Ex-CBK bureaucrat claims Pattni swindled taxpayers as regulator watched

In his latest court filings, the former CBK bureaucrat gives details of banks and overdrafts he alleges Mr Pattni exploited to swindle taxpayers as the regulator watched.

Mr Onesmus was a CBK bureaucrat when irregular payments of at least Sh19.3 billion were made to companies associated with Mr Pattni, in what was dubbed the Goldenberg scandal.

Resigned

He resigned from the banking industry regulator in August 1993 after Mr Micah Cheserem took over as CBK governor from Mr Eric Kotut.

The irregular payments were made in two batches of Sh13.5 billion and Sh5.8 billion when during Mr Kotut’s tenure.

The scandal was executed just after the government had implemented new laws that gave incentives to companies that brought in foreign exchange to Kenya.

The incentives involved the National Treasury, through the CBK, giving companies a 20 per cent bonus of whatever amount of US dollars that were brought into the country.

At the time, the CBK was fully in charge of handling of US dollars, meaning companies that were paid in the foreign currency had to deposit their earnings with the CBK.

Forged receipts

Mr Pattni took advantage of the scheme by providing the Treasury and CBK with forged receipts of gold and diamonds he claimed to have exported.

The CBK paid Mr Pattni at least Sh19.3 billion, on the strength of the businessman’s claims and receipts, rather than dollar deposits with the banking industry regulator.

In reality, the little gold and diamonds that Mr Pattni exported had not been mined locally, but were smuggled into Kenya from the Democratic Republic of Congo.

Mr Pattni shared the loot with several companies and law firms in a move that appeared to be money laundering.

After the Goldenberg scandal went public in 1993, Mr Onesmus was charged alongside Mr Pattni, former Treasury Permanent Secretary Karuga Koinange and former CBK Deputy Governor Eliphaz Riungu for authorising and making payments to Mr Pattni’s firms.

But last year, Mr Onesmus sued the CBK and government, claiming to have been coerced into resigning.

“On the morning of August 13, 1993, I was called by the head of administration of the CBK and informed me that the new (CBK) governor had decided to sack several senior officers of the CBK and there was no debate about it. The head of administration told me that I was the first to be informed so that I could be given a chance to retire because I had served the CBK for 27 years. I was required to tender my resignation immediately,” Mr Onesmus says in court papers.

No choice

“The threat was real because there are other officers who were sacked after refusing to resign and had to sue the CBK and the cases have been in courts for many years. I had no choice but to oblige”.

In pursuing millions of shillings for alleged coercion and malicious prosecution, Mr Onesmus now claims in court papers that the CBK had granted overdrafts to Pan African Bank (Sh4.5 billion), Exchange Bank (Sh3.96 billion), National Bank of Kenya (Sh1.2 billion) and Transnational Bank (Sh250 million).

Previously, the CBK had insisted that Mr Onesmus resigned voluntarily and that the regulator is not aware of the claims made by its former employee on the Goldenberg scandal.

Mr Pattni told the CBK that the money he made from the gold and diamonds exports would be sold to the banking industry regulator by the four banks with unpaid overdrafts.

The CBK used the money made by the four lenders in the Sh13.5 billion batch of payments to clear the pending overdrafts — a move that cleaned up the banking industry regulator’s own books of accounts, Mr Onesmus adds.

Mr Onesmus alleges that he was prosecuted as a scapegoat aimed at covering the regulator’s role in the scandal that benefitted Mr Pattni’s companies — Goldenberg International Limited and Exchange Bank.

The former CBK bureaucrat insists that he was not in charge of entering contracts with Goldenberg International or any of Mr Pattni's companies, and that the payment orders in the Sh13.5 billion batch were ordered by the Finance ministry.

At the time, former Vice President George Saitoti was the Finance minister, and was a close associate of his boss, President Daniel Arap Moi.

Mr Pattni owned Pan African Bank and Exchange Bank at the time. Transnational Bank was owned by former President Moi and his personal aide Joshua Kulei.

National Bank of Kenya was a government-owned lender at the time.

No dollars were expected

“It appears that these banks were unable to clear these overdrafts and therefore this scheme was used, which means that no dollars were expected to come. These transactions were performed in the accounts of the CBK and it cannot claim lack of knowledge or involvement.”

“My petition is based on seeking reliefs for contravention of my fundamental rights and freedoms that were contravened by the respondents when the CBK forced me to resign to yield me to stand trial on its behalf to cover up its active involvement and perpetration on loss of public monies, which loss the CBK had knowledge and admitted in correspondences between itself and Kamlesh Pattni and contrived I be charged to hoodwink the public,” Mr Onesmus says in court papers.

Mr Onesmus spent two years in remand as the trial proceeded, and his home was raided by Criminal Investigations Department (now Directorate of Criminal Investigations) detectives who claimed to be searching for evidence.

Harassed in remand

The former CBK bureaucrat adds that he was physically and verbally abused in remand, and that it was unfair to remand him in Kamiti Maximum Prison, a facility that is typically for convicted criminals.

Interestingly, by the time Mr Onesmus was being tried alongside three others, CBK records indicating the irregular transactions with Mr Pattni had already been destroyed.

During the hearings, Jacinta Wanjala Mwatela, a former CBK director in charge of supplies and service, told the chief magistrate’s court in 1998 that the documents were pulped and some shredded before being burned.

Why the documents were destroyed amid a pending investigation and trial has never been explained, but the move pointed at a cover-up plot.

Mr Onesmus is testing the limits of Kenya’s laws, which usually provide a three-year window for filing cases against unlawful termination.

But the former CBK bureaucrat has filed his suit as a constitutional petition on grounds that his basic rights and freedoms were violated, and that the allegedly forced resignation was only a product of the larger scheme to frame him as a rogue employee in the Goldenberg scandal.

Constitutional petitions are allowed to lift the time limit provided for any kind of dispute, whether employment, land or any other.

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