Grand Regency Scandal
Encyclopedia
Erupting in June 2008, the Grand Regency Scandal concerns the sale of the Grand Regency Hotel in Downtown Nairobi
, Kenya
, from the Central Bank of Kenya
to an unspecified group of Libya
n investors called "Libya Arab African Investment Company". The sale was directed by Finance Minister Amos Kimunya
, leading to passage of near-unanimous censure of Kimunya by the Kenyan Parliament on July 1, 2008. On July 8, 2008 Kimunya submitted his resignation, and called for an investigation to clear his name.
The controversy involves the no-bid nature of the sale, the secrecy under which it was negotiated, the identity of the buyers, and the price of the luxury hotel- reportedly 2.9 billion Kenyan Shillings (approx. US $44 million), around one-third of previous appraisals of the property's value in the neighborhood of 7 billion Kenyan Shillings (approx, US $114 million). The value of the hotel is disputed by Kimunya. Lands Minister James Orengo
blew the whistle on the sale, charging his fellow cabinet minister, Kimunya, with corruption.
, one of the largest corruption scandals uncovered in Kenya (See article: Corruption in Kenya
.) Goldenberg involved the trans-shipment of large quantities of gold through Kenya, with a 35% subsidy paid to the Goldenberg company by the Government of Kenya. Much of the gold was smuggled out of the Democratic Republic of the Congo
, site of a civil war. It is estimated the earlier scandal cost the country around 10% of one years' GDP, and many of the country's current leaders have been implicated.
Kamlesh Pattni, a central figure in the Goldenberg investigations and a founder of the Goldenberg company, reportedly used proceeds from the Goldenberg scandal to build the Grand Regency. In addition to the questionable source of the funds, Pattni acquired the lands from the Central Bank of Kenya in highly suspicious circumstances. Under a law passed in 2002 offering amnesty to those who return proceeds of corruption, Pattni negotiated immunity from prosecution for his role in Goldenberg in exchange for the transfer of the Grand Regency to the Central Bank of Kenya.
(PNU) and their rivals, the Orange Democratic Movement
(ODM).
The political dimensions to the scandal are still unfolding. Kimunya has been identified as a potential successor to President Mwai Kibaki
of PNU, while Orengo is a member of ODM. When first alerted of the sale, Orengo ordered his ministry to block the transfer of the land grant, but members of the Secret Police arrived at the ministry and reportedly threatened Orengo's employees into completing the transfer. Other members of PNU, including presidential aspirant Martha Karua
, joined Orengo and ODM in calling for full disclosure of the details of the sale, and Kimunya's resignation or dismissal, though Karua later backed off the call for dismissal. The sole member of Parliament to vote against the motion of censure was PNU-allied vice-president Kalonzo Musyoka
, whose own presidential ambitions stands to improve with the divisions within the Kikuyu ethnic block of PNU, giving him a motive to support Kimunya.
On July 3, a parliamentary committee investigating the sale issued a preliminary report recommending the suspension of the sale. The committee, headed by PNU-affiliated attorney general Amos Wako
, called for the resignation or dismissal of Kimunya, as well as National Intelligence Services, Maj-Gen Michael Gichangi, Central Bank governor Njuguna Ndung'u and the secretary to the board of directors at the CBK. Additionally, the Parliament refused to consider any bills relating to the Finance Ministry, pending Kimunya's ouster. This included the National Budget.
On 25 November 2008, an official inquiry cleared Kimunya of any wrongdoing. The commission's report was not made public.
On 23 January 2009, Kimunya was reappointed to the cabinet by President Mwai Kibaki
as Minister of Trade.
Nairobi
Nairobi is the capital and largest city of Kenya. The city and its surrounding area also forms the Nairobi County. The name "Nairobi" comes from the Maasai phrase Enkare Nyirobi, which translates to "the place of cool waters". However, it is popularly known as the "Green City in the Sun" and is...
, Kenya
Kenya
Kenya , officially known as the Republic of Kenya, is a country in East Africa that lies on the equator, with the Indian Ocean to its south-east...
, from the Central Bank of Kenya
Central Bank of Kenya
The Central Bank of Kenya is Kenya's central bank. The bank is located in Nairobi. The current governor of the bank is Professor Njuguna Ndungu whose appointment took effect from March 4, 2007...
to an unspecified group of Libya
Libya
Libya is an African country in the Maghreb region of North Africa bordered by the Mediterranean Sea to the north, Egypt to the east, Sudan to the southeast, Chad and Niger to the south, and Algeria and Tunisia to the west....
n investors called "Libya Arab African Investment Company". The sale was directed by Finance Minister Amos Kimunya
Amos Kimunya
Amos Muhinga Kimunya is a Kenyan politician and a Member of Parliament for Kipipiri Constituency, currently serving as Minister of Trade. He was Minister of Finance from 2006 to July 2008, when he resigned due to the Grand Regency Hotel scandal...
, leading to passage of near-unanimous censure of Kimunya by the Kenyan Parliament on July 1, 2008. On July 8, 2008 Kimunya submitted his resignation, and called for an investigation to clear his name.
The controversy involves the no-bid nature of the sale, the secrecy under which it was negotiated, the identity of the buyers, and the price of the luxury hotel- reportedly 2.9 billion Kenyan Shillings (approx. US $44 million), around one-third of previous appraisals of the property's value in the neighborhood of 7 billion Kenyan Shillings (approx, US $114 million). The value of the hotel is disputed by Kimunya. Lands Minister James Orengo
James Orengo
James Orengo, is a lawyer and former presidential candidate in Kenya. He comes from Ugenya Constituency of Siaya District; he was educated at Ambira Primary School and the Alliance High School. He is law graduate of the University of Nairobi where he was the student body president in his final year...
blew the whistle on the sale, charging his fellow cabinet minister, Kimunya, with corruption.
Background
The Grand Regency hotel played a minor part in the Goldenberg ScandalGoldenberg scandal
The Goldenberg scandal was a political scandal where the Kenyan government was found to have subsidised exports of gold far beyond standard arrangements during the 1990s, by paying the company Goldenberg International 35% more than their foreign currency earnings...
, one of the largest corruption scandals uncovered in Kenya (See article: Corruption in Kenya
Corruption in Kenya
Political corruption in the post-colonial government of Kenya has had a history which spans the era of the Jomo Kenyatta and Daniel arap Moi's KANU governments to the Mwai Kibaki's NARC government. In the Corruption Perceptions Index 2005 Kenya is ranked 144th out of 159 countries for corruption...
.) Goldenberg involved the trans-shipment of large quantities of gold through Kenya, with a 35% subsidy paid to the Goldenberg company by the Government of Kenya. Much of the gold was smuggled out of the Democratic Republic of the Congo
Democratic Republic of the Congo
The Democratic Republic of the Congo is a state located in Central Africa. It is the second largest country in Africa by area and the eleventh largest in the world...
, site of a civil war. It is estimated the earlier scandal cost the country around 10% of one years' GDP, and many of the country's current leaders have been implicated.
Kamlesh Pattni, a central figure in the Goldenberg investigations and a founder of the Goldenberg company, reportedly used proceeds from the Goldenberg scandal to build the Grand Regency. In addition to the questionable source of the funds, Pattni acquired the lands from the Central Bank of Kenya in highly suspicious circumstances. Under a law passed in 2002 offering amnesty to those who return proceeds of corruption, Pattni negotiated immunity from prosecution for his role in Goldenberg in exchange for the transfer of the Grand Regency to the Central Bank of Kenya.
Political Fallout
The scandal is the first major test of the Grand Coalition government following the resolution of the 2007-2008 Kenyan crisis. The Grand Coalition includes Kimunya's Party of National UnityParty of National Unity (Kenya)
Party of National Unity was founded as a political coalition of parties in Kenya. On September 16, 2007, Kenyan President Mwai Kibaki announced the party formation and said that he would run as its presidential candidate in the December 2007 Kenyan elections...
(PNU) and their rivals, the Orange Democratic Movement
Orange Democratic Movement
Orange Democratic Movement refers to a political party in Kenya, which is the successor of a former grassroots people's movement which was formed in the 2005 Kenyan constitutional referendum. The erstwhile single party which separated in August 2007 into two...
(ODM).
The political dimensions to the scandal are still unfolding. Kimunya has been identified as a potential successor to President Mwai Kibaki
Mwai Kibaki
Mwai Kibaki is the current and third President of the republic of Kenya.Kibaki was previously Vice President of Kenya for ten years from 1978–1988 and also held cabinet ministerial positions, including a widely acclaimed stint as Minister for Finance , Minister for Home Affairs and Minister for...
of PNU, while Orengo is a member of ODM. When first alerted of the sale, Orengo ordered his ministry to block the transfer of the land grant, but members of the Secret Police arrived at the ministry and reportedly threatened Orengo's employees into completing the transfer. Other members of PNU, including presidential aspirant Martha Karua
Martha Karua
Martha Wangari Karua is a Kenyan politician. She is a Member of Parliament for Gichugu Constituency and an Advocate of the High Court of Kenya...
, joined Orengo and ODM in calling for full disclosure of the details of the sale, and Kimunya's resignation or dismissal, though Karua later backed off the call for dismissal. The sole member of Parliament to vote against the motion of censure was PNU-allied vice-president Kalonzo Musyoka
Kalonzo Musyoka
Stephen Kalonzo Musyoka is a Kenyan politician, currently serving as Vice President of Kenya. Musyoka served in the government under President Daniel arap Moi and was Minister for Foreign Affairs from 1993 until 1998; subsequently, under President Mwai Kibaki, he was Minister of Foreign Affairs...
, whose own presidential ambitions stands to improve with the divisions within the Kikuyu ethnic block of PNU, giving him a motive to support Kimunya.
On July 3, a parliamentary committee investigating the sale issued a preliminary report recommending the suspension of the sale. The committee, headed by PNU-affiliated attorney general Amos Wako
Amos Wako
Hon. S. Amos Wako served as th Attorney General of the republic of Kenya for 20 years .Wako was born in Kenya...
, called for the resignation or dismissal of Kimunya, as well as National Intelligence Services, Maj-Gen Michael Gichangi, Central Bank governor Njuguna Ndung'u and the secretary to the board of directors at the CBK. Additionally, the Parliament refused to consider any bills relating to the Finance Ministry, pending Kimunya's ouster. This included the National Budget.
On 25 November 2008, an official inquiry cleared Kimunya of any wrongdoing. The commission's report was not made public.
On 23 January 2009, Kimunya was reappointed to the cabinet by President Mwai Kibaki
Mwai Kibaki
Mwai Kibaki is the current and third President of the republic of Kenya.Kibaki was previously Vice President of Kenya for ten years from 1978–1988 and also held cabinet ministerial positions, including a widely acclaimed stint as Minister for Finance , Minister for Home Affairs and Minister for...
as Minister of Trade.