How Kenyan fugitive Devani left British oil company Glencore Sh4 billion dry

When British Prime Minister Theresa May visited the country this week, one of the agreements she signed was on the tracing and returning of Kenyan loot hidden in UK and its territories.

And that means Britain will not be an enclave for those escaping justice, too. Perhaps.

One of the pending cases, and which Kenya has been silent on, involves fugitive businessman Yagnesh Devani — who is still fighting to stop extradition to face fraud charges in Nairobi.

A month ago, the Supreme Court refused to give hearing to a UK oil company, Glencore Energy, which wanted to siphon Sh4 billion from Kenya Pipeline from of a failed dealing with Triton Petroleum Limited — a company run by the wanted fugitive, who is the kingpin of the Triton oil scandal.

CIRCUMVENT LAWS

The importance of this case, besides exposing the tail of the Triton scandal, is it tested a principle in law: Ex dolo malo no ovitur actio. It simply means that no court will lend its aid to a man who found his cause of action on an immoral or an illegal act.

But whether we are going to see some movement in the Triton matter can only be speculated.

The saga of Triton and Glencore is the tale of two companies that fraudulently wanted to circumvent laws in Kenya and corruptly do business. Either they conspired to steal oil or one conned the other.

Before he surfaced in London, Mr Devani had apparently pulled off one of the biggest oil scams in the country. With the help of Kenya Pipeline officials, political and business connections, the fugitive managed to have 96,000 tonnes of processed petroleum worth Sh7.6 billion released to him without authorisation from the financiers of the cargo.

FRONT COVER

He then took off leaving his financiers, who included KCB and PTA banks, Fortis Bank of Netherlands, Glencore Energy UK Limited and Emirates National Oil Corporation (ENOC) of Singapore, running helter-skelter looking for their money. Their rendezvous with the absconding businessman had come to an end.

But while these financiers may have fallen into Mr Devani’s trap, the story of Glencore Energy is different and as it emerged later, the British company was anything but an innocent financier.

How this complex game was played was baffling to an extent that the Court of Appeal finally accused Glencore of hatching an elaborate scheme to use Triton as a “front, cover and cloak” to carry out illegal oil trading in Kenya without a license — or what the judges described as a “flagrant illegality”; perhaps the work of a rascally con man (emphasis mine).

REAL BETRAYAL

Glencore is not a run-of-the-mill company, but a multi-billion-dollar empire founded by the late Marc Rich, an international commodities trader and hedge-fund manager who was once indicted in the US on federal charges of $48 million tax evasion, the largest in US history, and making controversial oil deals with Iran during the Iran hostage crisis. During the investigations, Mr Rich fled to Switzerland and the media christened him the “fugitive financier”.

Mr Rich was, however, never followed since on the day President Bill Clinton was leaving office, he pardoned the man triggering a huge uproar, even among the Democrats.

“I was very angry about it,” Barney Frank Frank a Massachusetts Democrat was quoted saying by Washington Post: “It was a real betrayal by Bill Clinton of all who had been strongly supportive of him to do something this unjustified. It was contemptuous.”

POLITICAL FUNDRAISERS

Former US President Jimmy Carter said: "I think President Clinton made one of his most serious mistakes in the way he handled the pardon situation the last few hours he was in office … I don't think there is any doubt that some of the factors in his pardon were attributable to his large gifts. In my opinion, that was disgraceful."

Political fundraiser

Apparently, Mr Rich was very powerful in the Jewish community and in political fundraisers. His ex-wife, the Manhattan songwriter Denise Rich was reported to have sponsored various fundraising dinners and contributed more than $320,000 to Democratic Party — perhaps enough to buy a pardon.

Back to Kenya, it was the Glencore subsidiary, which was bringing in the four tankers of oil as the country was clearing the rubbles of the post-election violence and the man at the centre of the scheme was Devani. Known to wine and dine with Cabinet ministers, permanent secretaries and heads of State corporations, how Mr Devani managed to circumvent the contracts and sell fuel bought by his financiers to third-parties is still unresolved.

LIBERALISATION

When he registered Triton Petroleum Limited in 2000, Mr Devani had hoped to cash-in on an open tender system which had been introduced to help small indigenous oil companies to access fairly priced crude oil for processing at the refinery in Mombasa.

While this refinery, now abandoned, was 50 per cent owned by Caltex, BP and Shell — and the other chunk by the government — the small dealers had since the liberalisation of the sector complained that the big oil companies had monopolised the sector by using their financial muscles built over the years.

It was Bruce Pitman, the award-winning Canadian film director, who once remarked that “projects are usually undertaken to either solve a problem or take advantage of an opportunity.”

What we now know is that there was an oil consignment that had come to the port of Mombasa aboard five vessels, the Bahamas-registered SPT Navigator, Elka Aristotle’, ‘Chem Marigold’ ‘Artic Blizzard’ and ‘Kara Sea’ in the months of May and June 2008.

QUICK BUCK

Kenya was smarting from a violent political upheaval and two months earlier the Grand Coalition Government of President Mwai Kibaki and Prime Minister Raila Odinga had been put in place. As Kenyans focused on the Waki Commission which was investigating the masterminds of the post-election violence and Johann Kriegler’s Commission on the integrity of the poll, the businessmen were busy making quick bucks.

Devani, who knew his workings in the corridors of power, had won a tender to bring in this huge consignment but had no money: he was a broker, a nasty broker, and that is when things started going wrong.

He then came across Glencore Energy, a not-so-straight financier, who wanted to enter into the oil Kenya market scene without taking the required licenses and wanted to use Mr Devani’s license to import 72,284 metric tonnes of crude oil which were to be picked up by French oil marketer, Total Kenya.

In all these, Mr Devani wore the mask of an insider in the oil trade and had even convinced Kenya Commercial Bank to back him — at least, in some of the oil dealings. The bank would badly burn its fingers.

ACCOMPLICE

As it later emerged, and the Court of Appeal alluded as much, Glencore was not an innocent financier — but an accomplice in a scheme; nay “an illegality”.

Like other brokers who had pulled similar deals, Mr Devani had acquired the relevant licences which were required: Upon registration, Triton had first entered into a transportation and storage agreement, dated December 8, 2001 with KPC and another agreement dated July 7, 2004, which recognised the interest of financiers for Triton’s oil importation business. But this was just a ruse; nay a tricky deception. In that agreement, it had been agreed KPC would not release oil products in its custody without the express instructions of such financiers. -, although under another clause, the agreement said the “ownership in the petroleum products at all times remained vested in Triton.” As such, no third party could claim ownership.

CONSPIRED

Mr Devani, and the courts have been told, managed to circumvent the financiers and had the oil passed on to third parties with the payments never getting to the joint accounts of the financiers and Triton. This racket was carried out with the connivance of KPC officials — who most likely knew that a legal loophole existed in the deal.

The essence of the case in Nairobi against Mr Devani is that “he dishonestly procured or conspired with others to procure the transfer oil to Total” with the knowledge and intention this would result in his financiers losing security over the product.

While all the other companies sued Mr Devani for the loss, it was interesting Glencore decided to sue KPC. Why Glencore did not sue Mr Devani’s company for the loss of fuel baffled the judges and as KPC lawyers argued, the UK entity was suing the wrong entity. Actually, the judges were surprised that Glencore and Devani had entered into “a compact of mutual immunisation from any suit” which explained why they were not going for each other.

PUNISHABLE

KPC lawyer Pheroze Nowrojee said, and the Court of Appeal agreed, that Glencore had no contract and no direct arrangement with KPC and that it was entirely possible for Glencore to also release the product directly to Total Kenya without Triton receiving a drop of that oil.

KPC would also argue that it held no stocks of petroleum on its own account but only for oil marketing companies licensed under Section 80 of the Energy Act. Interestingly, Glencore was not licensed but had cleverly tried to trade in Kenya without a license.

“It retained the right to sell in Kenya and did in fact sell to Total Kenya either wholesale or retail … and this amounted to trading in oil in Kenya which was not only impermissible, but also illegal and punishable under Section 80 of the Energy Act as Glencore did not have the requisite license,” said the Court of Appeal.

LAWBREAKER

What the court was saying was that Glencore was an accomplice in the oil scandal and now after burning its fingers wanted to use the courts to get its money. Under the ex dolo malo no ovitur actio principle, and the court said as much, Glencore “has no right to be assisted … What the English courts could not do to assist a lawbreaker, Kenyan courts and courts anywhere, should not do.”

“No court ought to enforce an illegal contract where the illegality is brought to its notice and if the person invoking the aid of the court is himself implicated in the illegality,” said the judges while dismissing the award of Sh4 billion awarded by the High Court.

But KPC, although it escaped the award, was “not virtuous” — only that the court felt Glencore should carry its cross together with Mr Devani.

SUBSIDIARIES

This is not an isolated incident for those who have followed the workings of Glencore in Africa or its subsidiaries.

British newspapers say the British white-collar crime prosecutor is preparing to open a formal bribery investigation into Glencore Plc and its work with Israeli billionaire Dan Gertler and President Joseph Kabila of the Democratic Republic of Congo.

The US has further imposed sanctions on Gertler in December, saying he’d used his friendship with Kabila to corruptly build his fortune. Gertler denied any wrongdoing.

Will Britain, now bring back Devani to face trial? That is the question. But that he left a British company Sh4 billion dry is a fact.

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