Daily Nation

State chokes in the firm grip of graft cartels

NATION AGENDA: Who’ll tame the lords of ‘Bandit economy’?

Corruption in Kenya should be tackled in all levels of government.

From interference with the Judiciary to bribing MPs to enact laws to defeat legislation, grand corruption has become part of business in Kenya.

When images of Kenya’s drug barons, Baktash and Ibrahim Akasha, were recently beamed across the world – their arrest and extradition to the US to face justice was seen as a victory against the barons.

For years, they had outdone the state – lived by their rules, and taken hold of both the judicial, political and investigative arms of the government.

It is now emerging from news reports that they had used Sh4 million to delay justice in the Kenyan courts through a third-party – a perfect sign of political decay.

The judicial circus that started with their arrest in 2014 ended last week when, despite an ongoing case in a Mombasa court, they were arrested together with Indian national Vijaygiri Goswami and Gulam Hussein from Pakistan and finally appeared before a US grand jury in New York on Tuesday charged with four counts of conspiring to import narcotics into the US.

In Kenya, state capture has taken many forms.

From interference with the Judiciary to bribing members of parliament to enact laws –or defeat legislation, what is known as grand corruption has become part of business.

Take the case of tenderpreneur, Josephine Kabura.


When she walked into the Public Investment Committee late last year for questioning, Kiharu-born businesswoman of the Sh791 million National Youth Service payment fame looked thunder struck.

Her story, like others told to the committee, was disjointed, nay rambling.

Investigating such monumental scandals has become a routine circus – thanks to collusion, fight-backs and endless legal manoeuvres.

For television viewers who expected some bombshells from Ms Kabura – and editors who expected some bold one-liners – the disappointment was palpable.

At the heart of the NYS saga was former Devolution minister Anne Waiguru who has now declared her interest in the Kirinyaga governor’s seat.

The NYS scandal is one of the many examples where a public policy was intentionally skewed with the increase of state funding to an entity that had no capacity to absorb the billions of shillings that had been allocated to it.

As a result, some political elites and shrewd businessmen lined up to skim hundreds of millions of shillings from its coffers – and via another affirmative action policy that had been enacted to allow women, youth and the disabled easy access to government tenders.

But Kabura is a tiny cog in a country where billions of shillings are lost every year thanks to the emergence of wheeler-dealers, cartels and drug barons – creating what former Chief Justice Dr Willy Mutunga referred to as ‘bandit economy’.

The barons take advantage of calamities to create a health scandal, youth joblessness to come up with Kazi kwa Vijana or maize shortfall to push for fertiliser subsidy – which all end up as multi-million scandals.

These cartels collude with drafters of public policy and lay plans to swindle the taxpayers – as it happened in the monumental Goldenberg scandal where an outsider Kamlesh Pattni pushed through an export compensation scheme at the Treasury.

As a result, what was naively passed in Parliament through the budget, turned out to be a multi-billion export compensation theft scheme that involved cheque kiting and forex theft.

Cheque kiting involved taking advantage of a Central Bank float to make use of non-existent funds and that is what Kamlesh Pattni’s Exchange Bank was known for.

On paper, the gold and diamond export compensation scheme was supposed to lure businessmen into earning the country some hard currency after bilateral donors followed cue from the International Monetary Fund, and the World Bank and denied the President Daniel Moi regime crucial funding.


It was then Finance minister George Saitoti who was used to sanitize the Export Compensation Scheme through parliament and the schemers knew that all that was required from a precious mineral exporter – to get compensation – was paperwork.

If, in the paper, you said you exported gold worth Sh100 million, the government would pay you Sh20 million or 20 per cent of the remitted currency.

Goldenberg is a classic case of state capture.

After the state was swindled $600 million through this scandal, no one is in jail for it 21 years later and last year Justice Joseph Mutava halted the Goldenberg cases triggering an uproar.

In his ruling, Justice Mutava had said that since a Commission of Inquiry led by Justice Samuel Bosire had concluded that “Pattni (was) a perjurer, a forger, a fraudster and a thief” that had impaired (Pattni’s) presumption of innocence..and infringed on his Constitutional rights”.

Finally, a Judicial Commission of Inquiry recommended the removal of Mutava for mishandling the case and concluded that he was “not an innocent bystander” in the plot to have the Goldenberg cases thrown out.

Before he vanished into thin air – some sources say he stays in Mombasa – Peter Alfred Ndakwe became the architect of a Kenyan pyramid scheme that went down with Sh1.9 billion of investors money.

But Ndakwe was never arrested and his loot ended up in two offshore companies – Sun Jopkins SA and Pentkinson SA which in turn owned 11 local companies that legally operated in Kenya and bought properties.

That Ndakwe has been able to enjoy proceeds of his crime also echoes the case of Mungiki millionaires.

When Mungiki gangs were at their peak, they managed to infiltrate both the police and intelligence systems and it took only a special squad to annihilate the group and its ring-readers.

But before that, Mungiki had perfected the art of state capture by controlling the multi-billion Matatu business, the real estate security in Nairobi’s Eastlands and would dare anyone to report to police.

Today, some remnants of the gangs are in boda boda business where they have formed networks that harass anyone who threatens them.

Last week, they boda boda gangs torched a matatu plying the Rongai route that had knocked a rider forcing the police to arrest 23 of them and warn that the State would crack-down on them.


In the matatu business, some of the gangs still control routes and make it hard for new entrants to join the market by working with the police and county askaris to harass them.

When the Sh5 billion health scandal emerged – or rather when the draft leaked – it emerged that one of the company that was doing business with the government belonged to the Chairman of Ethics and anti-Corruption Commission, Phillip Kinisu.

During his interview, Kinisu had failed to disclose to the National Assembly that he had a company that did business with National Youth Service – a signal of how the anti-corruption agency had been penetrated by interested parties and tenderpreneurs.

It was not the first time that senior government figures had done business with the government.

It is now known that most of the civil servant millionaires earned their money through schemes and tenders that saw them become suppliers to the government departments where they served.

Perhaps the most recent case is the one facing a former corporate fat-cat named Samuel Gichuru, once the managing director of Kenya Power and Lighting Company.

Today, Gichuru and former Finance minister Chris Okemo are fighting in courts to stop their extradition to the Island of Jersey, a dependent territory of United Kingdom, where they are to face money laundering charges.

Both Gichuru and Okemo represent the excesses of the Kanu era when government officials set pace on conceiving projects – and getting commissions from the contractors.

At one point, Gichuru’s estate was estimated in court documents to be worth Sh100 billion and his case and that of Mr Okemo allowed Kenyans a chance to peep into the murky world of corporate management.

Both had flown to New Jersey on different dates and opened personal offshore accounts to put proceeds of “consultancy and business introductions”.


As it turned out, any foreign company that desired to carry out multi-million deals with Kenya Power, according to the extradition papers, had to pay some introduction fee – in essence a bribe – into the Gichuru account in Jersey.

Interestingly, the extradition cases have been in Kenyan courts for some years now – and no local effort to prosecute the graft cases either.

The devolved units of government have also turned to be the new citadels of grand-corruption and the office of the auditor-general has been unable to account for billions of shillings given to these counties.

In Nairobi, the auditor put the figure as Sh20 billion – and in various counties, he has pinpointed schemes that –though legal in nature since they are passed by local assemblies – have become conduits to steal taxpayers money. Some of these include unsecured mortgages and car loans.

When it was put in place, the Integrated Financial Management Information System (Ifmis) was supposed to be a secure and accountable platform.

But it has turned out to be an easier conduit for stealing public funds, especially at the counties where some of them don’t input the amount collected locally into the system.

As a result, the expenditure reported in the Ifmis is usually different from the one in the books creating an accounting nightmare.

Also, political lobbyist are now known to use their positions to bankroll politicians and political parties during campaigns in order to influence later policy.

For instance, some of the companies that were recently associated with the health scandal at the ministry of health, where container clinics were bought and left in Mariakani were owned by Jubilee ally. He was also contracted to bring in some energy foods worth millions of shillings for those living with HIV Aids.

In all these, neither the anti-corruption commission nor the public prosecutor is able to effectively do their work.

And as whistleblowers have found, it can be a dangerous business.