Grand Regency saga: The verdict

Summary of Findings

Mr Amos Kimunya

The Hon Amos Kimunya was not directly involved in the sale of the Hotel. However, he was briefed about what CBK was doing towards the disposal of the Hotel to Laico.

On 29th April 2008, he did not give Parliament and the people of Kenya the true picture of the impending sale of the Hotel to Laico. As the Minister responsible for the affairs of the CBK, he must take responsibility for the questionable disposal of the Hotel.

Prof Njuguna Ndung'u

Prof Njuguna Ndung'u was not truthful to other public institutions, namely the Kenya Anti-Corruption Commission, the Commissioner for Lands, the Public Procurement Oversight Authority and the Prime Minister about the sale of the Hotel.

Even the valuers who were instructed to value the hotel were not told the purpose for which the valuation was being undertaken. At CBK he and Mr Abuga were solely responsible for the disposal of the Hotel.

His conduct was contrary to Section 18 of the Public Officer Ethics Act which provides; “A public officer shall not knowingly give false or misleading information to members of the public or to any other public officer”. The Governor must take responsibility for the disposal of the hotel in a secretive and questionable manner.

Mr Kennedy Kaunda Abuga

Mr Kennedy Kaunda Abuga acted in concert with the Governor to rush the sale of the hotel while at the same time keeping it a close secret. He was only too willing to carry out all the wishes of the Governor relating to the disposal of the Hotel without offering independent professional opinion. His conduct was also contrary to Section 18 of the Public Officer Ethics Act.

The Grand Regency Hotel

The registration of the transfer of the Hotel to Laico appears to have been done within the provisions of the law. However, the Commission finds the entire transaction tainted with misrepresentation and deception to such an extent as to warrant specialized investigation by the Attorney General and other relevant institutions into the bona fides of the purchaser and other aspects of the transaction. The Commission so recommends.

Recommendations

The Public Procurement and Disposal Act: The Public Procurement and Disposal Act, 2005 prescribes procedures and set standards for public entities to ensure the procurements and disposals maximize economy and efficiency, promote integrity, competition, fairness and inspire public confidence.

The Act however has obvious lacunae and various provisions which are mutually inconsistent. These gaps and contradictions undermine certainty and ultimately the good objectives of the Act.

While the preamble of the Act provides that the Act applies among other things to disposal of “assets” of a public entity, the substantive provisions of the Act limit applicability of the Act to disposal of “unserviceable obsolete or surplus stores and equipment”, (S 2, S 4(d) and S 126).

The Act defines “procurement” by a public entity to include acquisition of real property. However, by limiting “disposal” under the Act to disposal of unserviceable, obsolete or surplus stores, there is a serious lacuna about how real property procured by a public entity is to be disposed of under the Act.

These provisions lead to an undesirable position where a public entity is obliged to follow the Act in procuring real property, but it is free to ignore the Act when disposing of that real property, since real property is clearly not unserviceable, obsolete or surplus stores and equipment.

Even if the Grand Regency Hotel was ultimately transferred and registered in the name of the Central Bank of Kenya, the Bank could have easily circumvented the The Public Procurement and Disposal Act in the disposal on ground that the Hotel is not a unserviceable obsolete or surplus stores and equipment.

The Public Procurement and Disposal Act should urgently be amended to remove these gaps and uncertainties.

The Central Bank Of Kenya Act

In line with the international best practice, the Central Bank of Kenya Act, Cap, 491 seeks among other things to guarantee the autonomy of the CBK particulary in the formulation of monetary policy.

While this objective of the Act is readily underantable and must be safeguarded, nevertheless the relationship between the Governor and the Board of CBK in practice leaves a lot to be desired.

Section 13 of the Act constitutes the Governor the chief executive officer of the Bank, its principal representative and the person responsible for its management.

Section 11 and Section 12 constitute the Governor a member and the chairman of the Board of Directors and vest in him the responsibility for convening the meetings of the Board “not less than once in every two months, or whenever the business of the Bank so requires, or whenever he is so requested in writing by at least three directors.”

The functions of the board include “keeping under constant review the performance of the Governor in discharging the responsibility of that office (S.10(d)) and “keeping under constant review the performance of the Governor in ensuring the Bank achieves its objectives” (S.10(e)).

From the evidence, the Board of CBK was given very sketchy information about the disposal of the Hotel. We have noted that at the level of management the sale of the hotel was handled exclusively by the Governor and Mr Abuga. The role of the Board was reduced to that of ratifying decisions of the two officers.

With the current set-up and practice, it is doubtful whether the Board can effectively discharge its statutory responsibilities to review and check any excesses of the Governor who happens to be its chairman.

The Judicial Commission of inquiry into the Goldenberg affair (The Bosire commission) expressed similar concern about the relationship between the Governor and the Board (Para 833) and we regret to note that its recommendations in this respect, which we share, have not been acted upon.

The commission has noted that the Draft Constitution 2005 had made elaborate provisions on the Central Bank, which would go along way to address the shortcomings noted about the management of the Bank. The Constitution craated the CBK and spelt out its functions.

The qualifications for appointment as Governor were spelt out (unlike under the current position) and the Governor and the members of the Board were to be appointed by the President subject to the approval of Parliament.

The commission recommends adoption of the arrangement proposed in the Draft constitution.