Sarah Elderkin: The Eurobond Smoking Guns

[jakaswanga]

Part 11 WHERE ART THEE, O GOOD DETECTIVES? FEAR NOT THE PUZZLE!

So the dogs which should bark did not bark. End of story. –--Tinda adong adong arom gi bao man Kanera!

Okay, David Ndii's anecdote jiving Sherlock Holmes's observance aside, I remember an old quip by a cheeky African writer. I suspect it was Chinua Achebe. He was always good for a load of chitty-chatty winks and full pulls of leg. His Eminence was asked to spare a thought on the silence of African (Nigerian) economists in government, in the light of the evident economic ills the literati were so vocal against. The writer shrugged, 'perhaps their heads are emptied of thinking that is why they got the jobs; perhaps their hearts are dread with fear, who knows what else tongue-ties a man apart from a beautiful woman? But why, really, would a soft c.ock be interested in a hot problem?'

Patrick Njoroge being a confessed celibate we can forget the last, unless the celibate too are captive to lurid fantasies. This possibility would really make the Vatican --sorry girls--- a jerker's paradise. But that is another story.

We know Patrick Njoroge is one dog who has not barked in the Eurobondgate. Interesting too is, he has barked neither at the trespassers nor at the hecklers. A balancing act. It is an outstanding exercise in studious silence. –-We make a mental note, like detectives hanging photos of suspects in the briefing room. He is drawing heavy on his rights to silence. A tough gambler with an inscrutable poker face, all his cards flat on his chest.

On the flip side, when your whiz kids maintain studious silences, you go for the work horses to get the job done. For time and tide wait for no man. And Kenya is already late in catching and killing her major thieves. And no wonder the IMF has to compare us to Sudan to give us pass marks! –-UUUwwiii!

ENTER SARAH ELDERKIN!

If you have a weakness for work ethics like me, you will abide her. She is a toiler. 'German girl''. A work horse. And I go with Deng Hsiao Ping on this: don't matter the colour of the cat so long it catches the mice. Which works to don't mind the colour of the horse, so long it does stellar work. It is a several parts. Brainy legwork, goodly Sarah.

Four smoking guns, hazy figures, Eurobond billions held in US bank accounts and bogus letters

By Sarah Elderkin. January 23rd 2016

Every senior person in the CBK and the Treasury and every lawyer advising either organisation must be able to look at these facts and figures and letters and tables just as I can, and they know very well what is going on here.

They are thus ALL persons of interest in this affair.

They ALL have something to say. Have they been silenced? Have they no courage? No patriotism? Have they been paid? (After all, a billion dollars is an unimaginable sum of money – plenty to spare for everyone.)

The upshot of all this is that we now call on the CBK and the Treasury to publish all the correspondence (unredacted) from the Federal Reserve Bank of New York, which as far as we know is still holding our nearly one billion dollars. We need the name of the account holder, we need the balance statements, we need the full details of any transactions on the account.

We need relevant letters from the Treasury, letters from the CBK containing the instructions to Federal Reserve Bank to transfer the money, and the resulting correspondence back to the CBK from the Federal Reserve Bank.

If this nearly one billion dollars was transferred to Kenya, we need to see very clearly when and how.

See also: Tobiko punches holes in EACC probe on Eurobond, demands answers

We need to see all the documents and whatever else is available that can constitute accurate, authentic and irrefutable proof that our money is safe. Without these documents, we can only say that this money is not "missing" or "lost", or "unaccounted for", as it is often politely described, but STOLEN.

And finally, I am sure the US Department of Justice might be quite keen to see all these documents too.

Copyright Sarah Elderkin 2016

www.standardmedia.co.ke/article/2000189083/four-smoking-guns-hazy-figures-eurobond-billions-held-in-us-bank-accounts-and-bogus-letters?articleID=2000189083&story_title=four-smoking-guns-hazy-figures-eurobond-billions-held-in-us-bank-accounts-and-bogus-letters&pageNo=8

It is worth a serious hearing at the detectives' mess. And a patient mind. Imagine what a billion, dollars or shillings, could do for the families surviving the KDF soldiers perished at El-Adde in Somalia!

Eurobond questions: Twists and turns of Sh100 billion loan

By Sarah Elderkin. Friday, January 22nd 2016

Right, hands up if you can think of a bunch of words and figures being bandied about in the media lately that have left you totally bewildered. Give yourself full marks if any of the following came to mind: Eurobond, Sovereign Bond, Syndicated Loan, Consolidated Fund, Offshore Account, GoK/CBK Sovereign Bond Account, Tap Sales, PFM Act, Transaction Advisers, Pre-Negotiated Expenses ... blah, blah, blah.

Add yourself a gold star if you admit to feeling similarly dazed by the accompanying numbers, some in dollars, some in shillings, all mixed up:

$2bn, Sh15 billion, $1,998,997,763, Sh25 billion, $604,560,737, Sh30 billion, $395,439,262, Sh17,268,281,135, $999,052,872, Sh34,648,388,180.25, $999,002,853, Sh3,394,492,135.47, $815,436,932 ...

www.standardmedia.co.ke/article/2000188957/eurobond-a-simple-guide-to-understanding-sh100-billion-theft

Continued. Part 3.

[jakaswanga]

disclaimer.

EL-ADDED THE BLESSING IN DISGUISE FOR THE ELITE

All around me, enlightened minds are bowed and veiled in patriotic colours mourning the national dead. The good manners of the well-bred seems to be, we are one nation, and at this hour of grief, we need must stand together as one. Thief and thief, hyena and lamb, cat and rat, slave and master, Muslim and Christian, born-again and pagan, our now seemingly petty differences need must melt as hearts at love at first sight, yeah, butter in hot pan. Then shoulder to shoulder with one purpose we stand, Al-Shabaab here we come.

The president himself led the nation in proclaiming this doctrine of unity. He dissolved the differences by decree. He called his brother Raila Odinga, leader of the opposition and a crown prince like him, so that they would together be photographed comforting injured KDF personnel, hospitalised at the forces hospital in Nairobi. And sounding the trumpet to charge, the chief of staff Mwathethe promised a bloody victory in which the craven enemy will be smoked out of every cave, hunted to every den, faced down at every corner and ripped to pieces in Tyrannosaurus-like instincts of hunger.

The war-drums are full throttle. One nation under one God. Dissent is treachery, is heresy.

This, in other words, is no time to bother with inconsequential stuff like the Eurobond, O no, not even law suits to reshine tarnished reputations. There are greater things to mind.

Now, I don't get paid to cheer cosmetic national rituals. Nor is it my hearts pleasure to participate in national comedies mocking the shed blood of our young. Neither is it my hobby that in my precious free time I hold lazy mental court on Jukwaa. So the readers with feeble minds broken in national grief, this is where you alight. –--Good bye.

The department of defence is a den of graft by the words of the president himself. Nobody should think an army led by the corrupt can be high performance. Why do we use the jocular lootenant for the KDF? Americans gave out money for, among other things, all-weather drones to overfly enemy territory, keeping a look out for the inevitable concentrations of enemy troops plotting attacks like we had.

800 Al-Shabaab convoying to annihilate a Kenyan camp happened undetected because there was no 24/7 air reconnaissance. I guess there was no money for that. And on human intelligence, informers wont inform if they don't get paid, well. Somali informers are not Kenyan teachers who will work for two months without pay.

Yeah, there was no money for 24/7 air intel gathering. Neither for human intel, nor local spies.

That is what corruption does to an army in the field. Turns them into sitting ducks. I know it, you don't. So thieves bother me more than Al-Shabaab. I get rid of the thieves, the soldiers at war get all the gear they need –--drones and air reconnaissance 24/7: any intimation of a troop concentration is a total wipe out; forewarned is pre-emptive step.

That is how I think it. War is serious business demanding total commitment. At least that was my experience as we did less dying than the enemy.

I blame the El-Adde debacle on the easy culture of corruption. A nation where the consequences of the acts of corruption are taken in step as normal, faces itself sooner rather than later in terrible circumstances. We already saw at the horrific Garissa campus massacre how there was no air transport for the crack RECCE, and supporting transport was on private mission to Mombasa. A nation where impunity is the name of the game, and the moral fibber is unwound, dissolved by unpunished corruption, repeats such bloody mistakes.

And so, the EUROBOND heist. And the other pending issues of graft (like the case of the bandit bankers##) become to me, even more desperate priorities. Indeed I propose not to go after Al-Shabaab with the murderous rage projected by General Samsom Mwathethe and his brass buddies at air-conditioned DoD fortified situation rooms, nay, I propose we reserve that rage and bloodthirst for the corrupt men (and the few women) who run the land aground and ruin the moral fabric of what otherwise would be a great nation.

I share the rage of Mwathethe and his CiC, just not the target.

And that –-difference in opinion-- now, can be our subject for debate. For I say corruption is more dangerous to Kenya than Al-Shabaab.

This level of ruthlessness requires no mistakes are made, so there must be a premium on the work to find and certify the thieves. A life once taken can not be reversed. Unless we go with the new American doctrine, an acceptance of high levels of collateral damage.

That means if the Eurobond is proved stolen in part. The whole board of the CBK and top treasury mandarins are executed. Not guilty Nyaoga? Sorry, collateral damage.

Cold, vicious and ruthless. Who is my patriot now!?

He, Nairobi. Wacheni mchezo nyinyi.

Back to Sarah Elderkin. She is been working. And diligence is holy.

NB: Bandit bankers footnote ##

A company associated with Devani and Somaia families has been linked to the rip-off that led to closure of Imperial Bank. It has now emerged that Jade Petroleum, which received over Sh3.5 billion in irregular disbursements from the bank, is associated with the two families. Weekend Business has also learnt that audit firm PKF Kenya, which audited the books of the bank at the peak of the theft, which saw the lender lose Sh38 billion of depositors’ cash, was also auditing the books of Jade Petroleum. Shareholders of the bank are considering suing PKF.

Read more at: www.standardmedia.co.ke/business/article/2000189075/devani-somaia-families-hand-now-seen-in-imperial-bank-grand-heist

[jakaswanga]

This was meant for the Boko Haram Boko Halal thread. But it will give a good background to the looting of Kenya. Putting it in historical perspective. After that we will narrow it home, with Elderkin again, AT EUROBONDS.

www.foreignaffairs.com/reviews/2015-06-16/plunder-africa

THE LOOTING MACHINE

The Plunder of Africa

How Everybody Holds the Continent Back

By Howard W. French

Discussions about the fate of Africa have long had a cyclical quality. That is especially the case when it comes to the question of how to explain the region’s persistent underdevelopment. At times, the dominant view has stressed the importance of centuries of exploitation by outsiders, from the distant past all the way to the present. Scholars such as the economist William Easterly, for example, have argued that even now, the effects of the African slave trade can be measured on the continent, with areas that experienced intensive slaving still showing greater instability, a lack of social trust, and lower growth. Others observers have focused on different external factors, such as the support that powerful countries offered corrupt African dictatorships during the Cold War and the structural-adjustment policies imposed by Western-led institutions in the 1980s—which, some argue, favored disinvestment in national education, health care, and other vital services.

At other times, a consensus has formed around arguments that pin the blame on poor African leadership in the decades since most of the continent achieved independence in the 1960s. According to this view, the outside world has been generous to Africa, providing substantial aid in recent decades, leaving no excuse for the continent’s debility. There’s little wrong with African countries that an end to the corruption and thievery of their leaders wouldn’t fix, voices from this camp say. Western media coverage of Africa has tended to provide fodder for that argument, highlighting the shortcomings and excesses of the region’s leaders while saying little about the influence of powerful international institutions and corporations. It’s easy to understand why: Africa’s supply of incompetent or colorful villains has been so plentiful over the years, and reading about them is perversely comforting for many Westerners who, like audiences everywhere, would rather not dwell on their own complicity in the world’s problems.
Reading about African villains is perversely comforting for many Westerners who, like audiences everywhere, would rather not dwell on their own complicity in the world’s problems.

One of the many strengths of Tom Burgis’ The Looting Machine is the way it avoids falling firmly into either camp in this long-running debate. Burgis, who writes about Africa for the Financial Times, brings the tools of an investigative reporter and the sensibility of a foreign correspondent to his story, narrating scenes of graft in the swamps of Nigeria’s oil-producing coastal delta region and in the lush mining country of the eastern Democratic Republic of the Congo, while also sniffing out corruption in the lobbies of Hong Kong skyscrapers, where shell corporations engineer murky deals that earn huge sums of money for a host of shady international players. Although Burgis’ emphasis is ultimately on Africa’s exploitation by outsiders, he never loses sight of local culprits.

GIMME THE LOOT

Sure signs that Burgis is no knee-jerk apologist for African elites arrive early in the book, beginning with his fascinating and lengthy account of “the Futungo,” a shadowy clique of Angolan insiders who he claims control their country’s immense oil wealth, personally profiting from it and also using it to keep a repressive ruling regime in power. The country’s leader, José Eduardo dos Santos, has been president since 1979, and in 2013, Forbes magazine identified his daughter, Isabel, as Africa’s first female billionaire. “When the International Monetary Fund [IMF] examined Angola’s national accounts in 2011,” Burgis writes, it found that between 2007 and 2010, “$32 billion had gone missing, a sum greater than the gross domestic product of each of forty-three African countries and equivalent to one in every four dollars that the Angolan economy generates annually.”

Meanwhile, according to Burgis, even though the country is at peace, in 2013 the Angolan government spent 18 percent of its budget on the Futungo-dominated military and police forces that prop up dos Santos’ rule—almost 40 percent more than it spends on health and education combined.

Those who tend to blame Africa’s woes on elite thievery seize on such examples with relish. But Burgis tells a much fuller story. Angola’s leaders may seem more clever and perhaps possess more agency than other African regimes—and indeed, other African states seem to be eagerly adopting the Angolan model.

But the regime relies on the complicity of a number of actors in the international system—and the willful ignorance of many others—to facilitate the dispossession of the Angolan people: Western governments, which remain largely mute about governance in Angola; major banks; big oil companies; weapons dealers; and even the IMF. They provide the political cover, the capital, and the technology necessary to extract oil from the country’s rich offshore wells and have facilitated the concealment (and overseas investment) of enormous sums of money on behalf of a small cabal of Angolans and their foreign enablers. Because Angola’s primary resource, oil, is deemed so important to the global economy, and because its production is so lucrative for others, Angola is rarely pressed to account for how it uses its profits, much less over questions of democracy or human rights. Burgis shows how even the IMF, after uncovering the $32 billion theft, docilely reverted to its role as a facilitator of the regime’s dubious economic programs.

For those who insist that foreign aid to Africa compensates for the role that rich countries, big businesses, and international organizations play in plundering the continent’s resource wealth, Burgis has a ready rejoinder. “In 2010,” he writes, “fuel and mineral exports from Africa were worth $333 billion, more than seven times the value of the aid that went in the opposite direction.” And African countries generally receive only a small fraction of the value that their extractive industries produce, at least relative to the sums that states in other parts of the world earn from their resources. As Burgis reveals, that is because multilateral financial institutions, led by the World Bank and its International Finance Corporation (IFC), often put intense pressure on African countries to accept tiny royalties on the sales of their natural resources, warning them that otherwise, they will be labeled as “resource nationalists” and shunned by foreign investors. “The result,” Burgis writes, “is like an inverted auction, in which poor countries compete to sell the family silver at the lowest price.”

Meanwhile, oil, gas, and mining giants employ crafty tax-avoidance strategies, severely understating the value of their assets in African countries and assigning the bulk of their income to subsidiaries in tax havens such as Bermuda, the Cayman Islands, and the Marshall Islands. Some Western governments tolerate and even defend such arrangements, which increase the profits of Western companies and major multinational firms. But these tax dodges further shrink the proceeds that African states earn from their resources. According to Burgis, in Zambia, one of the world’s top copper producers, major mining companies pay lower tax rates than the country’s poor miners themselves. Partly as a result, he reports, in 2011, “only 2.4 percent of the $10 billion of revenues from exports of Zambian copper accrued to the government.” Ghana, a major gold producer, fared slightly better, with foreign mining companies paying seven percent of the revenue they earned in taxes—still a tiny amount, Burgis points out, “compared with the 45 to 65 percent that the IMF estimates to be the global average effective tax rate in mining.”

A RACE TO THE BOTTOM

African countries’ unequal relationships with powerful international financial organizations and large multinational firms help explain the “resource curse” so frequently lamented in discussions of the continent’s economies. Rather than issuing from some mysterious invisible force, the curse is to a large degree the product of greed and the disparities in leverage between rich and poor—and its effects are undeniable. Burgis quotes a 2004 internal IFC review that found that between 1960 and 2000, “poor countries that were rich in natural resources grew two to three times more slowly than those that were not.” Without exception, the IFC found, “every country that borrowed from the World Bank did worse the more it depended on extractive industries.”


A case in point is the arid, Sahelian country of Niger, which for decades has served as a major supplier of uranium to France, its former colonial master. According to Burgis, the French company Areva pays tiny royalties for Niger’s uranium—an estimated 5.5 percent of its market value. And the details of the company’s contracts with Niger’s government are not publicly disclosed. Reflecting on this situation during an interview with Burgis, China’s ambassador to Niger adopts a posture of moral outrage, proclaiming that Niger’s “direct receipts from uranium are more or less equivalent to those from the export of onions.”
Rather than issuing from some mysterious invisible force, the "resource curse" is to a large degree the product of greed and the disparities in leverage between rich and poor.

This is a telling exchange, since many Africans believed that Chinese investment and influence on the continent would offer a way to lift the resource curse. Many greeted the arrival of the Chinese as big economic players in the region, which began in the mid-1990s, with great enthusiasm—especially the leaders of states whose economies depend heavily on minerals. China’s share of the global consumption of refined metals rose from five percent in the early 1990s to 45 percent in 2010; its oil consumption increased fivefold during the same period. In 2002, Chinese trade with Africa was worth $13 billion; a mere decade later, that figure had soared to $180 billion, three times the value of U.S. trade with 
the continent.
The hope was that with China directly competing with Africa’s economic partners in the West, African countries would win better terms for themselves.

But as Burgis makes painfully clear, what has happened more often is a race to the bottom, in which Chinese firms focus their attention on African countries that face sharp credit restrictions or economic boycotts from the West, owing to coups d’état or human rights abuses. In many such countries, including Angola, the Democratic Republic of the Congo, and Guinea, the Chinese have extended easy financing to governments, crafting secretive deals that reward Chinese investors with even more lopsided terms than Western governments and firms tend to enjoy. “Access to easy Chinese loans might have looked like a chance for African governments to reassert sovereignty after decades of hectoring by the [World] Bank, the IMF, and Western donors,” Burgis writes, but, “like a credit card issued with no credit check, it also removed a source of pressure for sensible economic management.” In addition to this, critics point out that Chinese companies frequently bring in their own workers from China, providing little employment for Africans and few opportunities for Africans to master new skills and technologies.


Some of Burgis’ strongest work follows the dealmaking of a shadowy Hong Kong–based outfit called the 88 Queensway Group, which was founded by a man sometimes known as Sam Pa, whose background is reportedly in Chinese intelligence. By tracing a complex web of corporate relations, Burgis shows how Pa’s group has put together lucrative deals in one African country after another, since starting seemingly from scratch in Angola during the early phases of China’s push into Africa.

In Burgis’ telling, one mission of Pa’s 88 Queensway Group and its associated companies, including China Sonangol and the China International Fund, seems to be offering the Chinese government plausible deniability when it comes to major transactions and contracts with some of Africa’s most corrupt and violent regimes. But some African elites at the receiving end of Pa’s entreaties have been left with little doubt that dealing with Queensway would in fact put them in contact with the highest levels of the Chinese state. Mahmoud Thiam served as the minister of mines in Guinea under President Moussa Dadis Camara, a junta leader who faced international outrage after his forces opened fire on a peaceful opposition rally in September 2009, killing at least 150 and gang-raping many who tried to flee the assault.

In 2009, Thiam traveled to China at Queensway’s invitation and later told Burgis about being whisked around Beijing by Pa’s associates. “If they were not a government entity, they definitely had strong backing and strong ties,” Thiam recalled. “The level of clearances they had to do things that are difficult in China, the facility they had in getting people to see us [and] the military motorcade gave us the impression that they were strongly connected.” In the case of Guinea and other places, Burgis reports that Queens­way was able to provide tens of millions of dollars to African governments on short notice, with virtually no strings attached, sometimes to help bail out leaders presiding over economic crises and sometimes merely to prove the company’s bona fides.

The hope was that with China directly competing with Africa’s economic partners in the West, African countries would win better terms for themselves. But what has happened more often is a race to the bottom.
In the hands of a less astute observer, Pa could come off as something like a Bond villain. But Burgis rightly reminds readers that it hardly takes a conniving mastermind to profit off the inequities and shortcomings of African political systems. “If it weren’t him, it would be someone else,” as a U.S. congressional researcher puts it to Burgis. The researcher adds that even if Pa’s operation were shut down, “the system is still there: these investors can still form a company without saying who they are, they can still anchor their business in a country that is not concerned about investors’ behavior overseas, and, sadly, there’s no shortage of resource-rich fragile states on which these investors can prey.”

LOSS PREVENTION

By showing how “the looting machine” is operated by people and institutions both inside and outside Africa, Burgis transcends the tired binary debate about the root causes of the continent’s misery. But if the problem is as complex as he makes it out to be, with avarice flowing from so many different sources, how can ordinary Africans—and African elites intent on leading more just, prosperous, and equitable societies—improve 
their prospects?


For Africans, the answer lies in large part in insisting on more open and accountable government. Although the outside world has taken little notice, democracy has spread significantly around the continent in the last two decades, and although conflicts grab the headlines, evidence suggests that war and other forms of large-scale violence have declined during this same period. Stronger civil societies and regular, free, and fair elections would prevent leaders such as Angola’s dos Santos from perpetuating their rule for decades and might allow more responsive elites to put Africa’s resources in the service of more equitable development strategies.

Washington should expand its efforts to prevent illicit financial flows, reducing the amount of revenue that African countries lose owing to tax havens.

For the outside world, the priority should be getting foreign powers, including China, to agree on more stringent measures to combat corrupt business practices. The U.S. Treasury Department is cracking down on foreign banks that enable Americans to evade taxes; Washington should expand its efforts to prevent illicit financial flows involving other countries as well, reducing the amount of revenue that African countries lose owing to tax havens.

Finally, as Burgis’ book strongly implies (although does not explicitly argue), international financial institutions such as the World Bank and the IMF must be made much more accountable. In Africa, that would mean publicly measuring their programs’ performance in terms of their impact on economic growth. Over the years, such institutions have demanded rigorous compliance from their poorest clients while never holding their own performance or the soundness of their advice up to public scrutiny. The internal IFC review Burgis cites made the same point more than a decade ago. But its findings were largely ignored as the World Bank continued to promote extractive industries in Africa even when they contributed nothing to development.

Today, with Africans seeking to cross the Mediterranean Sea by the thousands to escape misery, a simple recommendation from that review is perhaps more pertinent than ever: World Bank and IFC staff should be rewarded not simply for allocating money to projects but for demonstrably reducing poverty. After all, whatever the causes of African poverty, any efforts to address it will fail if they are blind to their own effects.

[jakaswanga]

Four smoking guns, hazy figures, Eurobond billions held in US bank accounts and bogus letters

By Sarah Elderkin. Saturday, January 23rd 2016


Treasury Cabinet Secretary Henry Rotich addresses the press over the Eurobond at State House Nairobi flanked by former Central Bank Governor Njuguna Ndung’u (right) and Solicitor General Njee Muturi. [Photo:FILE/STANDARD]


So the Eurobond $2 million — actually US$1,998,997,763 — was paid into the JP Morgan Chase account on June 24, 2014.

At the time, JP Morgan Chase had received no advice as to who the signatories to the account were. These were eventually sent, but then, despite the fact that June 30 is the end of the financial year in Kenya, it took more than a week before there was any action on the account. We were now into the next financial year, which posed a number of problems.

As an aside, the fact that JP Morgan Chase was the CBK's preferred bank in the US is also interesting.
JP Morgan Chase has been associated with a number of dodgy dealings, and only a few months previously, in January 2014, had been charged by the US Department of Justice with "failure to maintain an effective anti-money laundering program in violation of US law". JP Morgan Chase was forced to pay a fine of US$1.7 billion. Just saying.

The first instruction the CBK gave to JP Morgan Chase was the (illegal) repayment of the US$604,560,737.50 Syndicated Loan.
The next instruction CBK issued was to transfer US$395,439,262.50 directly and correctly into the Consolidated Fund as required by Kenyan law.
But how very interesting! If you study these two amounts, you will realise they add up to exactly one billion US dollars, right down to the last cent.

See Also: Tobiko punches holes in EACC probe on Eurobond, demands answers

Now, why would someone authorise the transfer to Kenya of the apparently random sum of US$395,439,262.50? (Of course, it is not random, as we have seen. It makes up the total withdrawal, with the Syndicated Loan, to exactly one billion dollars.)

That exact figure of one billion dollars provides the FIRST SMOKING GUN.

Why wasn't, for example, a round figure such as US$400 million transferred? Why not US$500 million? In fact, why not the whole darn lot? Why was money kept in the US in a holding account when it was apparently badly needed in Kenya?

It was so badly needed in fact, that the government not only soon began borrowing within Kenya – the very thing it had pledged to avoid when the Eurobond was touted – but it also had to go back for the Tap Sale, whose proceeds, US$815,436,932, were banked at Citi Bank New York at the beginning of December 2014 and were "processed into our books ... as at 5th December 2014", according to a letter dated January 14, 2015, from Gerald Nyaoma and Moses Muthui, of the CBK financial markets department.

Nineteen days later, and according to the same letter, the CBK transferred the money in full, in one credit, to the Sovereign Bond Account as shillings for the Consolidated Fund, as confirmed by the Budget Controller.

–--------

This all happened directly and swiftly. The question is, why not likewise the JP Morgan Chase balance of nearly one billion dollars?
Unlike in the case of the other sums of money transferred, there is no evidence whatsoever that any part of this money ever came to Kenya.

The Treasury has posted a number of documents on its website. In the case of the Tap Sale transfer and the apparently random US$395,439,262.50 transfer, most of the supporting documents are there.
The system works like this. When effecting such transfers, the CBK first gets the request from the Treasury to transfer the money. Then a government foreign exchange remittance form called Form PA (I presume it stands for Payment Advice) must be completed. This form has a number.

In the case of the US$395,439,262.50, this procedure was followed. The Treasury asked for the transfer, the CBK responded by issuing PA 105847, to be signed by authorised signatories at the Treasury and returned to the CBK, and the Consolidated Fund was credited in shillings, with a letter confirming this from the CBK dated July 4, 2014, and also a credit advice slip.
In the case of Tap proceeds, the money was transferred from Citi Bank New York to yet another newly opened (illegal) dollar account at the CBK. This one was called 'GoK/CBK Sovereign Bond Tap Proceeds'. CBK confirmed this in a letter dated November 27, 2014.

Other documents concerning this sum are scanty. But at least in this case, this money was soon converted into shillings. According to documents on the Treasury website, the shillings were transferred to the Consolidated Fund on December 24, 2014.

See Also: Tobiko punches holes in EACC probe on Eurobond, demands answers

In the case of the remaining nearly one billion US dollars left in the US, there is no legal documentation at all – nothing whatsoever to show what happened to this money. All is silence.
***
It was around September last year when opposition leader Raila Odinga began speaking out about this matter. He knew something very, very worrying was afoot.
As he spoke out, those involved in the affair, threatened with exposure, apparently panicked, and they hastily set in motion a cover-up by issuing a series of bogus letters.
These began with a letter backdated to September 5, 2014. This letter was purportedly from the CBK to the Treasury – though unlike some other CBK documents posted on the Treasury website, it has no CBK letterhead.
–---------

The letter purports to say that the CBK has received the completed form numbered PA 105526 and it understands the Treasury wishes by this to transfer the remaining nearly one million US dollars from JP Morgan Chase to Kenya.
The CBK advises that the best and easiest way forward is simply to close the Offshore (JP Morgan Chase) Account and get the money transferred. It asks the Treasury to amend the PA accordingly.
This letter is apparently signed by John Birech and Grace Waiganjo, both of the External Payments and Reserves Management department at the CBK.

But no further correspondence whatsoever exists on the matter. There is no evidence, no letters, no PA forms, no advice slips to show that any of this money was brought to Kenya.
What is more, just three days later, on September 8, 2014, when the nearly one million US dollars belonging to Kenya had been lying idle in a foreign bank account for more than two months, someone decided to close the account at JP Morgan Chase and to move the money to a different US bank, the Federal Reserve Bank of New York, where the opening balance is shown on that day as US$999,018,457.60.

The account at JP Morgan Chase was closed – but, far from being transferred to Kenya, the money was moved to another US bank!
It is patently obvious that any or all of three things are true with regard to the September 5 letter:
(1) the Treasury ignored the CBK's advice,
(2) the two CBK officers named on the letter are complicit in this affair,
(3) the letter is a forgery.

See Also: Tobiko punches holes in EACC probe on Eurobond, demands answers

This is the SECOND SMOKING GUN.

The Treasury has put on its website a document showing the transfer from JP Morgan Chase to the Federal Reserve Bank.
But the document does not show the name of the holder of the account at the Federal Reserve Bank or any other details – unlike other documents that relate to the money when it was at JP Morgan Chase.

And the reason these pertinent details about the Federal Reserve Bank account cannot be seen is that the lower half of the document posted on the website has been covered up during photocopying. This information has been concealed, or "redacted" – a word we have learned from the ICC.
It is easy to notice this because the edges of the photocopied document appear as a thin black line on two sides. The edges are not visible on the other two sides because of the overlying blank sheet of paper.
–-----------

What are they hiding?

Who owns the account at the Federal Reserve Bank of New York?
It is now 18 months since that money was transferred. Where is any statement from the Federal Reserve Bank showing the balance in that account, and details of any transactions made on it during those 18 months, in particular the transfer to Kenya of this money?
Why hasn't the Treasury posted any such documents on its website?
What are they hiding?

Another very curious document posted on the Treasury website is a statement of account from JP Morgan Chase for the period June 15 to June 30, 2014, a couple of months prior to the transfer to the Federal Reserve Bank.
It is curious because this statement did not come from JP Morgan Chase in New York but apparently from a branch of the same bank in Johannesburg, South Africa – though the address of the Johannesburg bank is crooked on the letter, as if it is not a real letterhead but as if the address has been stamped on.

See Also: Tobiko punches holes in EACC probe on Eurobond, demands answers

So why did the statement come from Johannesburg? Well, your guess is as good as mine. I only sceptically note that successful murder cases have been built on less circumstantial evidence than surrounds this whole Eurobond case.
***
So the nearly one million US dollars was apparently transferred to the Federal Reserve Bank on September 8, 2014 – and there the trail stops.
There is no further mention of this money in any banking document. The paper trail goes completely cold.

This is the THIRD SMOKING GUN.

–------------

Next, still in panic mode as Raila Odinga continued raising questions, seven further bogus letters were hastily composed.

Each of them requested the transfer of money to the Consolidated Fund from the so-called GoK/CBK Sovereign Bond account at the CBK. These letters attempted to give the impression that the billion US dollars were there at the CBK just waiting for the Treasury to withdraw it all in shillings.
The money was not waiting there at all. The letters are not worth the paper on which they are written. They are just so much hot air and deceit.

The letters are purportedly dated September 15, September 19, October 28 – all in 2014 – and January 21, March 16, June 2 and June 26, all in 2015.
They purportedly ask respectively for the seven sums of Sh25 billion, Sh25 billion, Sh15 billion, Sh25 billion, Sh25 billion, Sh30 billion and Sh17,268,281,131.75 to be transferred from the GoK/CBK Sovereign Bond dollar account to the Consolidated Fund.

The figures all add up to Sh162 billion, which is presumably the shilling equivalent of the nearly one billion dollars still held in the US – at the Federal Reserve Bank of New York (that is, as far as we know), together with the Tap Sale proceeds of US$815 million that we accounted for earlier.
We can recall that the Tap Sale proceeds were credited in ONE ENTRY to the Sovereign Bond account on December 17, 2014, not left available to be dripped into the Consolidated Fund in small transfers, as the bogus seven letters would have us believe.

See Also: Tobiko punches holes in EACC probe on Eurobond, demands answers

The letters are meant to show that the one billion dollars was received in Kenya. They actually show no such thing.
These letters are a blatant cover-up. There is not one single document, as would be expected in the normal course of banking procedures, to show any correspondence whatsoever with the Federal Reserve Bank of New York concerning our remaining nearly one billion dollars, let alone any instruction to transfer the money to Kenya.

What is more – these seven letters! Let us examine them.

First of all, the letters themselves are numbered out of sequence. The first letter bears a file number ending in 25, the second letter bears the number 22, the third letter again bears the number 25, the fourth 44, the fifth 50, the sixth 58 and the seventh 59.

The Treasury is now saying that the confusion in the way the first three letters are numbered is due to "clerical errors".
–-----------

Well, we've had more than our fair share of "computer" and "clerical" errors coming out of the Treasury in the past few years, haven't we? And in this case, two out of three letters are wrong, apparently. (Tut, tut – in that case, doesn't someone deserve the sack?)
As anyone who has worked in government knows, such "errors" are deeply frowned upon. If any such error is discovered, a motorbike messenger is dispatched with all haste to retrieve the letter and bring it back to be replaced.

These are not genuine errors (of course – how could they be? They are not genuine letters!). These are "errors" caused by indecent panic and haste in establishing a cover-up.
Likewise curious is the numbering of the remaining four letters – 44, 50, 58 and 59.
Presumably something as big as Eurobond has its own file at the Treasury and these purported letters would not be just shoved into some general Treasury file.
So where are all the other letters – that is, those numbered 26 to 43, 45 to 49 and 51 to 57? What are they supposed to be about?

Panic causes harebrained mistakes.

See Also: Tobiko punches holes in EACC probe on Eurobond, demands answers

Next, we come to the stamp on these letters, purporting to show they were received at CBK.
But there is no evidence they were ever received by Birech or anyone else in the External Payments & Reserves Management department at the CBK.
Birech's department is in some hallowed offices upstairs somewhere. These seven letters have been stamped as received in the CBK banking division downstairs, the banking hall where the likes of you and me do our money business.

Now, how easy do you think it would be for a Treasury official, looking all important, to approach some lower cadre staff member down in the banking hall, tell this person that Mr Birech has issued instructions for this letter to be stamped, and then ask for the letter back, saying he is "going upstairs to see Mr Birech"?
Which lower cadre officer in the CBK banking hall would have the nerve to refuse? Of course, it is also very easy to make a stamp.
--------

Something along those lines happened. The letters are bogus and the attempt to deceive us concerning the transfer of this non-existent money (at least, non-existent in Kenya – it is still at Federal Reserve Bank in New York as far as we know, remember?) is a breathtaking and blatant lie.

And to complete the cover-up, another letter, dated October 29, 2015, and purporting to be from the CBK but again with no letterhead, neatly confirms that the GoK/CBK Sovereign Bond account now has nothing left in it – all this (fictitious) money having been "transferred", as per the requests in the seven (fictitious) letters, to the Consolidated Fund.

The (fictitious) balance is a big fat zero.

Anyone can type up their own completely invented nil balance. Just as, without the proper certified and official documents that trace the movement of money, anyone can type out fictional accounts of transfers and balances and so on. It's just words on pieces of paper – absolutely meaningless.
The minister has issued all sorts of explanations in answer to questions about this money. He has also issued his own personal table of figures showing what the Treasury purports to have received from the CBK.
This table includes the whole total – reference the seven letters – of all the shillings accruing from the fictitious transfer of the nearly one billion dollars from the US. Rotich puts this total amount in his table as some Sh88 billion.

Once again these are just words and figures on a piece of paper. There are precisely zero documents to support them – nothing from the CBK, nothing from the Federal Reserve Bank of New York – just ..... nothing.
See Also: Tobiko punches holes in EACC probe on Eurobond, demands answers
Rotich's table is just a table, typed out by a Treasury secretary who has been told what to do, no questions asked. Anyone can make up any figures they choose to achieve a certain end – in this case trying to persuade us that the billion dollars was received. It was not
.
These bogus letters and tables combine to make the FOURTH SMOKING GUN.
***
Last week, Raila Odinga was threatened with lawsuits by people he had named as persons of interest in this affair.
Besides the fact that none of these lawsuits has yet materialised, the following should be noted:
–---------

Every senior person in the CBK and the Treasury and every lawyer advising either organisation must be able to look at these facts and figures and letters and tables just as I can, and they know very well what is going on here.

They are thus ALL persons of interest in this affair. They ALL have something to say. Have they been silenced? Have they no courage? No patriotism? Have they been paid? (After all, a billion dollars is an unimaginable sum of money – plenty to spare for everyone.)
The upshot of all this is that we now call on the CBK and the Treasury to publish all the correspondence (unredacted) from the Federal Reserve Bank of New York, which as far as we know is still holding our nearly one billion dollars.

We need the name of the account holder, we need the balance statements, we need the full details of any transactions on the account.
We need relevant letters from the Treasury, letters from the CBK containing the instructions to Federal Reserve Bank to transfer the money, and the resulting correspondence back to the CBK from the Federal Reserve Bank.

If this nearly one billion dollars was transferred to Kenya, we need to see very clearly when and how.
We need to see all the documents and whatever else is available that can constitute accurate, authentic and irrefutable proof that our money is safe.

See Also: Tobiko punches holes in EACC probe on Eurobond, demands answers

Without these documents, we can only say that this money is not "missing" or "lost", or "unaccounted for", as it is often politely described, but STOLEN.
And finally, I am sure the US Department of Justice might be quite keen to see all these documents too.

Copyright Sarah Elderkin 2016

www.standardmedia.co.ke/m/?articleID=2000189083&story_title=four-smoking-guns-hazy-figures-eurobond-billions-held-in-us-bank-accounts-and-bogus-letters&pageNo=8

It is hard work. And hard work is a holy thing, that is when it is in search of truth.

[kamalet]

CORD strategists need to refund the party its money!

After making Baba go all over the media with half baked information on the Eurobond saga and their local genius (Ndii) failing to give this "scandal" any traction, they fell on the media savvy Sarah to try and weave the story with a fresh coat of Thesaurus. The problem is that facts never lie and there does not seem to any evidence of THEFT. So what do we reduce this debate to?

The narrative is now premised on alleged conflict in dates and the request for evidence of what the money was spent on!

All I know is that people got bought cups of tea and some askaris guarding Baba were paid out of that money....but then the government has many bills to pay!

[jakaswanga]

BK differs with Treasury on Eurobond cash transfer dates

By Paul Wafula Updated Thursday, January 28th 2016

treasury CS Henry Rotich NAIROBI: The Central Bank of Kenya (CBK) Wednesday came to the defence of the National Treasury in explaining the transactions surrounding the Eurobond. But in its explanation, the CBK seemed to contradict part of an earlier account given by the National Treasury in one of the transactions involving a Sh34.6 billion transfer. While CBK cites July, 2014 as the date that one of the key transaction was done, Treasury gives June 30, 2014 as the date of the cash transfer, a contradiction that has deepened the mystery surrounding how the Eurobond cash was used.

According to the version given by the CBK Wednesday, the money from the first tranche was received in three different instalments on the same day at an offshore account it had opened at JP Morgan Chase Bank in New York. JP Morgan is one of the biggest US bank by assets. But it has been hit by various scandals in the recent past and was fined Sh200billion for money laundering. According to the CBK, the money was received on June 26, 2014 in the JP Morgan account. This transaction happened four days to the end of the financial year. The particulars of the transactions are that CBK received a total of Sh174 billion ($1.9 billion) in three deposits. Treasury did not withdraw any funds from this account, according to the CBK records. As a result, the cumulative bank balance at the end of that financial year stood at Sh174billion. The Government then paid the Sh53.2 billion syndicated loan on July 3, 2014. On the same day, it wired Sh34.6 billion to the exchequer account. This was money said to have been used for infrastructure projects in the 2013/2014 financial year.

See also: IMF extends Kenya's existing Sh69b credit facility to March

However, this transaction differs with the version given by Treasury. The Treasury had earlier in a statement posted on its website indicated that this amount was transferred on June 30, 2014. The dates are significant because the Government's financial year ends on June 30, and therefore any transactions in the June date are factored in the year ending June. Also, according to Treasury, at the end of the year, it had bank balances of Sh140.5 billion, while CBK, which holds the account on behalf of the Government shows that the balances were actually Sh174 billion, adding more confusion to the already delicate situation.

We sought an explanation from Treasury on this but there was no response to our text messages.

Treasury Secretary Henry Rotich and his principal Secretary Kamau Thugge did not return our calls either. The latest discrepancy may hurt efforts by the Government in explaining that no money lost. This comes days after the Government was at pains to explain a mix-up of reference numbers on letters directed to the Central Bank to transfer billions of shillings to the Consolidated Fund. Rotich had termed the mix-up as an administrative issue and touching on typing error. "The referencing is a clerical issue and I just need my staff to tell me how they were filing it but this is just an administrative issue and it does not point to any loss of money. The letters were internal memos to the Central Bank. The principal issue in this matter is if money was lost or not. But records are very clear that all the money was accounted for," Rotich told The Standard in a telephone interview recently.

www.standardmedia.co.ke/article/2000189595/cbk-differs-with-treasury-on-eurobond-cash-transfer-dates

[jakaswanga]

David Ndii.

Jan. 29, 2016. Eurobond saga is all about the politics of corruption

www.nation.co.ke/oped/Opinion/Eurobond-saga-is-all-about-the-politics-of-corruption/-/440808/3054360/-/8ilax0z/-/index.html

By JAMES NTHUKU

In the land of the blind, the one-eyed man truly is king. And once again, Dr David Ndii’s article the other Saturday, “Eurobond billions: The anatomy of a grand heist”, sought to pull wool over our eyes on the Eurobond issue; the dodgy math notwithstanding.
It behooves the question as to why a renowned and respected economist would stake his reputation week after week in doggedly insisting on a “scandal” that he has been defeated to convincingly prove even with his shifting claims and analysis. What is really going on here? First, let’s start with ghosts.
Initially, we were told that Sh140 billion was missing with evidence to follow in short order.
The amount missing then changed to Sh10 billion, then Sh87 billion, and now it is Sh150 billion.
Along the way, the word “missing” has uncannily transformed to “not accounted for”. And depending on the audience, these words are used interchangeably to achieve very different objectives.
Government borrowing for financial year 2014/2015.
The whole of Ndii’s theory of a grand heist stands on the amount of domestic government borrowing in FY 2014/2015.

According to him, the government borrowed Sh251 billion in FY 2014/2015.
He guesses this is the correct number given the Sh20 billion rise in domestic interest cost in FY 2014/2015 to Sh139 billion on the back of a “drop” in the actual stock of domestic debt from Sh200 billion to Sh110 billion. On the face of it, this looks like a logical argument.
But let’s take a closer look. Did the actual domestic debt really fall by Sh90 billion in FY 2014/2015? The answer is a resounding no.

What the good doctor is doing is confusing the Treasury presentation of the net domestic deficit financing for FY 2014/2015 of Sh110 billion and the amount of outstanding domestic debt needed to credibly sustain a domestic interest expense of Sh139 billion.
He is comparing apples to oranges. The correct way to determine whether a domestic interest cost of Sh139 billion makes sense is to look at the actual outstanding domestic debt for the period.
As per the CBK statistical bulletin of June 2015, gross domestic government debt increased by Sh136 billion from FY 2013/2014 to FY 2014/2015.

This gross number includes certain special items like Repos, which the Central Bank uses for open market operations.
So Treasury’s presentation of a net increase in domestic debt of Sh126 billion is reasonable.
An increase of domestic debt of Sh126 billion can very reasonably accommodate an increase in interest expense by Sh20 billion.

GHOST INVESTOR

To follow Ndii’s argument to its logical conclusion would mean adding his assumed domestic borrowing of Sh140 billion to the actual domestic debt amount of Sh126 billion for a total domestic borrowing of Sh256 billion.
This turns his argument on its head. This massive amount of debt cannot be supported by a mere increase of interest expense of Sh20 billion.
More importantly, who invested in this mythical Sh140 billion?
An objective independent test that we can use to assess the increase in the amount of domestic debt is to understand the amount by which commercial banks increased their investments in these securities as they routinely invest the largest proportion of all domestic investors.
Commercial banks invested in 63 per cent of Treasury bills and 49 per cent of Treasury bonds as expected.
These securities increased by Sh139 billion in FY 2014/2015 (Treasury securities are part of the Sh136 billion domestic debt).
It appears we have a convenient ghost investor for a ghost domestic borrowing of Sh140 billion.



Amount of deposit in the GoK Central Bank account

The government did indeed raise $2 billion (Sh176 billion) in the last week of June 2014.
This means that the financing was secured in FY 2013/2014. Treasury, therefore, had a basis to match expenditure commitments for FY 2013/2014 to financing raised in the same period to the extent that there was no mismatch between expenditures and financing.

Hence the transfer to the Consolidated Fund of $304 billion (Sh35 billion) made on July 3, 2014 leaving a balance of $1.604 billion net of fees.

Ndii’s contention here is that the Sh140 billion presented by Treasury as a domestic bank deposit could not have been in fact the actual position given the existing funds of Sh204 billion.
He goes on to add that this is corroborated by the Central Bank, which did not reflect the offshore account as domestic deposits but as foreign reserves.
By his own admission, the funds aren’t missing.

Rather they are accounted and presented differently by Treasury and the Central Bank, so technically while at the beginning of FY 2014/2015 the Treasury had the amount in an offshore account, the actual funds available for use in the financial year was Sh140 billion.
It is similar to a pending debit/credit card charge from your account or a pending deposit transaction into your account.

The actual balance will be different from the available balance for your use. Actual balance Vs Available balance. This is the supposed scandal.
Please note that irrespective of the preferred treatment or presentation, the net domestic outstanding debt still remains at Sh126.2 billion.
The net domestic borrowing does, however, reduce to Sh110.6 billion due to netting of government deposits of Sh15.5 billion, which excludes the Eurobond proceeds.
Utilisation of the Eurobond proceeds FY 2014/2015
In other words, Treasury does not need the Sh140 billion deposit to arrive at the net domestic borrowing number of sh110 billion.

That said, the CBK’s Audited Financial Statements for FY 2014/2015, audited by the Auditor General, presents Special Project Accounts for amounts received by the government for specific purposes.
The decrease in this account by approximately Sh174 billion is mainly attributed to the drawdown by the government of the Eurobond proceeds.

The problem with the Eurobond is its roaring success. And people only throw stones at trees laden with fruit.
Yes we are paying interest on the Eurobond and it’s important to know what projects the money was spent on.
It’s equally important to know what projects our domestic debt is spent on.
The stock of domestic debt was Sh1.35 trillion in FY 2014/FY 2015, with a net increment of Sh126 billion, compared to Eurobond proceeds of Sh196 billion.
And we are paying much higher interest rates on domestic debt currently even allowing for exchange rate depreciation.
So why the dogged insistence on a “scandal”? For that, we have to look no further than the politics of corruption. Let’s exercise prudent debate and prudent reporting until after we have the Auditor General’s report.

Nthuku is currently the Director of Structured Finance at Standard and Mutual, a corporate finance advisory firm in Nairobi.

Thugge and Rotich.