Kenya: The Real Fight for Grand Regency May 07, 2008 at 09:14 AM
Albert Muriuki And Morris Aron - On Nairobi's Loita Street, the Libyan flag flies high atop the five-storey Embassy building, perhaps a sign of the country's passion to get a foothold in Kenya's oil and business sector. The stakes are high.
Across the street is the Grand Regency Hotel, a landmark institution that symbolises greed, theft and corruption - the hallmark of the Kanu regime.
The Libyans want the hotel as part of their bid to entrench themselves into Kenya's business sector and so do the Indians.
Diplomatically, the Libyans have an upper hand - or so they believe.
Last month, when the country was in the thick of a political stalemate, President Kibaki flew to Kampala meet Libya's President Muammar Gaddafi who was commissioning a new mosque.
In diplomacy circles, that was a signal that the Libyans have got to the heart of Kenya's presidency.
Libyan oil merchants are in town looking for contracts and seeking to elbow out other investors in a pull-and-push game that has seen Indians - who were after the lucrative oil refinery in Mombasa - cry foul.
Eight years after they re-opened an embassy in Nairobi - which was shut in 1987 after the Moi regime accused the embassy officials of [/b]espionage - the Libyan oil merchants want to have a footprint in the region and are keen to edge out competitors.
Like the emerging story of the Grand Regency Hotel, the entry of Libyans - and the fight for lucrative tenders and business space - is opening new battle grounds.
Indian, Chinese and Libyan companies are taking advantage of a political stand-off between the Kibaki regime and British companies which were previously the main beneficiaries of such high level transactions.
At the Grand Regency, a group comprising Libyan investors trading as Libyan Arab African Investment Company is pitted against another one of Indians who recently bought a vacant plot next to the hotel.
The Indian group boasts of the fifth richest man in the world, Mr Mukesh Ambani, who early last month partnered with an Arabian real estate firm, Arrow Webtex, to form Delta Resources Limited and bought a number of plots close to the hotel.
One of the deals included the purchase of a parking lot next to Grand Regency at a cost of Sh1.4 billion from the National Social Security Fund (NSSF) in the country's biggest property deal so far this year.
Arrow Webtex has also reportedly bought another parking lot between Barclays Plaza and Nyati House, where it plans to build a number of top-end hotel and shopping malls, creating a "city within a city" around the hotel complete with modern shopping centres, casinos and other entertainment services.
The investors also recently bought into Gapco oil and have other interests in the country.
Once a virgin green zone, the land between Uhuru Highway and Loita Street has been the bastion of speculators who got the land in the mid years of the Moi Government and it is there that the Indians and the Libyans will start their fights.
And a cabal of local interests have joined the fray, questioning the authenticity of documents regarding the hotel sale.
A document supposedly written by businessman Kamlesh Pattni's lawyers but which do not have his signature, states that one of the pre-conditions for the hand-over of the hotel to CBK is the sale of the property to a pre-determined investor.
President Kibaki on a recent trip to Libya.
According to the document, the hotel was to be sold jointly by the Central Bank and Mr Pattni to a buyer free of any encumbrances at market value and determined by two reputable valuers.
Wetangula, Adan, Makhoha and Company, Mr Pattni's advocates, through Mr Ahmed Adan told the Business Daily that the reports were fraudulent and that the advocate firm had not issued such a document.
"I can confirm to you that we have not written any such a declaration," said Mr Adan.
The law firm accused politicians who are against the repossession of the hotel and "people who are interested in the deal," as being behind the document.
"The people behind this are shameless corrupt people with up to 20 cases in court," said Mr Adan as he showed the Business Daily what he said was the declaration signed by Mr Pattni before the handover of the hotel to Central Bank.
The Attorney General (AG) yesterday distanced himself from the hotel's recovery by the Kenya Anti-Corruption Commission (KACC).
So, if the documents were forged, who did it?
At the port of Mombasa, the transaction to buy 50 per cent of shares held by Shell, Chevron and BP in the Kenya Petroleum Refinery Limited (KPRL), has not only annoyed the Indians, but has brought to the fore just how Libya has muscled all its diplomatic, political and economic clout to get the lucrative deal even after the Indians, through their company, Essar Energy Overseas Ltd, won the tender in December last year.
The battle lines are slowly getting drawn.
Essar Energy Overseas Limited concluded a transaction of the purchase of 50 per cent shares by Shell, Chevron and BP in KPRL, Mombasa in December 2007. As per the Shareholders Agreement between the Government and the Industry shareholders, the Government has the Right of Pre-emption if the industry shareholders decide to sell their shares.
Accordingly, when the transaction was signed, the Government was approached by the three oil companies to waive its first right of purchase. This request has been extended three times, raising concern mainly amongst cadres of the Energy ministry, Foreign Affairs and Essar.
The last deadline passed on March 19.
The refinery in Changamwe, Mombasa, has a capacity of around 72,000 barrels per day and is an attractive investment. The intended modernization programme is to increase current production of liquefied petroleum gas, from the current 30,000 tonnes to 120,000 tonnes per year.
At the centre of the diplomatic row is the Finance ministry which has apparently been using delaying tactics probably as a way to force Essar to give up its bid and give Oilibya an easy way in.
The Libyans are slowly mastering their way into Kenya, having entered the downstream market with a rebranding of the former Mobil petrol stations.
However, during his recent trip to Uganda during the official opening ceremony of the Gadaffi National Mosque on March 19 in Kampala, Colonel Muammar Gadaffi held talks with President Kibaki. Whether this involved the pending business is not clear. The Presidential Press Service did not answer queries about the issue even after numerous calls and emails.
But the Indians are not taking it lying down, correspondence obtained by the Business Daily, shows that in a meeting held on March 12 this year, India raised concerns about the KPLR issue and urged his Kenyan counterpart to raise the issue with the Finance and Energy ministries.
The Kenyan Ministry of Foreign Affairs, in a letter signed by Ms Mercy Odongo on behalf of the Permanent Secretary, conveyed the Indians concerns to the ministries in a letter that clearly emphasised the fears and concerns of Essar.
"The matter is still being discussed in government. These consultations could take some while. In that regard and the fact that a number of ministries and stakeholders are involved, Foreign Affairs may not be in a position to provide further information at the moment," Mr Eliphas Barine of the Foreign Affairs ministry said.
The Indians are said to have pledged to use over $400 million (about Sh22 billion) in both equity and loans to upgrade the refinery, a process that would eventually dilute the 50 per cent share holding by the Government.
But the hurdle at the KPLR goes beyond the foreign relations and even deeper into matters of bi-lateral lending between Kenya and its erstwhile Indian partner.
This is because of Export-Import Bank of India (Exim Bank).
Exim normally finances Indian firms for acquisition of overseas businesses including leveraged buy-outs and structured financing options. According to a Ministry of Energy official, Exim bank was to be the main financer for Essar for the KPLR transaction.
Essar is considering taking legal action to scuttle the process for the Libyans and might end up in a court out of Kenya where the three KPLR shareholders can arbitrate a dispute against the Kenyan Government.
This will not be without precedent for the Libyans in Kenya. A Czech firm, Skoda Export which partnered with Tamoil (the predecessor of Oilibya) for the Kenya-Uganda oil pipeline sued Oilibya in a London court over contractual difficulties between them. The London suit was one of the reasons that led to the stalling of the oil pipeline extension to Uganda. The suit was however thrown out for lack of jurisdiction in late March this year.
India and Libya want a foothold on the East African coast as it will be one of the three entries to extensive offshore oil exploration in Africa with huge potential. Already, the Southern African and Western African coast have already been clinched by western countries and China.
Mr Kamlesh PattniIn Nairobi, intense lobbying for the ownership of Grand Regency hotel has been set off following the decision by Mr Pattni to surrender it to the Central Bank.
The hotel had been placed under charge in the mid 1990s over $210 million (Sh14 billion at current exchange rates) that Mr Pattni's defunct Exchange Bank had borrowed from the Central Bank and failed to pay.
Mr Pattni said he had surrendered the prestigious hotel under the Economic Crimes Act of 2003, which allows for pardoning of perpetrators who forfeit proceeds and assets from stolen public funds to the state.
But that is half the story.
"Investors know that they can make money if they bought the hotel," one investor interested in the facility said. But there is more in the Grand Regency saga.
Recent reports suggesting that the hotel has since been sold to Libyan investors and denied by the Central Bank are understood to be part of the shadow boxing tactics among prospective investors. There have since been questions over the authenticity of the correspondence on which the reports were based.
Valuers contacted by The Business Daily valued the property at between Sh8 billion to Sh12 billion compared to the Sh1.6 billion mentioned in the reports. It has since emerged from dealmakers advising various interest groups on how to approach the transaction that two investment groups, assisted by some politicians, are seeking to get the better of each other in the deal.
A third force exists in the form of politicians led by Imenti South MP Gitobu Imanyara who want the hotel sold to the public. The Law Society of Kenya has also threatened to seek legal redress if no competitive bidding is done in line with public procurement rules.
Patronage is seen to be in favour of Libyan investors especially after the government signed a memorandum of understanding on investment with the Libyan government.
Legally, CBK being the chargees can single-handedly choose who to sell the property to through either private treaty or public auction. Grand Regency was owned by Uhuru Highway Development Company which Mr Pattni acquired from the family of the late Mohamed Aslam, owners of the collapsed Pan Africa Bank.
Mr Pattni was the subject of a Commission of Inquiry into the Goldenberg scandal which started in February 2003 and ended in September 2004 The commission recommended that he, alongside other culprits, be prosecuted and made to pay back the stolen money. Under the Economic Crimes Act, however, those who agree to return the property they are cleared of all the charges.
Under the Anti-Corruption and Economic Crimes Act of 2003, KACC is given the powers to recover any property that is deemed to have been acquired illegally. However, this is done after the KACC institutes proceedings at the High Court and adduce evidence that the person has unexplained assets which have been obtained through corruption.
In the recent recovery of Grand Regency, at least three court cases which were still on going even as he gave up the property. The KACC is said to have offered Pattni amnesty in after he surrendered the property.
Further, the statement by Mr Wako also raises issues on the manner of cooperation between the AG's office and KACC, the two are supposed to compliment each other but seem to be working at a cross purpose without briefing each other.
"As the legal advisor to the government, the AG's opinion should have been sought before awarding amnesty to Pattni," says Prof Githu Muigai, a leading lawyer.
But Pattni remains a sideshow in the battle between the Libyans and Indians.
Chronology of events in the Grand Regency
1989-1993: The 220 room facility, Grand Regency (also originally known as Hotel Meridien) is constructedInitial cost approximated at US$30-40 million through a loan from CBK by Pan African Bank which was later closely related to the Goldenberg Scandal. Final cost at the time of completion placed at over US$100 million mainly through inflated costs of construction materials used and proceeds from the Goldenberg Scandal.
Mid-1993: A number of banks involved in the scandal including Pan African Bank, Credit Bank and other collapse one after another as the scandal hurts the economy in proportions never seen before.
July 1993: CBK shuts down Exchange Bank (owned by Pattni and the architect of the Goldenberg Scandal). CBK takes a security charge of US $40 million on the Grand Regency to cover part of the debt it was claiming from Pan African Bank.
April 1994: The hotel is first placed in receivership by the CBK on 15 April 1994.
1994-2007: A series of court cases and enquiries approximated to cost over Sh500 million make their rounds in court as Pattni and CBK battle over the hotel.
April 2008: Pattni agrees to hand over the hotel to CBK under an economics crime act.
Scramble for the hotel between begin due to the difference of what the hotel is worth and what CBK is legally mandated to dispose it at. allafrica.com/stories/200804221073.html?viewall=1...........and then, if this is NOT AMNESTY what is it?
www.kacc.go.ke/default.asp?pageid=97“REGISTRATION OF SETTLEMENT
(Under Section 56B (2) & (4) of the Anti-Corruption and Economic Crimes
Act and Section 3A of the Civil Procedure Act)
Whereas a settlement for the discontinuation and termination of this suit has been reached between the Plaintiff and the 1st, 2nd, 3rd, 4th, and 12th Defendants in terms of the provisions of Section 56B (2) & (4) of the Kenya Anti-Corruption and Economic Crimes Act and the said parties wish to and hereby register the said settlement in Court;
And whereas the Plaintiff and the 1st, 2nd, 3rd, 4th and 12th Defendants have agreed to settle this suit under Section 56B (2) & (4) of the Anti-Corruption and Economic Crimes Act;
IT IS HEREBY AGREED BY CONSENT THAT:-
1. The 1st defendant Kamlesh Pattni and the 2nd Defendant Uhuru Highway Development Limited do hereby agree to:-
(i) relinquish, assign, reconvey or otherwise transfer ownership and all their rights and interests in the property known as Land Reference Number 209/9514 together with all the improvements thereon including the Grand Regency Hotel, the fixtures thereto, moveable and immoveable assets (hereinafter referred to as “the Assets”) to the Central Bank of Kenya.
(ii) To execute any and all necessary instruments of transfer to give effect to (i) above and in default thereof the Deputy Registrar of the High Court to execute such instrument(s).
2. The Joint Receiver Managers appointed pursuant to a Consent Order dated 31st May, 2004 are hereby discharged forthwith and the ownership and management of the Assets be and is hereby transferred to the Central Bank of Kenya.
3. All bank accounts held by any bank in the name of the Joint Receivers/Receiver together with all funds held therein be and are hereby transferred to the Central Bank of Kenya.
4. The Plaintiff hereby discontinues the entire Civil Suit No. 1111 of 2003 and all pending applications therein.
5. The Central Bank of Kenya hereby abandons all its other claims against the defendants. 6. This consent constitutes the due registration of the Settlement Agreement between the Plaintiff and the 1st, 2nd, 3rd, 4th and 12th Defendants in terms of the provisions of Section 56B (4) of the Anti-Corruption and Economic Crimes Act.
7. That upon the filing of this settlement in court the same be and is hereby marked as duly registered under the provisions of Section 56B (4).”
It is clear from this settlement that the outcome of the negotiations has been the recovery of the Grand Regency Hotel. The Hotel was immediately handed over to Central Bank of Kenya on 9th April, 2008.
The recovery of the Grand Regency Hotel is, without doubt, a major breakthrough by the Kenya Anti-Corruption Commission in its efforts to recover public properties which have been improperly acquired through corrupt conduct and economic crimes. It is also a milestone in the Commission’s intricate war on corruption.
It cannot be denied that despite Goldenberg-related cases having swarmed our courts for close to two decades very little progress has been made towards recovery of money siphoned from Central Bank of Kenya or assets that may have been acquired with such money. The Grand Regency Hotel has not only been the only obvious asset whose acquisition can be directly linked to the Goldenberg scam but also it has for many years served as a relic of the mega corruption of the 1990’s which the Kenya Anti-Corruption Commission has been fighting to unravel for the past four years it has been in existence. It is therefore with much relief that, at last, this property has been restored back into the hands of the Public.
The Grand Regency Hotel, like many other assets that the Commission has recovered on behalf of different public bodies, has been handed back to the aggrieved institution, in this case, the Central Bank of Kenya. The Commission has done its part and there is no doubt that Central Bank will be properly guided by the law of the land in disposing of this Hotel to recover its money.
The importance of Section 56B to the Kenya Anti-Corruption Commission cannot be over-emphasized. As clearly demonstrated in the recovery of the Grand Regency Hotel it is a powerful yet diplomatic tool in the hands of the Commission for recovery of public assets pursuant to its mandate under the Anti-Corruption & Economic Crimes Act. However, since it requires the co-operation of the person or persons against whom recovery claims are raised, the Commission calls upon them to take up Mr. Kamlesh Pattni’s challenge and come forward and handover these assets to the Commission, amicably.
