REPUBLIC OF KENYA Report of the Judicial Commission of Inquiry into the Goldenberg Affair Chairman: The Hon. Mr. Justice S. E. 0. Bosire, J.A. Presented to: His Excellency Hon. Mwai Kibaki, C.G.H., M.P. President and Commander-in-Chief of the Armed Forces of the Republic of Kenya October, 2005 KSh. 800 TABLE OF CONTENTS PAGE NO. ABREVIATIONS ut LETTER OF TRANSMITTAL lv ACKNOWLEDGMENTS v INTRODUCfION I CHAPTER I 30 Economic & Political situation before 1992 General Election 30 CIIAPTER II # AOCEFTAITCE AITD IMPLEMEITTATION OF GIL'S PROPOSAI.S 4 E:rport compensation schem e 44 Gold and Di."'ond Jewellery Exports 59 GIL'S Initid Dealings with CBK 9l CHAPIER III 97 OTHDR SCHEMES IIT THE GOLDENBERG AF'FAIR 97 Pre-Export Finance 97 Retention Accounts Schem e 108 Convertible Foreign Exchange Bearer Certificates (Forex Cs) 111 CIIAPIER IV 116 TIITAITCIAL DEALINGE 116 Movement of money by GIL into and out of Kenya 116 Exchange rate gains to GIL t24 Cheque Kiting 128 Dollar Sale Contracts 131 US $2IO,OOO,OOO Contracts -American Express Bank Ltd. L44 PeSrment of Kstt. 5.8 Billion from Treasury to GIL 154 Treasury Bills L62 Pan African Bank Ltd. 168 Recipients of Goldenberg Money and Funding of 1992 General Elections L8I CIIAPIER V t97 EXPOSURE AI|D PREVTOUS NNTESTIGATIOITS AITD AFTERIUATH OF, THE GOLDEI|BERG AFFNR t97 Exposure and Previous Investigations of the Goldenberg Alfair r97 Role Played By Various People in the Goldenberg Alfair 203 Economic Social and Related Effects of The Goldenberg Affair 261 Persons Allegedly Adversely Allected By Goldenberg 287 Commendations 291 cueptpdvr 293 CONCLUSION AND SPECIAL RECOMMEITDATIONS 293 ll1ola - ?Ab 14 ),4:1 .:_>'I tt'i.r) APPENDIXES APPENDX A. GAZETTE NOTICE 1237 OF 24TH FEBRUARY 2OO3 305 APPENDX B - GAZETTE NOTICE I238 OF 24TH FEBRUARY 2OO3 306 APPENDX C - TEXT OPENING SESSION - CHAIRMAN 307 APPENDIX D - TEXT OPENING SESSION - ATIORNEY-GENERAL 308 APPENDX E . TEXT OPENING SESSION - CHAIRMAN LAW SOCIETY OF KEI.IYA 311 APPENDX F - COMMISSION'S RULES OF PROCEDURE 313 APPENDX G. LIST OF PERSONS SERVED WITH ADVERSE NOTICES 314 APPENDX H - LIST OF DOCUMENTS AND EXHIBITS PRODUCED 322 APPENDX I - LIST OF WTINESSES 338 APPENDXJ - RULING ON H.C. MISC. APP. 1279 OF 2OO4 341 APPENDIX K - RULING OF COURT OF APPEAL C.A. APP. NAI 3lo oF 2004 350 APPENDX L - PRE-EXPORT FINANCE AND EXPORT COMPENSATION APPLICATIONSTO BANKS 352 APPENDX M - SURVEY OF FINANCIAL DEALINGS BETWEEN CBK & GIL, EBL AND OTHER BANKS 357 APPENDX N- RECIPIENTS OF GOLDENBERG MONEY 360 APPENDX P- FINANCIAL GRAPHS 373 APPENDX Q. CRITIQUE OFTHE POSMION OFTHE CENTRAL BANI( OF KEI.IYA 342 ABBRTVIATIONS In a report of this size, we have had to use abbreviations. 'l ne main ones are as follows:- Pattni or Mr. Pattni refers to Mr. Kamlesh Mansukhlal Damji Pattni. All other Patnis are reffered to by their first of full names. GIL - Goldenberg International Ltd. EBL - Exchange BankLtd. Other abbreviations are listed alphabetically: AMEX - American Express Bank Ltd. BLA - Banque Indosuez Sogem Aval Ltd. CBK - Central Bank of Kenya CD3 - Customs Declaration Form 3 Forex C - Convertible Foreign Exchange Bearer Certificate GSU - General Service Unit of the Kenya Police Department IMF - International Monetary Fund LSK - Law Society of Kenya KANU - Kenya African National Union KCB - Kenya Commercial Bank Ltd KICC - Kenyatta International Conference Centre NBK - National Bank of Kenya NOCK - National Oil Corporation of Kenya Ltd. OMO Bills - Open Market Operation Bills PAB - Pan African Bank Ltd. PAC - Public Accounts Committee of Parliament PMG - Paymaster General Account with the Central Bank of Kenya TNB - Trans National Bank Ltd. VP/MF - Vice President and Minister for Finance (Hon. Saitoti) WB - World Bank rll LITTER OF TRANSMITTAL His Excellency the President Hon. Mwai Kibaki, C.G.H., M.P. State House NAIROBI Your Excellency, Il1 i1 By Gazette Notice Nos. 1237 and 1238 of 246 February 2OO3 and No.7593 lt of 29'h October 2OO3, you appointed us as members of the Judicial Commission tp enquire into the Goldenberg affair with specific terms of reference which we have reproduced at the beginning of this report. You also asked us to make various recommendations in lines suggested in the said terms of reference. We have carried out the assignment in terms of section 7 of the Commissions of Inquiry Act Cap lO2, Laws of Kenya, and now have the honour, Your Excellency, to submit our report to you. We thank you most sincerely for the trust you bestowed on us. We are, Your Excellency's most obedient servants, \ z"--{^. Justice S.E.O.-) Bosire, J.A. Chairmaa iu; +- Mr. Nzamba Kitohga, Senior Counsel Vice-Chalrman /41U./,1 Mr' Peter AHL:::"" cQunser 3.4 Fbn",,3 ILLF/ iv ACKNOWLIDGMENTS Our task would have been impossible without the assistance and support of various persons, individual, and corporate. In that connection, we would like to thank the Attorney General, Hon. Amos S. Wako, E.G.H., E.B.S., M.P. who appeared as amicus curiae before us and for his valuable assistance to us at various stages of the inquiry. We would like to thank the Chief Justice, Hon. Evan Gicheru, the Commissioner of Police, the Commandant Administration Police, and other Government Ministries and Departments for releasing the various officers who were attached to this Judicial Commission. We would like to express our appreciation to counsel assisting the Judicial Commission, viz Mr. Waweru Gatonye, Mrs. Dorcas Oduor, Di. John Khaminwa and Dr. Kamau Kuria whose assistance was invaluable in our endeavour to unravel the Goldenberg Affair. We particularly thank Mrs. Dorcas Oduor, for her re"ourc.fulness in identifying some important witnesses who testified and some documentary material which was tendered in evidence. We would like to express our appreciation to other Counsel who appeared for various persons, corporate and individual, who were adversely mentioned. They displayed excellent advocacy and decorum during the inquiry arrd for that we commend them. We must record our appreciation for the contribution of the Joint Secretaries to this Judicial Commission, Mr. Dan Ameyo (presently the Postmaster General) and Mr. William Ouko (now a Judge of the High Court), whose contribution to the judicial Commission although for a short time, was invaluable and memorable. Mr. George Mongare Kegoro, replaced those two and worked single handedly as Joint Secretary for this Judicial Commission for a period in excess of one and half years. His contribution merits special mention. The Judicial Commission on the Goldenberg Affair had a chequbred history. It had many challenges. Often we worked long hours and this inquiry involved a lot of documentation, a lot of correspondence, consultation, co-ordination etc. Mr. Kegoro was equal to the task and worked tirelessly to ensure that there were no administrative bottlenecks. We must thank him very much. The following deserve our special thanks for their commendable role in the proceedings; the Parliamentaqr Hansard team for the preparation of the voluminous verbatim report of our proceedings which runs to 18,324 pages. They were useful in compiling our Report; The Executive Oflicer, Mr. Henry Aoko, who coordinated the various activities during the proceedings and at our offices deserves commendation for his tireless efforts to ensure that all necessary facilities were present; Simon Wasilwa and Thomas Furaha of the High Court Nairobi and Chief Magistrate's Court, Mombasa, respectively whose personal support to us was indispensable. I The niost difficult and challenging part of our assignment was the compilation and writing of our report. The exercise took long as the I i documentation involved was massive. We could not have put the report I { together without the dedicated work of our secretaries; Miss Teresa Miyogo, I Mrs Felista Kiliku and Miss Lilian Amogola; and our clerk Mr. Simon Wasilwa I who was identiSing and availing the various documentary exhibits to us. Mr. Isaiah Langatt, Computer Operations Assistant, printed and bound our report. We thank him very much for his invaluable assistance. Finally, we wotrld like to thank the clerk of the National Assembl5r and the Management of KICC who placed at our disposal the physical and other facilities for the use of the Judicial Commission and all other staff of the Commission for their respective roles. ii t1 II tt tI .* "^r"^$*tr;,"r-"R couxsELl lzo/4 rR. PEtER LE PEIJET (SEMOyCOUXSELI COIIISAOrER VI i INTRODUCTION 14 crTATroN 1. By Gazette Notices Nos.1237 and 1238 dated 24ft February, 2003 [See Appeadix A & BI Hon. Mr. Justice Samuel Elkana Onderi Bosire, Hon. Mr. Justice Daniel K. Aganyanya and Mr. Peter Le Pelley Senior Counsel (S.C.) were appointed to be Commissioners of a Judicial Commission of Inquiry by His Excellency Mwai Kibaki, President of the Republic of Kenya in exercise of the powers conferred by Section 3 of The Commissions of Inquiry Act Cap 102 Laws of Kenya with Hon. Mr. Justice Samuel Elkana Onderi Bosire, a Judge of Appeal as Chairman and Hon. Mr. Justice Daniel K. Aganyanya, a Judge of High Court as Vice Chairman. By Gazette No.7593 dated 29ft October, 2003 the appointment of Hon. Mr. Justice Daniel K. Aganyanya was revoked and Mr. Nzamba Kitonga, (S.C).was appointed to replace Hon. Mr. Justice Aganyanya both as Commissioner and Vice Chairman of this Judicial Commission of Inquiry. 2. ln the citation Mr. William Ouko and Mr. Dan K. Ameyo were appointed Joint Secretaries to the Judicial Commission; Mr. Waweru Gatonye and Mrs. Dorcas Agik Oduor as Assisting Counsel, but in a later gazette notice to wit Gazette Notice No 2223 dated 4ft April, 2003 John Mugalasinga Khaminwa and Gibson Kamau Kuria were appointed additional Counsel to assist the Judicial Commission.