Goldenberg Commission of Inquiry Report - Mars Group Kenya

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promoting prudent macroeconomic policies. In areas where the World Bank and the IMF both have expertise – such as fiscal management, budget execution, budget transparency, and tax and customs administration – they coordinate closely. Because the PRSP provides the context for IMF and World Bank concessional lending and debt relief, the strategies are critical for the two institutions. Participating countries send the final strategy to the Executive Boards of both the IMF and World Bank for endorsement. The Executive Boards of both institutions also receive a World Bank-IMF staff assessment, with an analysis of the strategy and a recommendation on endorsement. The strategies need not be fully in accordance with staff recommendations to be endorsed. This process assures the Executive Boards – and the international community – that the strategies, while perhaps attracting broad domestic support, also address difficult or divisive issues in an effective way.” 71. In practice however, the position was different. On 6 th December, 1991 a week after the two institutions had frozen aid to Kenya, at a meeting of The Organization For Economics Co-operation and Development (OECD) in Paris, ministers from rich countries endorsed the link between aid and democratization. This was notwithstanding protests from a World Bank official that the Bank’s statutes barred such linkage. This is what he said: “There is an increasing tendency to use International Institutions as a political instrument. This is something that we as an institution must resist” (Olivier Lafourcade – director of the Bank’s Eupean office in Paris.) – See Exhibit 138M. 72. It was such an attitude which made Kenya vulnerable to further dictation from the two institutions regarding the implementation of various economic programmes and schemes under the World Bank’s Export Development Programme. It was a programme which was intended to help Kenya expand exports to enable it earn more foreign exchange for economic prosperity. [B] ECONOMIC REFORMS – POLICY MATRIX 73. In his budget speech delivered to the National Assembly, on 7 th June, 1990, the then Vice President and Minister for Finance Prof.
George Saitoti outlined various measures the country would undertake to promote production of industrial and other non-traditional exports. The aim was to have and maintain a realistic exchange rate, ensure that export producers have secure and easy access to imported inputs through the Export Compensation Scheme and by extending to commercial banks pre-shipment credit secured by export bills and to discount such bills at the Central Bank of Kenya. Export processing zones would be established to attract foreign investment and to stimulate industrial growth and exports. All these and several others were part of an Export Development Programme which the country had negotiated with the World Bank. All these measures were part of Sessional Paper No.1 of 1986, which emphasized liberalization of the market in Kenya. 74. In Sessional Paper No.1 of 1986 Kenya had said it would have a mixed economy, embracing socialistic and capitalistic principles, government role would not be participatory but merely supervisory and that the market would be liberalized. The Government would adopt a policy of District Focus to promote rural development. It should be noted that the government by formulating Sessional Paper No.1 of 1986 was attempting to address a foreign exchange shortage in the country. The policies in the paper were quite attractive to the donors more particularly the Bretton Woods Institutions. These policies were however dependent on donor support which was slowly dwindling. It is with this background that we have to look at the policy of the 1990-1991 budget speech. 75. Export Compensation Scheme would be reformed by accelerating payments to exporters and expand eligibility, there would be easy access to duty free inputs. A Pre-shipment Finance Scheme would be in place by December, 1990 to meet working capital needs of exporters through a CBK facility for rediscounting private financial paper. Commercial banks would allow pre-shipment Finance Scheme loans to exporters “against
Page 1: REPUBLIC OF KENYA REPORT OF THE JUD
Page 4 and 5: APPENDIXES APPENDIX A - GAZETTE NOT
Page 6: WB - World Bank
Page 10 and 11: [A] CITATION INTRODUCTION 1. By Gaz
Page 12 and 13: (ii) whether any or all the money w
Page 14 and 15: Nairobi. Thereafter, the sessions o
Page 16 and 17: must consider why the courts initia
Page 18 and 19: available to testify, he was not pr
Page 20 and 21: documents and other exhibits produc
Page 22 and 23: Code, in exercise of his powers und
Page 24 and 25: 23. And we did carry on, but not fo
Page 26 and 27: we deal with administrative matters
Page 28 and 29: was an International Women Aids Con
Page 30 and 31: themselves of the discretionary pow
Page 32 and 33: so, with tremendous respect to them
Page 34 and 35: These are some of the reasons norma
Page 36 and 37: each. The Memorandum and Articles o
Page 38 and 39: 55. Since the regulations allowed i
Page 40 and 41: CHAPTER I ECONOMIC AND POLITICAL SI
Page 42 and 43: 65. It was argued then, and Prof. R
Page 46 and 47: confirmed and irrevocable letters o
Page 48 and 49: application, discussed it before th
Page 50 and 51: compensation. Secondly, that it be
Page 52 and 53: Hezekiah Oyugi, who was then a Perm
Page 54 and 55: CHAPTER II ACCEPTANCE AND IMPLEMENT
Page 56 and 57: letter itself upon which the Minist
Page 58 and 59: 1) The granting of Sole rights to e
Page 60 and 61: Sign. (C.S. Mbindyo) 28 th January,
Page 62 and 63: 2. Folio 42/1 V.P. approves except
Page 64 and 65: we consider the cost which is much
Page 66 and 67: As the addressee, references and da
Page 68 and 69: 123. It was the duty of the exporte
Page 70 and 71: licence which was issued by the Dep
Page 72 and 73: (ii) Procedure for Export of Eligib
Page 74 and 75: included its terms in its agreement
Page 76 and 77: that publication nor had he ever he
Page 78 and 79: innocent inquirer into the existenc
Page 80 and 81: 147. It is of interest that Pattni
Page 82 and 83: 153. Paragraph (e) of the same noti
Page 84 and 85: *$323,000 *$206,000 $121,000 *$179,
Page 86 and 87: would have each time accompanied th
Page 88 and 89: Nairobi which shall see Foreign Exc
Page 90 and 91: would receive its purported export
Page 92 and 93: 166. As in the case of First Americ
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evidence before us that GIL had ach
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176. When EBL was formed and grante
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(vii) Compensatory Payments 182. Th
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compensation claims each time they
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exported eligible goods to have bee
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“THE CONTROLLER M/S GOLDENBERG IN
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agreement with GIL, or at least rej
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fraudulently redesignated, initiall
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with the then Chief Banking Manager
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215. There are some discrepancies b
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application (Exht 155 pgs. 16 & 18)
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229. The facility was retired by a
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236. The documents produced show th
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244. The pre-export financing schem
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GIL had a retention account with Ex
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256. Forex Cs were to be issued by
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In addition Forex Cs were used to e
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CHAPTER IV FINANCIAL DEALINGS (A) M
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ehalf of either themselves, or GIL.
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eflect money which is unaccounted f
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282. Mr. Smith was referring to the
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exchange rate and interest from len
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Exchange Bank Operational Aug-92 29
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like Seville Investments Ltd and Du
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commented that certain banks were i
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associated organisations or account
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“We have remitted US$ 19 million
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e on the same day or within 48 hour
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the same day. This contract was rev
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our account at the Federal Reserve
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dates. It is also very clear that M
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Discussed with Manager Foreign Depa
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356. On the other side it is clear
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This is the background of the agree
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Wanjihia, and to do so without thei
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of the fact that EBL had placed no
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The governor appeared not to be awa
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Permanent Secretary is not the acco
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him time to find a way round the pr
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395. The English revolution of the
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it, it would have been extremely un
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410. Omo bills were sold by auction
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Later still the witness said: “My
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from the then governor of CBK, Mr.
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425. In conclusion, we think that t
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Gama Rose and S.B.R. Shah. On 21 st
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438. The letters of credit issued b
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lend money (Banking Act, Section 10
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“We refer to the above matters an
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March, 1993 and payments were made
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468. On 30 th March, 1993 a sum of
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them. The actual exhibit referred t
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y Mr. Kulei has not been provided a
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Kanyotu received GIL funds which th
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commercial and social relationship.
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503. The late Hon. Jaramogi Oginga
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509. He was served with an adverse
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ooks or there is no recall on their
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Name Shearson Lehman Bros London Ac
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525. The Controller and Auditor Gen
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531. Sometimes in or about May 1993
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een achieved by them. Be that as it
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earned the country well over Kshs.2
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exported when in fact that was not
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of Kshs.2.6 million by GIL allegedl
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The payment was administratively re
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compensation. The witness further s
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prompting of the former President.
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intelligence officer, he inquired a
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and therefore who would advise on t
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arguing that the company earned the
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Mr. Charles Mbindyo 590. It should
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the former President to make paymen
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Pattni. Dr. Koinange used the same
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latter having admitted that he is t
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608. Mr. Mulili was the Deputy Comm
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left this country. Apart from Mr. P
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egardless of whether they were prop
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625. Mr. Riungu was also involved w
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1993 but it wasn’t effected. Mr.
Page 254 and 255:
Shs.2 billion, and also that the St
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643. The evidence before us shows t
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evidence is that Mr. Kotut avoided
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652. We heard Dr. Koinange, Mr. Wer
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keep the documents “for my own pr
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counsel, Mr. Bowry, did cross-exami
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674. He was the General Manager of
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681. Mr. Wanjihia was also involved
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688. It was he who should have reve
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was quite prepared to stand by thes
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707. Pattni is therefore shown conc
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alleged to have talked to, Mr. S.N.
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make any assessment as to how the a
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us as printing money. Professor Rya
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public funds in debt servicing at t
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(3) Effects on Government Instituti
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e used to influence the propriety o
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Njoroge testified that Prof. Mbithi
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to the Government of Kenya. (3) The
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766. But even before such prosecuti
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This is the case in which Job Kilac
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775. Despite the misleading appeara
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however to enable us to state with
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13. HCCC29/95 Uhuru highway Develop
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39. HCCC669/03 Kenya Commercial Ban
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791. Besides tax cases Mr. Pattni a
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800. Mr. Kirira is of the opinion t
Page 308 and 309:
809. It is not therefore at all lik
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efore us for 18 days. This has been
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822. At the time with which we are
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undesirable political influence may
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836. The Controller and Auditor-Gen
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international attempts to deal with
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Notes: through EBL (Exht. 141 pg. 2
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APPENDIX “A”
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APPENDIX “C” TEXT OPENING SESSI
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een fulfilled. This became the subj
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1.1.1.1.2 APPENDIX “E” 1.2 TEXT
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GAZETTE NOTICE NO. 1566 THE COMMISS
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184. HON. SHARRIF NASSIR 185. MR. K
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DAWA 578. HUSSEN MURSALE 579. ALICE
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973. NJAGI NANCY WAMBUGU 974. IRERI
Page 339 and 340:
1369. REUBEN KITHITU 1370. GIRIARI
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9 10 11 MUKURIA, INSP. JAMES GITAU-
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19 20 MAGARI, MR. JOSEPH MBUI (Perm
Page 345 and 346:
21 22 23 RYAN, PROF.TERRY C.I. (Eco
Page 347 and 348:
37 NGONZE, MRS. MIRIAM TSINGUI (Sen
Page 349 and 350:
61 MUTUNGA, MR. MRS. BRETTA NDULULU
Page 351 and 352:
71 NJOROGE, MR. H.H. (Retired CBK e
Page 353 and 354:
77 AURA, MRS. ANTONINA (Retired emp
Page 355 and 356:
1.3 APPENDIX “I” LIST OF WITNES
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2 SUNKULI, MRS. ZILPAH EMMA NTEMEL
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2 EX-PARTE ) HONOURABLE JACKSON MWA
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closes its pulic hearings the corre
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Order 53 rule 2 which prescribes th
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Similarly rule (i) is also in direc
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APPENDIX “K” RULING OF COURT OF
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720655 D7/009/92 71,635,000 25-Jun-
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709538 G5/017/92 42,806,263 06-Feb-
Page 374 and 375:
2.1.1.1 APPENDIX “M” (i) Cheque
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to be short-term as the forex trans
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28 Waruhiu & Muite Advocates 29 Gac
Page 380 and 381:
109 Philip Ochieng 110 Abraham Kipt
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53 Silpack Industries Ltd. 54 Haide
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134 Khetshi Samat & Bros 135 Reliab
Page 386 and 387:
214 Inder Singh 215 Olivia Ndangire
Page 388 and 389:
295 Sherali Kassam Jiwa 296 B.S. Sh
Page 390:
APPENDIX “P” FINANCIAL GRAPHS
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