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A history of state capture in Kenya: The Anglo Leasing scandal

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The recently released memorandum of the Judicial Service Commission to the Building Bridges to Unity Advisory taskforce, brought to light a couple of important things to our articles on the rule of law in the context of politics and ethics.

There are at least 38 laws dealing with corruption in Kenya. The Judicial Service Commission (JSC) has rightly stated that fighting corruption is primarily a political problem and that the Executive and Legislature should deal with corruption within its ranks decisively.

Truth be told, our criminal system is slow and quite inefficient. So, we will never solve the problem if all our hopes are placed on the judiciary. After all, the judiciary only acts after the crime has been committed.

The ingenuity of modern-day Kenyan corruption scandals lies in the artful manipulation of State infrastructure to generate collective public and institutional amnesia. It seems the country’s collective psyche, despite being appalled at the grand theft, is eventually lulled into moving past the affair.

Last week we explained that Goldenberg siphoned off over 10 percent of the country’s annual GDP. Despite numerous attempts at punishing culprits, the government hesitated.  No one was prosecuted at the end of the inquiry.

The Office of the Attorney General, which held prosecutorial power, was particularly instrumental in the non-prosecution. It took external pressure from the International Monetary Fund and the World Bank for the AG to institute proceedings against Kamlesh Pattni and his co-accused in 1997.

Even then, the AG self-sabotaged the process by framing irregular charges which were likely to be dismissed, as it happened when the High Court—without missing a beat—went ahead to issue a prohibition order against the prosecution. Subsequent charges against Pattni and his co-accused were unsuccessful because of similar recklessness.

For every scandal, we appointed sterile and impotent commissions whose main task was to prevent the taking of any substantive steps, but pretending to quench the thirst for justice from infuriated citizens. Still now, this blueprint continues to guide the post-uncovering of any mega corruption scandal. This was what was done for Goldenberg, and a few later, for Anglo Leasing too.

False dawns in the fight against corruption

During his inaugural speech in December 2002, newly-elected president Mwai Kibaki promised that corruption would cease to be a way of life in Kenya. He also warned members of his administration that none found to be dishonest would be exempt from the law. Sound familiar?

The Kibaki administration introduced several new laws and bodies to combat corruption. Notably, the Kenya Anti-Corruption Commission (KACC) was established in 2003 under the newly enacted Anti-Corruption and Economic Crimes Act (2003).

President Kibaki also appointed John Githongo as the Permanent Secretary for Governance and Ethics in the Office of the President. With this cherry, Kibaki’s administration appeared primed for success against corruption. Githongo’s previous role as the founder and Head of the Kenyan chapter of Transparency International inspired confidence in his ability to serve as principal advisor to the President on anti-corruption issues.

Githongo took his new job to heart. He lost friends, acquaintances and eventually had to go into a self-appointed exile after blowing the whistle on one of the largest corruption scandals Kenya has seen. If Goldenberg had been ugly, Anglo Leasing was poised to be grotesque. 

The Anglo Leasing scandal

Anglo Leasing and Finance Limited (ALFL) was one of over a dozen shadowy companies that had irregular government contracts. Anglo Leasing became an omnibus description of all the contracts due to the striking similarity in the type and terms of the contracts.

Anglo Leasing was unlike any other scandal Kenya had witnessed before. The Ksh. 13.5 billion Goldenberg fleeced out of the Central Bank of Kenya is petty theft when compared to the 55 billion shillings’ worth of bogus state security contracts in the Anglo Leasing scandal.

In ‘It’s Our Turn to Eat: The Story of a Kenyan Whistle Blower’, Michela Wrong explains Anglo Leasing’s money was roughly 1.5 times the foreign aid Kenya received in 2004 and could have bought every HIV positive Kenyan ARVs for a decade.

So, what made the Anglo Leasing scandal so extraordinary? First, it involved 18 separate contracts entered into by the government (13 under Moi’s regime and 5 under Kibaki’s regime). The contracts generally dealt with government procurement in the security sector, and took the form of lease finance and suppliers’ credit agreements.

Supplier credit agreements are particularly accommodating of countries working towards increased development, such as Kenya. Most of these contracts involved either highly inflated prices or undelivered goods by ghost suppliers after payment.

Second, at the top level alone, it involved a crowd of at least twenty people, cutting across the private and public sector. Businessmen and government officials at different levels were associated with the scandal in different degrees.

The ghost of Anglo Leasing and Finance Limited

On 22 November 2005, John Githongo presented President Kibaki a chronological account of how the infamous Anglo Leasing scandal developed.

Githongo began the account by addressing a contract between the Kenyan government and ALFL, a supposed British-incorporated company with offices in the city of Liverpool. The engagement had started in the year 2000, when the Department of Immigration within the Ministry of Home Affairs (that fell under the Office of the Vice President) was contracting a new passport issuing system that would produce tamper-proof passports to eliminate fraud, forgery and inefficiencies.

A tender for supplier companies to submit bids was issued. One company was selected for meeting the required specifications of the tender. However, as the Ministry’s budget for the 2000/2001 financial year did not cover the proposed contractual costs, no agreement was reached with the successful company.

In 2002/2003, the tender process was opened again and none of the bids were considered successful. After the second process, the Ministry expanded the range of immigration service solutions, and went beyond just tamper-proof passports.

The Ministry’s needs were: 1) high security new generation passports; 2) a secure passport issuing system; 3) high security new generation visas; 4) a high security visa issuing system; and 5) computerisation of machine-readable immigration records. This change made the cost swell and Treasury got involved.

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In August 2003, the Permanent Secretary in the Vice-President’s Office received an unsolicited proposal from a company for the supply and installation of an “Immigration Security and Document Control System, (ISDCS)”. The company offered a credit facility of 2.67 billion Kenyan shillings repaid at an interest of 5 percent over a period of 62 months to ease funding. That company had inside information. They had what the government needed, and they also knew that funding challenges had halted previous tenders. That company was Anglo Leasing (ALFL).

It is evident that Githongo and the Public Accounts Committee (PAC) appointed to investigate the Anglo Leasing scandal felt that it was too much of a coincidence that the ALFL had such specific knowledge of the Ministry’s challenges and needs.

The fact that this proposal was not immediately dismissed—or at least flagged—for its suspiciously detailed insight into the Ministry’s needs and challenges points at collusion in the contracting process. Despite this, the Immigration Department awarded ALFL the ISDCS contract in December 2003.

The public was first made aware of the scandal through documents tabled by Maoka Maore, former MP for Ntonyiri, in April 2004. The documents showed that 91 million Kenyan Shillings (3 percent of the 2.67 billion shillings total amount due) was paid as a commitment fee for the ISCDS project.

In his dossier, Githongo reveals that in total, about $ 4.7 million was paid for Anglo Leasing’s ISDCS project. 

The creators and contractors of the Anglo Leasing scandal

The information about ALFL that Githongo received from several sources suggested that the company was in fact non-existent. He confirmed this when he took a trip to the United Kingdom.

Githongo established that the company was connected to notorious Kenyan businessmen.  Not by chance, these companies had won most large contracts to supply goods and services to the security and defence sectors at highly inflated prices.

At the request of Githongo, the KACC and Controller and Auditor-General listed their main suspects within government and President Kibaki authorised their suspension.

Suddenly, on 14 May 2004, Anglo Leasing and Finance Ltd refunded the Kenyan government 95 million Kenyan shillings from a Swiss bank for the immigration services.

The ‘refund’ issued by Anglo Leasing was as a blessing to some government officials. It was the leverage they needed to try to stop investigations into the scandal. Politicians also asked Githongo to go easy and prevent a bigger mess. By this time, Githongo’s head had a price.       

The second Anglo Leasing Contract: C.I.D Forensic Science Laboratories

It came to Githongo’s attention that ALFL had another contract for USD 40 million to build the C.I.D Forensic Science Laboratories. Under this supplier credit agreement, USD 5 million was paid for no work done.

In this case, ALFL had a different address than the one given in the immigration services contract, supporting the suspicion that ALFL was a phantom firm. Further, the 2004/2005 budget allocated over KSh 450 million to Anglo Leasing.

Whether the president was aware of the Forensic Science Labs contract is uncertain. When Githongo furnished him with a copy of the Forensic Laboratories contract, Kibaki ordered that all payments be halted and that the people behind Anglo Leasing be unveiled.     

The Ministry of Finance’s 2007 request for a forensic audit and valuation of the contracts was done by PWC. The contracts were categorised as: cancelled contracts; fully paid contracts and partly completed contracts.

The cancelled contracts were those where some sort of ‘refund’ was paid as compensation to have them closed and buried. ALFL paid back Ksh. 370 million for the Forensic Science Laboratories for the C.I.D. and 95 million Kenyan Shillings for the ISDCS; Infotalent and Silverson Establishment, also reimbursed the Kenyan government. In the end, over Ksh. 1 billion was recovered from the scandal.

The Vice President himself was not held accountable for the botched contracts even though the immigration services contract originated in his office. Other contracts dealt with the National Security Intelligence Service; the National Anti-Terrorism Centre, Kenya Prisons, the Police Airwing and the Administration Police. Despite the scale, there have been no convictions and rest of the money has never been recovered. Indeed, a number of the Anglo-Leasing creditors obtained international arbitration awards against the Government of Kenya, which had to be paid in full by the Government. This gives us no reason to think that we have the capacity to deter, prosecute, or even fully uncover such looting in future.

Living our own Greek tragedies

Kenya’s need for better security was stolen, our national security was compromised. There is reason to believe that Kenya’s horrible terrorist attacks in the last 10 years have something to do with our poor security, migration and identification systems. They were all compromised when our public coffers were raided.

Anglo Leasing is and will always remain a tragic event, unforgivably audacious yet predictable. Just like Greek tragedies that gave audiences an experience of catharsis (relief from strong repressed emotions) and ended in an exodus sung by the chorus as they left the stage.

Our corruption scandals are a tragedy. We live in constant state of Twitter catharsis, while the culprits just exit the stage. This is stage and State capture.

This article is part of a long series of articles on the rule of law in the context of politics and ethics. The series is researched and co-authored by:

• Prof Luis Franceschi, founding dean of Strathmore Law School and Visiting Fellow, University of Oxford
• Karim Anjarwalla, Managing Partner of ALN Anjarwalla & Khanna, Advocates
• Kasyoka Mutunga, Research Associate at ALN Anjarwalla & Khanna, Advocates
• Wandia Musyimi, Research Associate ALN Anjarwalla & Khanna, Advocates

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Our wizards saw the Brave New World, but none saw coronavirus

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By CHARLES ONYANGO-OBBO

Last year in December, Nation Media Group held its first Kusi Ideas Festival in Kigali. The festival tried to peer ahead the next 60 years in Africa.

There were many Brave New World ideas about how that future might look like, and also the perils that progress almost always brings. Needless to say, no one saw Covid-19 coming.

A futurist curtain-raiser in The EastAfrican, titled Africa in 2079, came close to outlining a mirror universe to the one Covid-19 is bequeathing us.

Between London, Zimbabwe, and the corners of Africa where Econet’s fibre optic network reaches, Strive Masiyiwa, founder and chairman of Econet Wireless and former chair of the board of AGRA wrote:

“I recently invested in a tech start-up that has created an Uber-like platform for tractors, enabling farmers to link up with a central database and order a tractor via SMS…freeing the farmer from the drudgery of the hoe. This service is particularly valued by women farmers, enabling them to circumvent social norms that might otherwise hamper their ability to hire a tractor.” From wherever we are hiding from the virus, unable to roam the farm, Uber farming could be the new way a lot of our food is produced.

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From Tanzania, Aidan Eyakuze, who is executive director of Twaweza East Africa and has been confined in-country as an elegant prisoner for nearly two years because of his love of inconvenient data, painted an intoxicating but strange utopian-dystopian picture of Africa at the end the century.

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By 2079, he foresaw the “vast majority of Africans earn their living through multiple micro-tasking (MMTs) ever since every ”job” was unbundled into its component tasks…leaving only those unbundled micro-tasks needing social intelligence, creativity or dexterity to be done by people. All ”taskers” are always-on private contractors who bid relentlessly for the privilege of tasking.

Incomes are kept low by the relative scarcity of tasks requiring the human touch.

“The unrelenting competition for tasks is both stressful and socially divisive — you are competing against everyone all the time…even marriages have renewable term limits, ‘in case someone better comes along.’” With work-from-home regimes, the former has come 78 years earlier.

Indeed, even for the latter, more people now probably think being cooped up with the same man or woman in the house “for better, for worse, for richer, for poorer, in sickness and in health, to love and to cherish, till death us do part,” is a very archaic model.

Between Italy and Kenya, the Society for International Development’s Arthur Muliro, peered into a what a truly borderless Africa might look. Among others, his gaze settled on, of all places, Libya.

“Libya…was now welcoming other Africans and allowing them to settle. The peace deal that had come after a decade of civil war was holding and there was new optimism, in part boosted by the arrival and expansion of new migrant groups who had settled there and were helping rebuild their adopted country.”

On a close re-reading, turns out Aidan hinted that Turkey, which jumped in the Libyan fray as the coronavirus made its way out of Wuhan, might have something to do with it.

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Stadiums progress welcome – Daily Nation

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By EDITORIAL

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Last week, the Sports ministry’s top officials, led by Chief Administrative Secretary Hassan Noor Hassan and Principal Secretary Joe Okudo traversed the country to access the ongoing construction of stadiums.

President Uhuru Kenyatta also made an impromptu tour of the Nyayo National Stadium to ensure that all is well besides giving Cabinet Secretary Amina Mohamed full support. That has made sure that renovation works resume at all the stadiums — including Kasarani, Nyayo, Kipchoge Keino, Kamariny and Wote — and that everything is running on schedule.

Upon completion of some of these arenas, the country will have positioned itself to host major world events, especially in football, athletics and basketball. The ministry must, therefore, ensure that, while it has given contractors an ultimatum to finish their work, it also insists on quality delivery.

But there are concerns about work at county stadiums, especially in Mombasa, where those who redesigned the arena have done away with the internationally approved running track.

The new stadium has been designed for football only hence won’t host any track and field events. The four lane track will only be for warm up and this has raised eyebrows.

Mombasa County Chief Sports Officer Innocent Mugabe said Bububu grounds in Likoni and Kenya Ports Authority’s Mbaraki Sports Club will be upgraded for sports use. Mombasa being at low altitude, it is suitable for staging major World Athletics events, having staged the 2007 World Cross Country Championships.

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Kenya is bidding to host the 2025 World Championships in Athletics and Mombasa can easily be the venue with a good stadium in place. There is still time to build a county stadium.

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Ensure reopening of schools runs smoothly

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By EDITORIAL

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When Education Cabinet Secretary George Magoha announced a fortnight ago the postponement of school reopening to January next year, he gave an exception. Universities, teacher training colleges and technical training institutions were directed to be ready to reopen in September.

Consequently, they were asked to put in place safety measures prescribed by the Health ministry, including reorganising classrooms and hostels to ensure social distancing. Just a month to the planned reopening, are those institutions really prepared?

In the past few days, Prof Magoha has convened meetings with the heads of the institutions to plan for the reopening and visiting the colleges to assess their preparedness. Preliminary reports from these engagements indicate that just a few institutions are ready.

POOR STATE

At the university level, so far, only Strathmore has been declared ready for reopening. Ensure reopening of schools runs smoothly

For teachers’ colleges, three — Murang’a, Kibabii and Kericho — have met the threshold. Assessment is ongoing for the technical training institutions.

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But the broad observation is that most of the institutions are not ready. Though not surprising, most of them are ordinarily in poor state and Covid-19 has just exposed them. Beyond the situation, long-term actions are required to revamp and revitalise them.

Reopening the colleges in September will be the starting point for relaxing restrictions in the education sector. The reason for beginning with colleges is that they have mature students who understand the health protocols and can, therefore, take care of themselves and minimise infections. Their experience would then inform plans for reopening primary and secondary schools.

REPEAT CLASSES

Closure of schools and colleges has dealt a huge blow to education. Learners in schools have lost a whole year and have to repeat classes next year. This comes with high social, economic and psychological. Indeed, this is the first time in history that schools are being closed for a year.

The last time the education sector suffered most was in 1982, when, following an abortive coup, the University of Nairobi and then-Kenyatta University College were closed for nine months. That created a major backlog and that took five years to clear. This is the reason steps should be taken at the earliest opportunity to mitigate the damage.

The challenge, therefore, is for the colleges to work on those health protocols to prepare for reopening. All other sectors, such as transport and tourism, are reopening and, therefore, colleges have no reason to lag behind. We ask the management of the institutions to expedite the required processes and get ready for reopening in September as directed.

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