A lot has been said about the Goldenberg scandal but all the blame and the axe fell only on Kamlesh Pattni, while other people that made a cameo appearance in the scandal walked away unscathed, some opening money laundering outfits like Victoria Commercial Bank.
According to an article done by John Kamau of the Daily Nation, When Goldenberg scandal architect Kamlesh Pattni decided to take advantage of the government’s export compensation scheme, he was only 25, yet he pulled off one of Kenya’s biggest thefts of the public coffers.
In just three years, the fiddle had cost taxpayers more than $600 million.
Then the holder of a British passport and son of a Mombasa gold jewellery dealer, Pattni was hardly known as he and his brother ran a small jewellery outlet known as Manorama Limited on Nairobi’s Dubois Road.
He later shifted to Moi Avenue’s Mageso Chambers and it was from there that Goldenberg International Limited and Exchange Bank Limited, the two companies that were to become the face of the scandal, were hatched.
How Pattni came to enlist spy chief James Kanyottu as a director, nay promoter, of the two companies is not clear.
He would later tell a judicial commission appointed by President Mwai Kibaki to investigate the scandal that the two had met at a Nairobi shop, where they had been introduced by a mutual friend, a Mr Veljibhai Gami.
The objective of the Goldenberg company was to “carry on the business of import and export in any or all types of minerals, gold, silver, diamonds, precious and semi-precious stones… in Kenya, to all PTA countries, Europe, India, and other parts of the world.”
HIDDEN IDEA
The hidden idea was how to take advantage of the various economic schemes crafted by the Central Bank of Kenya (CBK) and the Ministry of Finance by carrying out fraudulent business deals, illegal and irregular.
These schemes involved export compensation, pre-shipment finance, retention accounts, forex certificates, spot and forward contracts, and cheque kiting.
While some of these economic schemes had been put into place to lure businessmen into earning Kenya hard currency after donors, the International Monetary Fund, and the World Bank imposed stringent rules on aid, the Goldenberg company was paid more than their foreign currency earnings and with little export of gold, if any.
Even today, there is no evidence that the company engaged in any mining of gold and diamonds, the two minerals it purported to be exporting.
Initially, Pattni started small, but when he presented his first nine export compensation forms to his bankers, First American Bank (Kanyotu was one of the directors), the Central Bank and the bank observed some anomaly.
The amount of money purported to have come from overseas was through numerous cash deposits and in various hard currencies, and not through the usual inter-bank transfer.
What they did not know, or perhaps suspected, was that Goldenberg was purchasing hard currencies at the local market, depositing them at the First American Bank account, and using that to demand export compensation.
With the myriad questions by the Central Bank and the First American Bank, Pattni decided to register his own bank in August 1991, with a proposed capital of Sh40 million, which was deposited with Transnational Bank Ltd.
At first, he wanted the bank to be known as Republic National Bank.
The bank’s shareholding almost mimicked that of Goldenberg International.
Pattni and Kanyotu each held 25 per cent stake, while a Mrs Daksha Rana took a 25 per cent shareholding. Bhailal Patel and Rohit Damji held the balance.
But when the company was finally formed, the names of Rana, Patel and Damji disappeared and only Kanyotu and Pattni remained with one share each of Sh1,000.
CBK MISTAKE
One of the early mistakes was that CBK did not check if the bank had any capital.
The bank started operating on June 4, 1992 and was authorised as a depository institution under the Exchange Control Act on July 30, 1992.
With the bank and the company set, it was easy to transact business.
The two — the company and the bank — entered the market at a time when President Daniel Arap Moi’s government was facing an economic downturn in the country and was desperate for foreign exchange.
With few economic managers at the Ministry of Finance and facing irregular foreign debt repayment, anyone with a semblance of an idea (however crooked) on how to earn Kenya foreign currency would have received a good audience, both at State House and at the Treasury.
Both the IMF and the World Bank helped the government to come up with various schemes and economic policies that included the liberalisation of the economy and removal of currency controls, which ended up depleting the foreign exchange reserves.
MULTI-PARTY CLAMOUR
On the political side, the clamour for multi-party politics was reaching a crescendo and Kanu was desperate for another term.
Pattni came on the scene during this time and into the hands of desperate politicians and reckless economists and administrators.
Pattni had studied then Finance minister George Saitoti’s June 1990 budget speech and the various proposals that would see Kenya promote the “production of industrial and other non-traditional exports.”
Prof Saitoti had put in place the Export Compensation Scheme, which was to encourage the re-export of minerals from other countries via Kenya.
The companies would be compensated for that effort after lodging the paperwork.
To get the compensation — and this was paid in cash — an exporter had to have the export forms stamped by the necessary authorities and confirmation that all the foreign exchange relating to the exports had been received and sold to the CBK.
If in the paper you said you exported gold worth $1,000, the government would pay you $200 or 20 per cent of the remitted currency.
The government had no way of verifying the volume of what was exported. It relied on a paper trail.
MONOPOLY
Pattni sought and was given a monopoly to export gold and diamonds on the promise that he would earn the country $50 million. And instead of the legal 20 per cent compensation, his company was granted 35 per cent, which was concealed in the budget as “customs refund”.
While Goldenberg breached all the exchange control regulations and the agreement it had signed with CBK to abide by the rules, Pattni used his connections to get his compensation paid after the claim was processed by the Customs and Excise Department.
While CBK governor Eric Kotut was alerted to this by his exchange controller, T.K. Birech-Kuruna, nothing was done.
Pattni tried his luck with Citibank and they smoked him out before he finally settled for government-owned banks, which were easier to corrupt.
Although CBK was informed about the dubious transaction, it continued paying export compensation without verifying whether any exports took place.
And by registering his own bank, Pattni was able to escape scrutiny.
WILSON AIRPORT
A day in the multi-billion Goldenberg scandal would often be dramatic. On October 22, 1991, for example, senior customs officer, Samuel Njiraini was in his office at Wilson Airport when an aeroplane from Bunia, Zaire, landed at 8 pm.
As an examining officer grade 2, Njiraini would work late into the evening just in case somebody tried to smuggle anything through the airport.
Kamlesh Pattni never committed these crimes alone, he used bankers, partners and one of the most important people of his cabinet was none other than Kanji Damji Pattni.
According to close associates of Kanji Damji Pattni Kamlesh Pattni’s wife Minal Pattni and her mother, Anjana Morarji are always the Victoria Commercial Bank founder’s house.
In 2003, during an inquiry on Goldenberg, Kanji Pattni was immensely mentioned as the courier to Kamlesh Pattni, revealing how he made money to open a bank just after the scandal. It is suspected that Kamlesh Pattni is a faceless owner of the Victoria Commercial Bank.
Mr Pattni had indicated that the Sh10 million a month was to go to his cousin, Mr Kanji Damji Pattni so he could pay “the authorities” to obtain the licence.
Mr Justice Aganyanya, the inquiry’s vice chairman said: “We have checked the Hansard report and are satisfied that names of Prof Saitoti, Gideon Moi and June Moi were not mentioned as the persons who demanded Sh10 million to assist Aurum Ltd to get a licence to deal or export gold. It is actually a man called Kanji Damji who mentioned the figure of Sh10 million which was required for those who intended to assist that company to acquire the requisite licence.”
KANJI DAMJI PATTNI
The founder of Victoria Bank has been accused of being inhuman.
It is said Kanji Damji Pattni took the life and property of his late step-uncle Girdharlal Pattni and let his widow Shantaben and his three daughters Daksha, Raksha and Hasmita live in exile in poverty.
Damji Devji, Kanji’s father shared the same father as Girdharlal Pattni but not the same mother. After Damji Devji’s mother passed away his father remarried and Girdharlal was born.
He was a kind, noble man that respected everyone in this world and reached out to help anyone in need. The wicked actions of his step-nephew Kanji Damji Pattni caused him to leave Kenya without a shilling and the stress and vindictive games that Kanji Damji Pattni played ended up with him dying in London a young man.
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