Grand Regency Scandal

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 a unspecified group of Libyan investors called "Libya Arab African Investment Company". [ BBC News, June 30, 2008: [http://news.bbc.co.uk/2/hi/africa/7481140.stm Probe into Kenya hotel sell-off] ] 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. [ Business Daily, July 2, 2008: [http://allafrica.com/stories/200807021069.html Kenya: MPs Censure Kimunya Over Sale of Grand Regency Hotel] ] 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.

Background

The Grand Regency hotel played a minor part in the Goldenberg Scandal, 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 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. [ Nairobi Chronicle, April 25, 2008: [http://nairobichronicle.wordpress.com/2008/04/25/goldenberg-ghost-haunting-kenya-government/ Goldenberg ghost haunting Kenya Government] ]

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. [ East Africa Standard, June 29, 2008 http://www.eastandard.net/news/?id=1143989317&cid=4 Grand Regency: What does Kibaki know? ]

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 Unity (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. [ Daily Nation, July 7, 2008 http://www.nationmedia.com/dailynation/nmgcontententry.asp?category_id=2&newsid=126811 Karua denies calling for Kimunya ouster ] 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. [ Daily Nation, July 6, 2008: [http://www.nationmedia.com/dailynation/nmgcontententry.asp?category_id=1&newsid=126766 Knives Out in the Kitchen Cabinet] ]

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. [ The Nation, July 4, 2008: [http://allafrica.com/stories/200807040080.html Kenya: Raila Team Okays Probe Report] ] Additionally, the Parliament refused to consider any bills relating to the Finance Ministry, pending Kimunya's ouster. This included the National Budget.

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