The foremost tenderpreneur: Charles Njonjo and the CMC offshore scandal

Once upon a time - in April 1982, Ugenya MP James Orengo irked Njonjo by saying he “dresses like the Queen’s Butler.”

One afternoon, that April, Mr Orengo was on the floor of the House when Njonjo walked in. Then, Orengo quipped: “The hon. Member for Kikuyu has just come in and I almost thought that I was seeing the Queen’s butler walking into the House.”

Orengo had not forgiven Njonjo for once forcing him into exile in Tanzania. In the previous week, Njonjo had used the term “five bearded sisters”—perhaps in reference, or as a jibe, to some government critics all who spotted beards.

Though he later denied and claimed he was referring to the ‘Seven Sisters” —a pejorative term used in the 1970s and 1980s in reference to the seven oil companies that dominated the global market—it was not lost on observers that he was referring to the likes of Orengo, Koigi Wamwere and Abuya Abuya and not to the oil cartels.

Master of hubris

Njonjo, like those oil cartels, knew where to make money. But as money flowed relentlessly to his side, Njonjo became the master of hubris.

He was one of the most powerful kingpins in the Jomo Kenyatta government and the kingmaker to the Nyayo regime. But how did a civil servant turn into a billionaire after only 20 years of employment? What was his Midas touch? Let me look at what is known.

In the history of cutting deals within the government, Njonjo was a trailblazer: The ultimate tenderpreneur. It later came to haunt him and his other ally, Jeremiah Kiereini.

Njonjo died last Sunday while still fighting to extricate himself from a case filed on Jersey Island involving secret offshore accounts, he, and some CMC Motors directors, had opened there, and where proceeds of inflated invoices were deposited by foreign companies, which were dealing with the motor dealer.

This case, which always bothered him, exposed how Njonjo, and his allies, were swindling other shareholders of CMC Motors to their own advantage.

It was a scheme that started in 1977 and it went on until 2011 when it rocked the CMC boardroom that they had to hire a South African firm to carry out forensic audit. The Webber report concluded that CMC lost billions of shillings over the decades when Jack Benzimra, Jeremiah Kiereini and Martin Forster were in charge.

Ever since it was established in 1948, CMC was involved in motor dealership and had been the supplier of British Land Rovers to, first, the colonial Kenya government and later to both Jomo Kenyatta and Moi administrations.

This was a multibillion business since the Land Rover had no known competitor in the region. It was also the symbol of the colony, power, and government reach. But to Mr Njonjo and his allies within CMC, it was the cash cow—the ultimate road to riches.

Purchase of government cars

Njonjo and his friend, Jeremiah Kiereini, had been introduced to CMC by Kenyatta’s former Minister for Agriculture Bruce McKenzie and for a reason. As the Permanent Secretary for Defence, Kiereini had overall say on the purchase of military Land Rovers, while Njonjo, as Attorney General, was the legal gatekeeper.

They were not the only senior civil servants investing in companies that were doing business with the government. Another company comprising Njonjo, Kiereini, Finance minister Mwai Kibaki, Central Bank governor Duncan Ndegwa, and Julius Gecau, then managing director of East African Power and Lighting Company, (and several others) had also registered Heri Limited, which bought shares in DT Dobie, the Mercedes Benz franchise holders. DT Dobie not only sold luxury vehicles to government but also trucks to the Defence ministry.

How much business these civil servants brought as a result of their influence within government can only be estimated, and, interestingly, years later, they did not seem to think there was something wrong with that arrangement.

“By setting up this (Heri Ltd) investment company, we were able to purchase shares without hesitation, because we were not involved in either running of the businesses or the decisions made by the management,” Kiereini would later reveal in his autobiography, A Daunting Task.

Back to CMC, and as per the scanty records available, the auto dealer had found that more than £5 million (Sh640 million) was paid to board members from the secret slush fund—financed through inflated invoice prices for imported vehicles and parts by Kenya’s largest importer of vehicles and largest car-assembly company.

Money-minting scheme

As the court would be told, Njonjo and Kiereini plus two other CMC directors, Jack Benzimra and Prahlai K. Jani, hatched this money-minting scheme.

It was a simple scheme as the court papers showed: The overseas suppliers of motor vehicles and spares would invoice CMC Motors for amounts greater than the true price, and the Kenyan entity would pay the inflated invoice.

The overseas supplier would then pay the extra amounts to bank accounts in Jersey in the names of entities established at the request of colluding directors. As a result, those who did not have a clue on the Jersey accounts were being swindled.

It is now known that the group had established a feeder bank account in the name of Corival in Jersey and which was funded by the over-invoiced amount charged by the manufacturers. Besides that, they had established Fair Valley Trust, which received the funds banked in the Corival account, at the National Westminster Bank at St Heiler in Jersey, and this Trust later distributed the cash to accounts or companies associated with these directors.

It is not clear whether Mr Njonjo and Kiereini got any other money from other defence and security arrangements during the time when Kiereini was the Permanent Secretary at the Office of the President, Head of Civil Service and Permanent Secretary, Defence. But that might explain why the two civil servants were filthily rich.

So scandalous was the Jersey account that when CMC was cash-strapped, Corival would masquerade as moneylender and would loan CMC some money to purchase more inflated vehicles! Njonjo was a signatory to this account and CMC would also pay interest on the Corival loan.

When CMC (the listed entity) filed the case in Jersey, it was seeking orders against two Jersey firms—RBC Trust Company (International) Limited and The Regent Trust Company Limited—arguing that they “dishonestly assisted” both Njonjo and Kiereini and they demanded that these companies “account to (CMC) all sums paid into the Scheme on the ground of their dishonest assistance in these breaches of fiduciary duty”.

Legal tussles

The case in Jersey has been hampered by legal tussles on the whereabouts of some documents that could help prosecute it and establish how much was paid.

Two years ago, the Royal Court of Jersey ruled that “given that it appears to us that part of that scheme encompasses the payment of secret commissions generated by an over-invoicing arrangement … then it must be that the plaintiffs (CMC Holdings) must establish every element of that operation.”

“Once they have established the existence of the scheme and the payment of monies to the entities in Jersey, they will then also have to establish that such was a breach of duties by the directors to prove that the second and third defendants had knowledge of the fact that the scheme was created in breach of duties owed by the directors to the plaintiffs and, in the light of that knowledge, dishonestly assisted the plaintiffs in the manner alleged,” said the court in a case in which Kiereini and Njonjo are third-party defendants.

It is now established that when Martin Forster took over as the CEO of CMC Motors, he found a secret file in the safe that had details of off-shore accounts that only a few directors knew about—and only a few benefited from it. The audited accounts were usually silent on these offshore accounts.

Martin, as he would claim later, thought that the funds in that account belonged to CMC and that was the reason he left the file at the safe when he was fired from CMC on March 14, 2011. He also benefitted from these accounts, earning a total of £142,750 or 26.4 per cent of the £538,684 disbursed between 2008 and 2011.

What is not known is whether there were other accounts besides the 1999 accounts since the Scheme dated back to 1977.

It is also known that it was Jack M. Benzirma, a former chairman of the auto dealer (deceased), who initially formed the Fair Valley trust “for the benefit of past, present, and future CMC’s employees”.

It was a lie.

But what we learn from this Njonjo, Kiereini saga is that people have abused their positions for years to make money within government—and we have come to accept that as a virtue.

Ndegwa Report

Two years ago, President Uhuru Kenyatta promised to revise the 1971 Ndegwa Report whose Clause 32 allowed civil servants to do business.

It was this clause 32 that gave politicians and civil servants carte blanche for predatory behaviour and which still gives modern-day cartels and kleptomaniac politicos some clues on how to become overnight billionaires despite the meagreness of their civil-servant’s salary.

Those who pushed for the implementation of the Ndegwa Report, with Njonjo as legal adviser, became the first beneficiaries. The proposed office of the Ombudsman, which was to check the bad manners and the abuse of power, never materialised. And so, the seeds of corruption were planted and today we have, not just a tree, but a forest.

Thus, when the history of cutting deals within the government is written, it will start with the Ndegwa Report and Charles Njonjo’s name will feature. The Ndegwa Report not only cemented sleaze but sanitised corruption as business. The current kings of sleaze learnt their art from the best from these pioneers.

The words of former US President Theodore Roosevelt (1858–1919) lingers on: “A man who has never gone to school may steal a freight car; but if he has a university education, he may steal the whole railroad.”

[email protected] @johnkamau1