The Goldenberg scandal

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The Goldenberg scandal was a political scandal where the

Kenyan government was found to have subsidized exports of gold far beyond

standard arrangements during the 1990s, by paying the company Goldenberg

International 35% more (in Kenyan shillings) than their foreign currency

earnings. Although it notionally appears that the scheme was intended to earn

hard currency for the country, it is estimated to have cost Kenya the

equivalent of more than 10% of the country's annual Gross Domestic Product

[1], and it is possible that no or minimal amounts of gold were actually

exported. The scandal appears to have involved political corruption at the

highest levels of the government of Daniel Arap Moi. Officials in the current

government of Mwai Kibaki have also been implicated.

Background

Similar to most countries, Kenya encourages international trade by granting

tax-free status to commercial enterprises involved in the export of goods and

sometimes subsidizes these exports. The Goldenberg scandal was based on the

fact that exporters who deposited U.S. dollar earnings with the Kenya central

bank received in exchange the equivalent in Kenyan shillings plus 20 percent.

However, gold mining represented a tiny portion of Kenya's GDP, with only one

operational gold mine (at Kakamega). Goldenberg International therefore

developed a scheme of smuggling gold into Kenya from Congo, so that it could

legally export it more than the export price from the government.

Details

The chief architect beyond the scheme was a relative of the Kenyan

businessman Kamlesh Pattni. However, it was Pattni who established Goldenberg

International to implement the scheme. The very large sums involved (600

million dollars) indicate that the senior government officials were at least

complicit. Almost all the politicians in the Moi government and a

considerable percentage of the current Kibaki government have been accused.

The judicial system also appears to have been deeply involved, with twenty

three of Kenya's senior judges resigning after evidence indicated their

involvement.

The scheme began in 1991, almost immediately after the

Kenya government, following directions from the IMF, introduced measures to

reform the economy and increase international trade and investment, and seems

to have stopped in 1993 when it was exposed by a whistleblower, David

Munyakei. As a result of this, Munyakei was fired from his position at the

Central Bank of Kenya, and spent the next decade of his life poor and largely

unemployed. He died in August 2006, leaving three daughters and his wife.

There have been two investigations on the scam, one under the Moi government

and the other under the current government. The gold was likely imported from

Democratic Republic of the Congo, and therefore probably helped finance the

war that raged (1997-2002) in that country.

Bosire report

On February 3, 2006 A report by Mr. Justice Bosire recommended that current

Education Minister George Saitoti should face criminal charges for his

actions and that former President Daniel Arap Moi should be further

investigated. Saitoti was both vice president and finance minister under Moi

in the early 1990s. On 13 February Saitoti resignation was announced by

President Kibaki in a television address.

The report said that records presented at the inquiry

showed that Lima Ltd, which is associated with Mr. Gideon Moi, Mr. Nicholas

Biwott, and two other people, received Sh6.3 million from Goldenberg.

However, the Commission concluded that in respect of Nicholas Biwott, who had

not been in government at the time,

whole article extracted from: Apsea.or.ke,. (2015). The goldenberg scandal. Retrieved 7 December 2015, from http://www.apsea.or.ke/reforms/index.php/news/1-injustices/78-the-goldenberg-scandal