Global Policy Forum

A Scandal That Could Topple


By Makau Mutua

The Boston Globe
June 17, 2000

The government of President Daniel arap Moi of Kenya was supposed to root out corruption in a deal struck between it and the World Bank last July. But his government's refusal to institute political and economic reforms has resulted in a scandal that threatens to turn Kenya into a failed state.

Although Kenya has formally been a political democracy since 1991, the Moi regime is steeped in a one-party culture of official graft, repression, and state-directed human rights violations, abominations that have become the trademark of the Nairobi government. Nothing more clearly demonstrates the government's intrangisence and blatant disregard for the rule of law than what is called the Goldenberg scandal, the longest-running and most egregious case of massive high-level corruption in Kenya's history.

The outcome of the scandal, in which the public purse was defrauded of hundreds of millions, if not billions, of dollars, will determine whether the Moi government sets Kenya on a solid democratic path. The facts are stunning.

Kamleshi Pattni, a businessman, devised a scheme in which he purportedly exported gold and diamonds worth hundreds of millions of dollars, although Kenya is not a producer of either mineral. Pattni then presented fictitious export compensation claims for payment by the central bank.

World Duty Free, the company that owns and runs the duty-free complexes at both the Nairobi and Mombasa international airports, was indicated in Pattni's documentation as the consignee of the exports. Nasir Ibrahim Ali, the Canadian owner of the company, has denied that his company participated in the fraud. Ali has offered evidence suggesting that Moi and his senior aides were the masterminds of the scheme. In August last year, the Moi government deported Ali and placed his duty-free complexes in receivership.

The government should not be able to thwart the rule of law in a normal democracy. The courts would ensure legality. But Moi's Kenya is different. Since 1992, when the scandal first became public, the government has manipulated the legal system and employed extrajudicial and political pressures to block the investigation and punishment of those responsible. In what looks like a protection racket for Moi, his vice president, and other senior officials implicated in the scandal, the attorney general has stopped the private prosecution of culpable public officials by the Law Society of Kenya. In order to blunt domestic as well as World Bank and International Monetary Fund pressure, the government has initiated its own halfhearted prosecution, no doubt intended to whitewash the affair.

Available evidence almost certainly suggests that the Goldenberg scandal grew out of Moi's efforts to raise money to "buy" the 1992 democratic elections, the first of their kind in decades. Working closely with Moi, Pattni devised the export fraud and turned over the payments from the central bank to Moi who then used it to finance his reelection. Nasir Ali, the unwitting "consignee" of the fictious gold and diamonds exports, was supposed to keep his mouth shut once the scandal became public. Failure to do so has resulted in his deportation and the loss of his business, worth millions in dollars.

Since the Kenya courts are captive to the government, Nasir Ibrahim Ali is seeking compensation for his loss before the International Center for Settlement of Investment Disputes in Washington, D.C. If he prevails, which seems likely, the Kenyan government will have to pay him millions of dollars. The actions of the Kenya government do not inspire the confidence of foreign investors, which is essential for an economic takeoff.

The Goldenberg scandal, and the inability of the Kenyan legal system to vindicate the rule of law against Moi and his ruling clique speaks volumes about the stillbirth of democracy and economic reforms in Kenya. Already, Moi has expressed doubt about stepping down, as mandated by the constitution, after his term ends in 2002. He has hamstrung efforts at reforming the constitution and revising the country's political and legal architecture to permit genuine democracy.

In 1997, the World Bank, the International Monetary Fund, and other Western donors suspended $500 million in aid to Kenya because of official corruption. In an agreement with the World Bank, Moi last year appointed Richard Leakey, the famous paleontologist and a onetime opposition politician, to head the civil service and clean up the rot. But corrupt senior officials are still in charge, and the public purse has never been more vulnerable. Moi clearly hopes that Leakey's reputation and his cohort of technocrats will lure donors back. Only resumed donor support can save his corrupt regime.

At a time of great distress in many African states, including those surrounding Kenya, it is imperative that Kenya not fail. Its collapse would have far-reaching consequences for the region and democratic renewal throughout the continent. The international community should support the efforts of local nongovernmental organizations, the civil society, and opposition political parties to consolidate democratic gains and resist Moi's intransigence. At the very least, the World Bank, the IMF, the United States, and the European Union should not become Moi's "enablers.' Without their support, Moi will be forced to accommodate the demands of Kenyans who hunger for a new constitutional order of an open democracy devoid of official thievery.


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