Gemstones in high places

Kelly McParland
National Post
May 29, 2004

For an international criminal genius – accused of masterminding a gold and diamond smuggling scam that almost brought Kenya to its knees – Kamlesh Pattni cuts a decidedly unimpressive figure.

A short, bushy-haired, fast-talking man of Indian descent, he has trouble pronouncing his V’s (he says “anwil” instead of “anvil”) and has several times prompted bursts of laughter from a government inquiry now underway in Nairobi.

One of the guffaws came when he described how he bribed Daniel arap Moi, Kenya’s former president, into backing the complex smuggling plot the inquiry is investigating.

It was back in 1990, when he was only 25 and still very naive, he told the inquiry. So when Kenya’s top intelligence official told him he’d have to give Moi a “gift” to get his co-operation, he thought a nice watch or a gold tie pin would do. Instead, he was told to bring a briefcase containing US$70,000 to the president’s mansion.

He did so, and left it there, he testified. And that was the start of an officially sanctioned looting of the Kenyan treasury, which resulted in $1-billion or more being stolen.

Moi, forced from office 18 months ago after leading the country for 24 years, denies the claims. He says evidence against him was forged and has promised to co-operate. But in several days of testimony this week, Pattni has provided plenty of detail to call the former president’s denial into question.

Pattni claims his plan was rooted entirely in patriotism. Kenya in 1990 was in dire shape, dependent on foreign aid to prop up its eroding economy. To attract foreign currency, it offered a 20% premium on all foreign exchange brought into the country and traded for schillings.

Pattni was an ambitious young jeweller, just starting out in the family business.

“Gemstones were in our family’s blood,” he said. “This trade has been in our family for 13 generations.”

Eager to make his mark, he hit on a bold scheme.

Africa is awash in gold, diamonds and other precious metals mined in war zones such as Congo or Angola, then smuggled through neighbouring countries to buyers in the West. Pattni knew plenty passed through Nairobi, and dealers were making lots of money shipping it illegally to Europe.

He reckoned that if Kenya legalized the exports, the government could claim a chunk of the profits.

Using contacts, he put his scheme to officials, eventually earning an audience with James Kanyotu, Moi’s director of intelligence, who set up a meeting with Moi.

Pattni bought a briefcase and stuffed it with money, as instructed, and the pair met Moi at his mansion outside Nairobi. The accused swindler provided extensive detail of the meeting, the interior of the heavily guarded home and the handover of the money.

The president loved the scheme, Pattni testified, saying Moi was mortified at being constantly ordered around by the World Bank and the International Monetary Fund, and jumped at the chance to earn enough to tell them to take a flying leap. Pattni promised at least US$50-million a year, though he believed it would make double that. Moi signed a document authorizing the plan, agreed to a 35% premium instead of the usual 20%, and took a 50% “silent” share in the operation with Kanyotu.

It was all Pattni needed. In the next three years, he brought in the illicit goods, repackaged them and sent them on to foreign buyers, financed by massive “export loans” from the Treasury. He called the company Goldenberg International, a mix of German and English meaning Gold Mountain.

Despite the government backing, it was all very cloak and dagger. For “security” reasons, he set up a gold smelter on the 14th floor of a downtown tower, avoiding industrial areas that would have made more sense. Shipping documents were filled with falsified information, including fake flight numbers, buyers and destinations.

When gems were to be handed over, Pattni would put them in a small package and carry them to the airport. He would take care of customs details, then meet the buyer on the plane, where they’d make the transfer.

“The goods were handed over when we were 20,000 feet in the skies, and there, the consignee would go to the washrooms to stuff the goods into his pockets,” he said.

Money was transferred from firms in Switzerland, though Pattni admitted they were all fronts, controlled by Goldenberg, to let him disguise the buyers. He also won’t identify the “syndicates” that supplied the smuggled goods. To this day, no one is really sure whether any of the “deals” ever actually took place.

Equally uncertain is just how much was stolen. Estimates range as high as several billion, though most reports put the loss at US$600-million to US$800-million, 20% of Kenya’s gross domestic product.

Terrence Ryan, a former economic secretary in Moi’s government, said inflation, unemployment and interest rates soared as the government desperately printed money. The cost of basic foods spiked, and government borrowing rose 400%.

Adding insult to injury, the World Bank and IMF, citing corruption, froze their loan programs.

Civil servants testified that when Pattni had trouble collecting from the Treasury, Moi ordered it to pay up. In addition to the former president, his finance minister and Kanyotu, the hearings have implicated Moi’s two sons and his daughter.

Pattni himself has been having a tough time of it since Moi’s successor, Mwai Kibaki, ordered the inquiry more than a year ago.

A network of hotels and duty-free shops he co-owned was ordered seized in November. He’s been charged with murdering Friedrich Wilhelm Kohlwes, his security chief.

Last Christmas, a man cycling past a 16-acre farm owned by Pattni – he planned to open an orphanage there – noticed smoke and came across truckloads of documents related to the Goldenberg case in the process of being burned.

These days, Pattni is said to be in poor health and having trouble sleeping. He showed up late for testimony one day, explaining he’d slept in after taking a pill.

All the revelations have increased pressure to call Moi as a witness. Kibaki has been reluctant to involve the former president, fearful of the tumult it would cause.

Categories: Africa, Kenya, Odious Debts

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