have added insult to injury by feeding the pig of corruption in Kenya when many Kenyans were beginning to hope they might smell the bacon beginning to fry.”

Over the weekend, Mr Githongo’s leaked report said his attempts to investigate the Anglo-Leasing scandal were blocked by four top ministers – Vice-President Moody Awori, Energy Minister Kiraitu Murungi, Finance Minister David Mwiraria and sacked Transport Minister Chris Murungaru.

Mr Murungi and Mr Awori have publicly denied the claims.

Mr Murungi said the report was “untrue” and an attempt to bring down the government.

Mr Githongo resigned last year amid reports that his life had been threatened.

The money raised by the alleged scam was to be used to fund the ruling Narc coalition’s campaign in elections due next year, Mr Githongo said.

Following the leaking of the 31-page report, the opposition has urged President Kibaki to dissolve cabinet.

Opposition Orange Democratic Movement leader Uhuru Kenyatta said: “This is clear evidence that the government can no longer be trusted to conduct detailed and honest investigations into this saga.”

Other diplomats were maintaining effective “radio silence” in the sensitive closing days of the 2007 campaign, while Ranneberger was speaking out to defend the Kibaki administration’s corruption record. In the meantime, after my December 15 experience at the Embassy residence I was quietly preparing the new last-minute pre-election Langata survey, along with all the other work for the exit poll and Election Observation Mission.

After reading the Standard article, I e-mailed my local USAID officer on the Election Observation and Exit Poll to complain, noting my opinion about the article and where things seemed to be going in regard to my obligation to supervise an objective and independent Observation Mission and the Ambassador’s alternative approach.

Part One;   Part Two;    Part Three;    Part Four;    Part Six;    Part Seven;   Part EightPart NinePart Ten

“What are your views on corruption?”

[From “Envoy Predicts Free and Fair Election”, The Standard, December 18, 2007–an interview with U.S. Ambassador Michael Ranneberger nine days before the Kenyan election]

Q: What are your views on corruption?

A: Lots of people look at Kenya and say lots of big cases have not been resolved because of Anglo Leasing and Goldenberg. I always point out that we have lots of corruption even in the US. These cases take a lot of time to bring to justice. We had the famous Enron case. It took over four years to resolve in a system that works efficiently, yet only a couple of people were convicted. These things take a long time.

There has been substantial effort to fight corruption in Kenya and the award the country won for Civil Service reform [from the World Bank] is a pointer to that effect. The fact that the Civil Service is more professional than ever before is progress as are the new procurement laws recently put in place and the freedom of the Press to investigate and expose corruption. More, of course, needs to be done.

The economy has grown by 7 per cent. How much of that has actually trickled down to the people will again be determined by time.

A career diplomat, Ranneberger has been in Kenya for close to one-and-a-half years, and has served in Europe, Latin America and Africa.

This was a full page “exclusive” feature interview in The Standard nine days before the 2007 Kenyan election. “Envoy predicts free and fair election”, December 18, 2007.

During previous days The Standard had been running new revelations about corruption in the Kibaki administration from documents from exiled former Kenya Anti-Corruption Commission chairman John Githongo. Rumor had it that Githongo wanted to be able to return to Kenya and might want to be able to return to government after the election, although I had no knowledge one way or the other about whether that was true. Githongo’s personal adventure trying to address corruption in the Kibaki administration is the subject of Michela Wrong’s It’s Our Turn to Eat. Wrong rightly noted in her book that stealing the election was the ultimate corruption.

Ranneberger has somewhat reinvented his public persona in Kenya the last couple of years, in that he now openly criticizes and challenges Kenyan politicians and is outspoken against corruption. Readers of this blog will know that I agree with him, now, on corruption and that corruption is nothing new. I wish him “happy trails” as he completes his tenure in Nairobi and moves on.

Kenya Anti-Corruption Commission steps up; Kibaki reverts to form; TJRC fails

News from Kenya suggests that a fresh breeze has finally started to stir on the corruption front. Nairobi Mayor Majiwa was forced to resign in the wake of his arrest on corruption charges, after initially vowing to stay on duty.

“The Big Story” yesterday in the Daily Nation reveals that the Anti-Corruption Commission, the KACC, has begun new efforts to recover from overseas proceeds from the massive and notorious Anglo-Leasing and Goldenburg fraud schemes and probe additional ministries in current scandals. The Commission has written seeking formal assistance from the US, the UK and Switzerland. The Commission cleared away through a successful appeal a 2007 court ruling that it did not have authority to seek such foreign cooperation, with the Court of Appeals finding the argument that persuaded the lower court to be “idle”. Today, we have the detail that PLO Lumumba, KACC head, says that they are investigating four ministers and at least 45 heads of parastatals.

Nonetheless, President Kibaki appointed George Saitoti, his minister of Internal Security since January 8, 2008 during the post-election violence and a longtime insider, to the additional portfolio of Interim Foreign Minister. As I have noted previously, Saitoti was implicated by human rights groups in Moi-era election violence. He previously stepped aside as Education Minister as suspect in Goldenberg investigations, although the High Court ruled that he should not be prosecuted and he was reinstated. The BBC said at the time:

The court rejected the conclusions of an earlier commission of inquiry that recommended Mr Saitoti’s prosecution over the so-called Goldenberg affair.

The $1bn scam in the 1990s involved government payments to a company for non-existent gold and diamond exports.

Mr Saitoti was serving at the time as finance minister and vice-president.

The court ruled that Mr Saitoti had been acting according to procedure when he approved a payment to the firm Goldenberg International.

The court also noted the attorney-general had cleared Mr Saitoti of wrongdoing in a statement that he issued in parliament more than a decade ago.

“Today marks my happiest day in the last 16 years because during that period I have gone through much pain and suffering,” Mr Saitoti said after the judgement.

Both Mr Saitoti and former President Daniel arap Moi, in whose administration he served, have denied any knowledge of the scam.

For further perspective on the status of corruption and the middle class in Kenya, I highly recommend John Githongo’s inaugural post today on his “The State of Hope” blog: “Colonial Spoils Recycled as New Money”.

In this context, a crucial part of the 2008 settlement and “Reform Agenda”, the Truth Justice and Reconciliation Commission, has completely derailed over the continued clinging to power of Ambassador Bethwel Kiplagat. The American member loudly resigned, neither Parliament nor foreign donors will pay to operate the Commission, and the public obviously has expressed no confidence.

Corruption and Geopolitics

The Economist has highlighted the ongoing competition in Africa, including in Kenya, between Iran and Israel: “A Search For Allies in a Hostile World“.  In the East Africa/Greater Horn region, Sudan is Iran’s key ally and Ethiopia is Israel’s.

With diplomatic battles approaching over sanctions for Iran’s nuclear program in the context of all of the existing competition for influence, resources and business opportunities, the leverage for existing African players to extract corrupt rents are likely to increase. The Kenya Publicity Tour to Washington last week invited the US to once again move away from a strong stand on corruption and move on with greater government to government support and incentives for investment without waiting to see actual reforms in light of the 2007 election debacle.

To date we haven’t seen accountability for the multi-year theft of public education funds that triggered first the UK and then the US to freeze a small amount of education assistance.  While the PM and others are pressing for the resignation of the Education Minister, the funds have gone missing each year of the first Kibaki Administration as well, as indicated in the report from Transparency International.  Removing the current minister (who presumably would remain a Member of Parliament and, if patterns hold, soon enough get another ministerial appointment in another agency) is not a substantive answer.

Likewise, action on the Rift Valley Railroad concession remains elusive and deferred.  And accounting for the “Internally Displaced Funds” associated with the “Internally Displaced Persons” from the post-election violence remains outstanding. And the bills continue to come due, literally, from the Anglo Leasing scandal (you may remember this as the scandal that was supposedly caught in time to prevent major loss to the taxpayers–doesn’t seem to be working out that way).

Key players, at least, in the US government supported Kibaki’s re-election in 2007 in spite of the corruption concerns. Is Kenya better off now? What US interests were actually advanced? In particular, how is the situation in Somalia better now than it was in the fall of 2007? Let’s “don’t get fooled again” and maintain a focus on helping Kenyans who share the values to which we aspire to build a stronger and more prosperous country–by maintaining a strong and steady focus on improved governance and fighting corruption. We have a bad record on the geopolitical gamesmanship in Kenya, in my estimation, and values aside, I don’t think it has worked very well.

More Recognition for “It’s Our Turn to Eat”

Congratulations to Michela Wrong (and John Githongo) on the selection of “It’s Our Turn to Eat: The Story of a Kenyan Whistleblower” as a Book of the Year by the Economist!

Especially timely this week as news trickles out of intentions by the Government of Kenya to pay millions of additional dollars on the “Anglo Leasing” contracts from the first big scandal to hit the first Kibaki Administration.