Saga of how JKIA duty-free shops changed hands

Businessman Kamlesh Pattni appears before the Public Investment Committee on July 22, 2015 over the JKIA duty-free shops. He was cleared over the Goldenberg scandal. PHOTO | FILE | NATION MEDIA GROUP

What you need to know:

  • Pattni was the son of a Mombasa gold jewellery dealer, and was running a small jewellery outlet, Manorama Limited, in Nairobi’s Dubois Road together with his brother.
  • The government had an export compensation and Pattni sought and was given a monopoly to export gold and diamonds on the promise that he would earn the country $50 million.

Three months ago, taxpayers were spared the burden of paying Sh8.5 billion to Kamlesh Pattni — the man who duped this country with the cock-and-bull diamond exports but, somehow, got away with it.

The Sh8.5 billion is equivalent to the amount used to build the Outering Road dual carriageway in Nairobi — and that is the much we could have lost, as an addition to the Goldenberg mess.

The story starts in Dubai in 1989 when the Al Ghurair family, regarded as one of the wealthiest in the Emirates, decided to invest in a duty-free shop complex at the Jomo Kenyatta International Airport (JKIA) and the Moi International Airport in Mombasa.

The family had incorporated a firm, World Duty Free Company Limited, and brought in a Canadian passport holder businessman Nasir Ibrahim Ali to manage it.

Mr Ali was well-connected — or so he thought. Although he had some of the most influential corporate and political honchos on his speed dial, it was all but an illusion.

LUXURY

As Mr Ali would later claim in court, and in order to get the deal, had to make a “personal donation” of $2 million (Sh200 million) to former President Moi as “part of the consideration paid by House of Perfume to obtain the contract”.

This, he said, was on the advice of Mombasa tycoon and nominated MP Rashid Sajjad — the man who would usually fax a long list of requests for watches for powerful Permanent Secretary Hezekiah Oyugi, his wife and secretary and others involved in the transaction.

“I was frequently travelling backwards and forwards between Dubai and Kenya. During this time, I received several requests for gifts to bring to officials in the Kenyan government.

"I was not given any money in return for these items and it appeared to me that it was expected that I would bring what they requested,” Mr Ali said in his court papers.

But what surprised Mr Ali was the meaning of a maize cob inside a briefcase.

CONTRACT

He once told the arbitration court that after taking the $2 million harambee money in a briefcase — he was asked to place it next to a wall — and after allegedly meeting President Moi, he was given his empty briefcase back.

Inside was the green maize and after asking what that meant, he was told by Mr Sajjad: “It means the president likes your proposal.”

And that was not all: “On May 3, 1989, I received a telex from Sajjad requesting a gift of the latest model Polaroid camera.”

As records show, Mr Ali later signed the contract for the Al Ghurair family.

This was a multimillion-shilling deal that was to allow them the exclusive rights to operate the duty-free complexes at both JKIA and Mombasa “for its own benefit without restraint”.

EXCLUSIVITY

So sweet was this deal, also signed on behalf of government by Mr Oyugi, the then powerful Internal Security permanent secretary, that Mr Ali would exclusively lease 3,000 square metres of space at Jomo Kenyatta International Airport — which is equivalent to half of a football field — and 2,000 square metres at the Mombasa airport.

To put the icing on the cake, the Kanu regime had agreed that World Duty Free would not only get exclusive rights for such business in Nairobi and Mombasa, but on “any airport terminals — which may in future be constructed at public airports”.

To upgrade the then wanting facilities, Mr Ali had spent about US$27 million and President Moi was at hand to open the facelift in 1990.

That meant that World Duty Free would be allowed — as the contract said — “to construct, develop and furnish the duty-free complexes and to operate such complexes commercially”.

But after running the company for two-and-a-half years, and changing its name to “House of Perfume”, the Al Ghurair family sold it to Mr Ali who registered a new company in the offshore haven of Panama in the name Dinky International SA whose other shareholder was his wife.

RE-ELECTION

Through his connections, Mr Ali inherited the 10 years lease — with similar terms earlier given to Al Ghurair family in 1989.

All was well, as Mr Ali would say in court later, until April 1992 when President Moi asked him, one of his State House aides and Mr Kamlesh Pattni “to obtain secret funds from abroad to finance his re-election campaign”.

Pattni was the son of a Mombasa gold jewellery dealer, and was running a small jewellery outlet, Manorama Limited, in Nairobi’s Dubois Road together with his brother.

After a short while, he shifted to Moi Avenue’s Mageso Chambers from where Goldenberg International Limited and Exchange Bank Limited — the two companies that were to become the face of the Goldenberg scandal — were hatched.

It is not clear how Pattni, then 25, enlisted into the mix the dreaded Director of Intelligence James Kanyottu as a director, nay promoter, of the two companies — although he told the judicial commission that the two had met at a Nairobi shop where they were introduced to each other by a mutual friend, a Mr Veljibhai Gami.

GOLDENBERG

But in just three years, Mr Pattni had pulled Kenya’s most laborious theft of public coffers — a fiddle that cost the taxpayers more than US$600 million. It was a simple scam.

The government had an export compensation and Pattni sought and was given a monopoly to export gold and diamonds on the promise that he would earn the country $50 million.

Moi was desperate for hard currency. While the Treasury had put the compensation at 20 percent, Goldenberg was granted 35 percent.

This was concealed in the budget by Finance minister George Saitoti as “customs refund”.

It was through this scheme that Mr Ali’s World Duty Free was brought into the picture.

In his documentation for the exclusive export for gold and diamonds, Mr Pattni indicated that the consignee (the company exporting) was World Duty Free.

Mr Ali claimed he didn’t know about this forgery and that made him a crucial witness in the Goldenberg affair.

FORGERY

But rather than have a rogue businessman smoke him out, Pattni and his comrades in crime hatched a plot to take over Mr Ali’s World Duty Free.

On February 14, 1998, a rubber stamp for Mr Ali’s Dinky International was fabricated by a company associated with Pattni at a Nairobi stationery shop.

It was this stamp that was used to forge sale documents of Mr Ali’s shares.

That sale was said to have taken place in 1992 — meaning that Mr Ali could not claim to have owned the company when the Goldenberg exports were done.

There are many other letters, all forgeries, purporting to back the same agreement.

A UK Home Office forensic handwriting expert would later, and authoritatively say, that all these were forgeries but then-Attorney-General Amos Wako was not willing to prosecute this case.

Instead, on February 24, 1998, Mr Pattni took his papers to the High Court and requested that he be declared the beneficial owner of World Duty Free since 1992 and requested that the company be placed under receivership.

OWNERSHIP

That same day, Lady Justice Owuor granted Mr Pattni his orders and by a stroke of a pen — Mr Ali had no business in Kenya.

He was appalled since the order was based on forged documents.

One question the High Court did not ask is: If indeed Mr Pattni was owning this World Duty Free, why had he written a letter dated May 16, 1992 asking World Duty Free to lease him some space.

The court had also appointed a receiver, Charles Kariuki Githungo, who started running down the company and dishing out space and money to Pattni’s relatives.

On December 31, 1998, Justice Moijo ole Keiuwa, after visiting the World Duty Free premises, ordered the removal of Pattni and Githungo and effectively restored the company back to its owners.

But that was short-lived for two weeks later, the Court of Appeal, on January 15, 1999, handed the business back to Pattni who went to the British Virgin Islands and registered a new company World Duty Free to operate the JKIA and Mombasa business.

He also registered a similar company in Kenya in collusion with government officials.

DEPORTED

As the push to prosecute the Goldenberg case came — and as Mr Ali tried to rescue his company from Pattni, some government mandarins on July 24, 1999 had Mr Ali arrested and deported to the United Arab Emirates.

That way, he would neither pursue his business nor would he be of any assistance to the Goldenberg scandal — and the pseudo efforts to arrest and prosecute Mr Pattni.

"I was informed that the company would only be taken out of receivership and restored to its contractual position if I declined to give prosecution evidence in the Goldenberg trial,” Mr Ali wrote in an affidavit.

Defeated, Mr Ali went to the International Centre for Settlement of Investment Disputes (ICSID) which ruled that since the businessman had bribed his way into the contract, an illegality by itself, he could not turn back to the court for justice.

“No court will lend its aid to a man who founds his cause of action upon an immoral or illegal act,” he was told.

ARBITRATION

With Mr Ali out of the way, Mr Pattni was determined to get back World Duty Free — after all there was a court order that he was the bona fide owner of the contract which had been cancelled by the government.

In 2008, Mr Pattni asked the Chief Justice to appoint a tribunal to determine whether his contracts, which were to lapse in 2012, were breached.

On September 22, 2008, Justice (Rtd) E. Torgbor was appointed the sole arbitrator to the dispute between World Duty Free and Kenya Airports Authority and this was followed by drama.

After Pattni had tabled all his evidence, the KAA representatives on June 19, 2012 walked out of the proceedings — leaving World Duty Free to win the case.

The consequence of that was that Justice Torgbor awarded Mr Pattni US$50 million plus costs.

PUBLIC POLICY

But his attempt to get this money backfired when KAA lodged a case at the High Court arguing that the payment was against the public policy.

Justice F Tuiyott ruled that an arbitral award, even by consent, cannot be enforced if it is in conflict with public policy of Kenya.

Had nobody pursued that line, we most likely could have paid Mr Pattni another Sh8.5 billion on top of the Goldenberg money.

And that is the saga of our duty free shops.

[email protected] @johnkamau1