Viewing cable 06NAIROBI3217, CHARTERHOUSE WHISTLEBLOWER DETAILS MONEY LAUNDERING
- MPs, John Mau and Kabogo Involved
- Nakumat Group of comapnies major conduits
- Laundered money funded Narc’s 2005 Referendum campaign
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SUBJECT: CHARTERHOUSE WHISTLEBLOWER DETAILS MONEY
LAUNDERING AND TAX EVASION AND REQUESTS REFUGE IN U.S.
REF: A. A. NAIROBI 2870
¶B. B. NAIROBI 2482
¶C. C. NAIROBI 1688
¶D. D. NAIROBI 1614
Classified By: Charge John F. Hoover for reasons 1.4 (B) and (D)
¶1. (C) Summary: Kenyan auditor Peter Odhiambo exposed billions of shillings of tax evasion and money laundering at his former employer, Charterhouse Bank, by a group of major companies partly owned by notorious businessman John Mwau and MP William Kabogo. On July 20, Odhiambo briefed Emboffs on the details of the scam, and explained he had experienced death threats and a frightening attempt by some policemen to serve him with a bogus warrant. Because the people implicated in the scandal are dangerous and appear to have bought influence and protection from the GOK, Odhiambo requested refuge in the U.S. Refugee Officer is prepared to write an Embassy referral for Odhiambo to DHS for processing his application for refugee status, and DHS is willing to interview him. End summary.
Money Laundering and Tax Evasion at Charterhouse Bank
¶2. (C) Peter Odhiambo met with PolOff and EconOff on July 20 to describe his role in exposing massive money laundering and tax evasion by the Nakumatt Group of companies. (See reftels for more details.) Odhiambo moved from Barclays Bank to Charterhouse in May 2003 as the internal auditor. Within two months, he noticed suspicious transactions in accounts lacking the customer identification information required by the Central Bank of Kenya,s (CBK) &Know Your Customer8 regulations. Some accounts also appeared to violate CBK prudential limits on loans and liquidity. Charterhouse concealed the violations by manipulating the figures just before the end of the month submissions were compiled, or before visits from external or CBK auditors, and then reverted the figures immediately afterwards. The General Manager told Odhiambo not to write down anything about the suspicious accounts in any report the CBK auditors might see.
¶3. (C) Odhiambo examined the suspicious accounts and found many personal savings accounts with (annual?) turnovers in excess of Ksh2 billion ($27 million). The transactions records showed funds were being diverted from Nakumatt Supermarket and related firms into various personal savings accounts, presumably to avoid taxes by under-declaring revenues to the Kenya Revenue Authority (KRA). In May 2004, Odhiambo collected the information on 85 accounts with annual turnover of about Ksh20 billion ($270 million) and presented it to the KRA, which promised strict confidentiality to protect him. KRA however, took no action, and did not give Odhiambo the 1% reward its newspaper ads promised to informants who revealed tax fraud.
¶4. (C) Odhiambo identified the companies involved in tax evasion and money laundering as the five companies in Nakumatt Holdings: XXXXXXXXXXXX. (A CBK report also implicated the John Harun Group, Triton Petroleum, law firm Kariuki Muigua & Co., Pepe Ltd, XXXXXXXXXXXX, and businessmen William Gitau). Odhiambo stated that, although six South Asian Kenyans were listed as the owners of Nakumatt Holdings, some of them were proxy holders of shares actually owned by John Haroun Mwau and MP William Kabogo, both of whom have been linked to smuggling XXXXXXXXXXXX. Odhiambo noticed a deposit of Ksh10 million/day into Nakumatt,s or Tusker Mattresses, accounts, and he suspected the funds were smuggling proceeds from Harun Mwau,s container depot company, Pepe. Odhiambo believes the perpetrators evaded about Ksh43 billion ($573 million) in taxes, but that KRA has been purposefully understating the figure.
Whistleblowing is Hazardous in Kenya
¶5. (C) When KRA made no effort to pursue the fraud and money laundering at Charterhouse, Odhiambo presented the information in August to CBK Governor Mullei. Mullei formed a task force with KRA and the Kenya Anti-Corruption Commission (KACC) to investigate Odhiambo,s information. Odhiambo left Charterhouse in August 2004. In November 2004, colleagues still at Charterhouse warned him the bank was aware of his disclosure of information. He began receiving
disquieting calls, but claims he was not offered any bribe for silence. Odhiambo suspected someone at KACC revealed his whistleblowing role to Charterhouse. In February 2005, Mullei offered him a position at CBK advising the task force, and his situation &quieted down.8 Odhiambo said the task force confirmed Odhiambo,s information. (Note: Press reports claimed the Charterhouse Bank Archives were destroyed in a fire, so it is not clear whether the task force was able to view the files Odhiambo copied. End note.) Press reports said CBK fined Charterhouse for violations of the Banking Act and on March 20, 2006 recommended to the Minister of Finance that he cancel the bank,s license (ref A). A few days later, Governor Mullei was charged in court with four counts of abuse of office, apparently in retaliation for his effort to indict Charterhouse.
¶6. (C) In an effort to defend himself, Mullei leaked information on Charterhouse to the press, and Finance Minister Kimunya was forced to close the bank temporarily to prevent a run. On July 6, shadow Finance Minister Kerrow tabled a bootlegged CBK report claiming the Nakumatt Group of companies had evaded Ksh18 billion of taxes. On July 7, two men who identified themselves as police officers from the Central Station confronted Odhiambo at the CBK and ordered him to accompany them to his house for a search. Fortunately, the acting CBK Governor demanded to see the warrant, and rejected it because it was dated July 2005 and the applicant was no longer the General Manager of Charterhouse.
¶7. (C) Fearing further police harassment, Odhiambo called the Daily Nation, which published his story on July 8, and the Kenya National Human Rights Commission (KNHCR). The head of the Commission arranged a meeting for Odhiambo on July 11 with Justice Minister Martha Karua, who was concerned by his story and regretted how &criminals had taken over so much of the Kenyan Government.8 She advised Odhiambo to write a letter to Police Commissioner Ali asking him to guarantee his safety. He sent copies of the letter to Minister Karua, Finance Minister Kimunya, Internal Security Minister Michuki, the Attorney General and the CBK Acting Governor to ensure they were all aware of the effort to use the police to intimidate or threaten him. Odhiambo never received any acknowledgment of the letters, nor any protection. Nor have the CBK, KRA, KACC, or the Ministry of Finance taken any further action against Charterhouse Bank or the account holders. The Ministry has not officially released any of the CBK,s reports on the Charterhouse investigation. A scathing July 8 press article called into question Finance Minister Kimunya’s credibility in getting to the bottom of the matter, pointing out a number of critical omissions and deceptions in the Minister’s June 27 statement to Parliament, when he announced the temporary closure of the bank.
¶8. (C) After the July 8 newspaper stories, Odhiambo said he began receiving threatening phone calls warning him to leave Kenya, suspicious people were seen lurking around his house, and his cell phone may have been bugged. He claimed one of the Task Force members connected with him has also received threatening calls. Odhiambo sent his family to the U.S., changed his cell phone, and changed his residence twice. He suspects Mwau and the other businessmen bought protection from all GOK enforcement agencies by funneling large sums of money to senior officials to pay for the NARCs constitutional referendum campaign in November 2005. For example, one acquaintance at KRA told Odhiambo the KRA Commissioner receives Ksh5 million/month from Mwau,s group. Odhiambo fears Mwau, Kabogo and others involved will kill him or &make him disappear8 both to retaliate and to deter other potential whistleblowers. He does not believe any GOK agency will protect him effectively.
Whistleblower Requests Refuge in the U.S.
¶9. (C) Odhiambo therefore requested refuge in the U.S., where he would like to study and work in the banking field. He believes protecting him would demonstrate the USG cares about corruption in Kenya, protect people in jeopardy, and shame the GOK into a better recognition of the need to seriously address corruption. Odhiambo said it would be dangerous, but he would be willing to return temporarily to Kenya as a witness, if his testimony in court was needed to convict the criminals. He said he was considering fleeing Kenya shortly, with or without arrangements for onward travel to the U.S. He believed he could travel to a neighboring country and be safe for a time. Refugee Officer discussed the possible options and procedures available for refugee processing. He said he would discuss the issue with the DHS officer responsible and get back to Odhiambo ASAP.
¶10. (C) Credible contacts familiar with the case, including XXXXXXXXXXXX and the journalist investigating the Charterhouse scandal, are unequivocal in lending credibility to Odhiambo’s fears. The believe that Odhiambo, as a low-profile “small fish”, makes a perfect victim through which Mwau and his accomplices can vent their anger and send a message to other whistleblowers to lay off. They urge the USG to do whatever it can do now to assist Odhiambo, both for his own physical safety, and to send a signal that the U.S. supports whistleblowers on corruption.
¶11. (C) Refugee Coordinator discussed this case with DHS rep and others within the Mission. The consensus view among those consulted, as well as Refugee Coordinator’s own view, is that the rarely used in-country DHS interview approach would not be suitable in this case. However, Refugee Coordinator is prepared to write an Embassy referral for Odhiambo should he go to another country, and DHS is willing to interview him for refugee processing. While Emboffs do not advise anyone to become a refugee, we will let Odhiambo know when he contacts us again that should he depart Kenya, we will arrange an interview for him. Odhiambo has been out of contact since July 20, and Emboffs are concerned about his safety.
Comment
¶12. (C) Odhiambo,s story is credible. It fits well with information from other sources about Harun Mwau, Nakumatt, and the others implicated in the Charterhouse scandal (see reftels). We believe he has a well-founded fear of being injured or killed. The perpetrators would most likely be thugs working for John Harun Mwau and his accomplices, but we can’t rule out that corrupt police or security officers would do the job. In any event, Odhiambo cannot expect GOK protection given the strong ties we believe Mwau enjoys at all levels of the Kenyan government. MP William Kabogo, if he is involved as now alleged, also has a reputation for being a ruthless businessman. Like Mwau, he got rich by means of a large-scale smuggling operation in Mombasa. He is believed by many to be behind the New Years Eve murder of a CID officer investigating smuggling there. Given the stakes involved (penalties that could reach roughly $1.3 billion, plus potential criminal charges and prison) they have both the incentive and the track record to make an example out of Odhiambo through violent means.
¶13. (C) Although the GOK recently passed a Whistleblower Protection Act, the recent death from pneumonia and in poverty of Goldenberg whistleblower David Munyakei demonstrates the neglect and lack of protection the GOK provides. Odhiambo,s story and concerns sound realistic. A DHS visit to a neighboring country could be arranged relatively quickly, allowing DHS to make a refugee status determination in short order, if Odhiambo chooses that route.
HOOVER
About the Author
MPs demand open process in selecting new CBK boss
Written By:Catherine Achieng’a, Posted: Wed, Feb 23, 2011
CBK boss Njuguna Ndung’u
Parliament is demanding a Ministerial Statement from the government on the progress made so far in nominating the new Governor of Central Bank.
MPs said a list of nominees to the position need to be forwarded to parliament for scrutiny as per the requirements of the new constitution.
Imenti Central legislator Gitobu Imanyara told parliament that the term of office of the current governor Njuguna Ndung’u is set to expire next week.
Imanyara sought to know the measures in place to fill the post through a competitive transparent process that recognizes the role of public participation to avoid controversy such as that witnessed in the just nullified nominations of the AG, DPP, CJ and Controller of Budget.
Legislators including Gwassi MP John Mbadi and his Rangwe counterpart Martin Ogindo demanded that the statement be delivered Thursday as a matter of urgency.
They said the question of appointment to the office of governor is of national interest and should be done in full view of the public.
The speaker directed the statement be delivered on Tuesday next week.
Campaigns for the renewal of Prof Ndung’u’s tenure picked up from a number of sectors.
Treasury is backing his re-appointment crediting him with transforming and stabilising the country’s financial sector.
Ministry of Finance Permanent Secretary Joseph Kinyua said the career economist should be given another opportunity of steering the direction of monetary policy.
Prof Ndung’u whose terms expires on March 4 has been at the helm of the CBK since March 2007.
What should the People of Kenya do to these thieving Kikuyus >read this Kikuyu net work of stealing cars from DRC and they might go away withit>http://www.nation.co.ke/News/Two+wanted+in+DR+Congo+over+robbery+/-/1056/1116534/-/nkly5hz/-/index.html
MONEY LAUNDERING PATETERNS IN KENYA
Corruption in Kenya takes many forms, all of which result in the loss of public funds or other resources. The government of Kenya lost more than Sh12 billion through fraudulent payments in the 1996–97 financial year alone. In the period 1990–95 it lost a total of Sh127 billion through corruption. These figures are said to represent the loss of one in every six shillings allocated by Parliament.14
The manner in which proceeds of corruption are laundered varies from case to case, and two illustrations will suffice.
The special conditions that typically form part of a grant include a bar to the sale or transfer of the land that is the subject of a grant, unless it is first developed. Generally, this condition is disregarded. A large number of the grantees are, therefore, land speculators.
During much of the 1990s, a scandal involving the alleged export of non-existent gold and diamonds occurred in Kenya. Other than the direct loss to the public, it had a profound negative effect on the economy.
Examples of activities that lead to money laundering in Kenya:
The Goldenberg scandal
Violent crime
Three forms of violent crime are prevalent in Kenya and provide substantial sources of money that may need to be laundered. These are:
motor-vehicle theft;
cattle rustling; and
violent robbery.
Trade in narcotics
Kenya’s trade partners
Kenya is believed to be mainly a trans-shipment centre for narcotics and psychotropic substances destined for markets in Europe and North America. There is increasing evidence, however, that a domestic market for drugs is developing, although it is still very small. From Pakistan (believed to be Kenya’s leading trade partner in drugs), Kenya receives heroin and hashish. From India, it receives both heroin and mandrax. Heroin also comes into Kenya from Afghanistan. Cocaine comes from South America, mainly Colombia and Ecuador. Mandrax passing through Kenya is sold mainly in South Africa, believed to have the largest market for mandrax in the world. Other than Europe and North America, which provide the market for the bulk of the heroin, cocaine and hashish, an important market has developed in the Indian Ocean islands, including Mauritius and the Seychelles.
Laundering drug money
The principal method of laundering the proceeds of drugs coming into Kenya is through casinos.
The more than 20 casinos in Nairobi are at odds with the economic realities of Kenya. In a country that has recently faced major economic hardships, which have lead to massive bankruptcies, it is inexplicable how so many casinos can do legitimate business in Nairobi. A Kenyan fugitive, Said Masoud Mohammed, who jumped bail in a drug-related trial in Nairobi, is said to own one of the casinos in Nairobi.42
The proceeds of drug sales are laundered in various ways, depending on the amount of money involved. Relatively small dealers usually set up retail businesses. Women dealers usually set up cash retail businesses like hair salons, massage parlours and boutiques. Whatever business is set up, it will usually have an export or import component. If, for example, a drug dealer sets up a clothes shop, she will usually have an import component to the business.
Foreign travel for the purpose of buying drugs will be explained as travel for bringing in fresh orders of merchandise. Often, instead of bringing in the proceeds of crime in cash, the dealer imports items for the business. Export components in such businesses include curios, horticultural products and agricultural produce.
Therefore, a drug dealer may set up a motor-vehicle dealership, export drugs, and import motor vehicles using the proceeds of the drug sales. Exports, other than providing a cover for any proceeds that may be received from abroad, also provide a cover for the drugs themselves, which may be hidden in the exported items.
Small- and medium-scale dealers typically spread their money across many banks. In this way, the amounts look small and do not attract adverse attention. For example, a Kenya Airways hostess jailed for 20 years in November 2002 after being found in possession of 27kg of heroin at the Jomo Kenyatta International Airport, had four different accounts in several banks in Nairobi. She had a tailoring business as a front, and was also an importer of clothes for sale in Nairobi.
Large sums of money derived from drug sales are smuggled between countries. The carriers of the cash bribe their way out of any trouble in which they land, or make prior arrangements with security personnel to avoid such trouble. The Expression Today report claims that the Jomo Kenyatta International Airport has twice been hit by “major heists involving millions of shillings being brought into Kenya” as proceeds of drug sales.
Large dealers also set up retail businesses that serve as fronts for their illegal activity. For example, the late billionaire, Ibrahim Akasha, a reputed drug dealer, had a business empire in Mombassa consisting of hotels, high-cost residential premises, petrol stations and commercial real estate.
Expression Today identified several ways in which proceeds of drug sales are laundered in Kenya. Treasury bonds issued by the government of Kenya are cited as providing an easy money laundering opportunity. In January 1999, for example, the government issued three billion shillings’ worth of bonds to the Kenyan market. All that one needed to do was to open an account and buy at least Sh50,000 worth of such bonds.
Commercial banks, through which bids for bonds must be placed, ask very few questions about the source of the money being invested in the bonds. The successful investment of money in treasury bonds has, of itself, a laundering effect, as subsequently the money will be accounted for as proceeds of investments in government securities.
http://www.iss.co.za/pubs/Monographs/No90/Chap5.html
“There is suspicion that some of the money that is being collected in piracy is being laundered by purchase of property in several countries, this one being one of them,” said government spokesman Alfred Mutua.
“Especially at this time when we are facing global challenges of security such as terrorism and others, it is very important for us to know who is where and who owns what.”
The investigation will also help the government catch tax evaders, he said.
Kenya may be the most attractive spot for pirates to launder their money because it shares a roughly 500-mile (800-kilometer) border with Somalia and has investment opportunities and a large Somali community of up to 200,000 people, Mutua said.
In a neighborhood of Nairobi now called “Little Mogadishu” because of its Somali community, large business and apartment buildings have sprung up. A similar explosion of real estate development can be seen in higher-income areas of the city.
Somali pirates have been paid more than $100 million in ransoms the last two years, said Roger Middleton, a piracy expert at the London-based think tank Chatham House. The average ransom is also up, from $1 million per vessel a year ago to about $2 million today.
Pirates in Somalia say they invest their ransom money outside their war-torn country, including in Kenya. One pirate who gave his name as Osman Afrah said he bought three trucks that transport goods across East Africa. A second pirate, who only gave his name as Abdulle, said he’s investing in Kenya in preparation for leaving the pirate trade.
http://www.huffingtonpost.com/2010/01/02/pirate-ransom-money-kenya_n_409219.html
Another thieving Kikuyu: Samuel Gichuru said to be worth almost 100 billion Kenya shillings.
Kenya power boss ‘stole millions’
The head of Kenya’s state-owned power company plundered the institution for nearly two decades, according to an official Government investigation.
Samuel Gichuru, the managing director of Kenya Power and Lighting Company for 19 years, is said to have stolen millions of Kenyan shillings.
He also created an artificial power shortage, said the report.
The investigating committee has called for Mr Gichuru to have his property seized and face prosecution.
‘Total Abuse’
George Nyanja, who led the investigative committee, said: “(We found) mismanagement, total abuse of office, because even ethics, morality requires that you don’t do certain things.”
Gichuru refused to comply with a request to appear before the committee, and was sent on compulsory leave in February by Energy Minister Ochillo Ayacko.
Kenya Power and Lighting Company (KPLC), which was founded 81 years ago under the British colonial administration, has just had three consecutive years of record losses.
Kenyan manufacturers have complained that the country’s power costs are among the highest in Africa.
‘Zero tolerance’
President Mwai Kibaki, who was elected in December last year, has promised zero tolerance towards corruption.
The Kenyan Government owns 51% of KPLC.
http://news.bbc.co.uk/2/hi/business/3308671.stm
Good stuff.Keep it up.
its sad how all this shit happens in our country…….evading of billions in tax money yet the kra remains mum yet the common raiyaa is fleeced out of the little he has in form of ‘taxes’……..
FUCK GOK!!!!!!!!!!!
We should take carre of Odhiambo because if it were not for him the country would continue to suffer from the scandal