Four smoking guns, hazy figures, Eurobond billions held in US bank accounts and bogus letters

Treasury Cabinet Secretary Henry Rotich addresses the press over the Eurobond at State House Nairobi flanked by former Central Bank Governor Njuguna Ndung’u (right) and Solicitor General Njee Muturi. [Photo:FILE/STANDARD]

So the Eurobond $2 million — actually US$1,998,997,763 — was paid into the JP Morgan Chase account on June 24, 2014.

At the time, JP Morgan Chase had received no advice as to who the signatories to the account were. These were eventually sent, but then, despite the fact that June 30 is the end of the financial year in Kenya, it took more than a week before there was any action on the account. We were now into the next financial year, which posed a number of problems.

As an aside, the fact that JP Morgan Chase was the CBK's preferred bank in the US is also interesting.

JP Morgan Chase has been associated with a number of dodgy dealings, and only a few months previously, in January 2014, had been charged by the US Department of Justice with "failure to maintain an effective anti-money laundering program in violation of US law". JP Morgan Chase was forced to pay a fine of US$1.7 billion. Just saying.

The first instruction the CBK gave to JP Morgan Chase was the (illegal) repayment of the US$604,560,737.50 Syndicated Loan.

The next instruction CBK issued was to transfer US$395,439,262.50 directly and correctly into the Consolidated Fund as required by Kenyan law.

But how very interesting! If you study these two amounts, you will realise they add up to exactly one billion US dollars, right down to the last cent.

Now, why would someone authorise the transfer to Kenya of the apparently random sum of US$395,439,262.50? (Of course, it is not random, as we have seen. It makes up the total withdrawal, with the Syndicated Loan, to exactly one billion dollars.)

That exact figure of one billion dollars provides the FIRST SMOKING GUN.

Why wasn't, for example, a round figure such as US$400 million transferred? Why not US$500 million? In fact, why not the whole darn lot? Why was money kept in the US in a holding account when it was apparently badly needed in Kenya?

It was so badly needed in fact, that the government not only soon began borrowing within Kenya – the very thing it had pledged to avoid when the Eurobond was touted – but it also had to go back for the Tap Sale, whose proceeds, US$815,436,932, were banked at Citi Bank New York at the beginning of December 2014 and were "processed into our books ... as at 5th December 2014", according to a letter dated January 14, 2015, from Gerald Nyaoma and Moses Muthui, of the CBK financial markets department.

Nineteen days later, and according to the same letter, the CBK transferred the money in full, in one credit, to the Sovereign Bond Account as shillings for the Consolidated Fund, as confirmed by the Budget Controller.

This all happened directly and swiftly. The question is, why not likewise the JP Morgan Chase balance of nearly one billion dollars?

Unlike in the case of the other sums of money transferred, there is no evidence whatsoever that any part of this money ever came to Kenya.

The Treasury has posted a number of documents on its website. In the case of the Tap Sale transfer and the apparently random US$395,439,262.50 transfer, most of the supporting documents are there.

The system works like this. When effecting such transfers, the CBK first gets the request from the Treasury to transfer the money. Then a government foreign exchange remittance form called Form PA (I presume it stands for Payment Advice) must be completed. This form has a number.

In the case of the US$395,439,262.50, this procedure was followed. The Treasury asked for the transfer, the CBK responded by issuing PA 105847, to be signed by authorised signatories at the Treasury and returned to the CBK, and the Consolidated Fund was credited in shillings, with a letter confirming this from the CBK dated July 4, 2014, and also a credit advice slip.

In the case of Tap proceeds, the money was transferred from Citi Bank New York to yet another newly opened (illegal) dollar account at the CBK. This one was called 'GoK/CBK Sovereign Bond Tap Proceeds'. CBK confirmed this in a letter dated November 27, 2014.

Other documents concerning this sum are scanty. But at least in this case, this money was soon converted into shillings. According to documents on the Treasury website, the shillings were transferred to the Consolidated Fund on December 24, 2014.

In the case of the remaining nearly one billion US dollars left in the US, there is no legal documentation at all – nothing whatsoever to show what happened to this money. All is silence.

***

It was around September last year when opposition leader Raila Odinga began speaking out about this matter. He knew something very, very worrying was afoot.

As he spoke out, those involved in the affair, threatened with exposure, apparently panicked, and they hastily set in motion a cover-up by issuing a series of bogus letters.

These began with a letter backdated to September 5, 2014. This letter was purportedly from the CBK to the Treasury – though unlike some other CBK documents posted on the Treasury website, it has no CBK letterhead.

The letter purports to say that the CBK has received the completed form numbered PA 105526 and it understands the Treasury wishes by this to transfer the remaining nearly one million US dollars from JP Morgan Chase to Kenya.

The CBK advises that the best and easiest way forward is simply to close the Offshore (JP Morgan Chase) Account and get the money transferred. It asks the Treasury to amend the PA accordingly.

This letter is apparently signed by John Birech and Grace Waiganjo, both of the External Payments and Reserves Management department at the CBK.

But no further correspondence whatsoever exists on the matter. There is no evidence, no letters, no PA forms, no advice slips to show that any of this money was brought to Kenya.

What is more, just three days later, on September 8, 2014, when the nearly one million US dollars belonging to Kenya had been lying idle in a foreign bank account for more than two months, someone decided to close the account at JP Morgan Chase and to move the money to a different US bank, the Federal Reserve Bank of New York, where the opening balance is shown on that day as US$999,018,457.60.

The account at JP Morgan Chase was closed – but, far from being transferred to Kenya, the money was moved to another US bank!

It is patently obvious that any or all of three things are true with regard to the September 5 letter: 1) the Treasury ignored the CBK's advice, 2) the two CBK officers named on the letter are complicit in this affair, 3) the letter is a forgery.

This is the SECOND SMOKING GUN.

The Treasury has put on its website a document showing the transfer from JP Morgan Chase to the Federal Reserve Bank.

But the document does not show the name of the holder of the account at the Federal Reserve Bank or any other details – unlike other documents that relate to the money when it was at JP Morgan Chase.

And the reason these pertinent details about the Federal Reserve Bank account cannot be seen is that the lower half of the document posted on the website has been covered up during photocopying. This information has been concealed, or "redacted" – a word we have learned from the ICC.

It is easy to notice this because the edges of the photocopied document appear as a thin black line on two sides. The edges are not visible on the other two sides because of the overlying blank sheet of paper.

What are they hiding?

Who owns the account at the Federal Reserve Bank of New York?

It is now 18 months since that money was transferred. Where is any statement from the Federal Reserve Bank showing the balance in that account, and details of any transactions made on it during those 18 months, in particular the transfer to Kenya of this money?

Why hasn't the Treasury posted any such documents on its website?

What are they hiding?

Another very curious document posted on the Treasury website is a statement of account from JP Morgan Chase for the period June 15 to June 30, 2014, a couple of months prior to the transfer to the Federal Reserve Bank.

It is curious because this statement did not come from JP Morgan Chase in New York but apparently from a branch of the same bank in Johannesburg, South Africa – though the address of the Johannesburg bank is crooked on the letter, as if it is not a real letterhead but as if the address has been stamped on.

So why did the statement come from Johannesburg? Well, your guess is as good as mine. I only sceptically note that successful murder cases have been built on less circumstantial evidence than surrounds this whole Eurobond case.

***

So the nearly one million US dollars was apparently transferred to the Federal Reserve Bank on September 8, 2014 – and there the trail stops.

There is no further mention of this money in any banking document. The paper trail goes completely cold.

This is the THIRD SMOKING GUN.

Next, still in panic mode as Raila Odinga continued raising questions, seven further bogus letters were hastily composed.

Each of them requested the transfer of money to the Consolidated Fund from the so-called GoK/CBK Sovereign Bond account at the CBK. These letters attempted to give the impression that the billion US dollars were there at the CBK just waiting for the Treasury to withdraw it all in shillings.

The money was not waiting there at all. The letters are not worth the paper on which they are written. They are just so much hot air and deceit.

The letters are purportedly dated September 15, September 19, October 28 – all in 2014 – and January 21, March 16, June 2 and June 26, all in 2015.

They purportedly ask respectively for the seven sums of Sh25 billion, Sh25 billion, Sh15 billion, Sh25 billion, Sh25 billion, Sh30 billion and Sh17,268,281,131.75 to be transferred from the GoK/CBK Sovereign Bond dollar account to the Consolidated Fund.

The figures all add up to Sh162 billion, which is presumably the shilling equivalent of the nearly one billion dollars still held in the US – at the Federal Reserve Bank of New York (that is, as far as we know), together with the Tap Sale proceeds of US$815 million that we accounted for earlier.

We can recall that the Tap Sale proceeds were credited in ONE ENTRY to the Sovereign Bond account on December 17, 2014, not left available to be dripped into the Consolidated Fund in small transfers, as the bogus seven letters would have us believe.

The letters are meant to show that the one billion dollars was received in Kenya. They actually show no such thing.

These letters are a blatant cover-up. There is not one single document, as would be expected in the normal course of banking procedures, to show any correspondence whatsoever with the Federal Reserve Bank of New York concerning our remaining nearly one billion dollars, let alone any instruction to transfer the money to Kenya.

What is more – these seven letters! Let us examine them.

First of all, the letters themselves are numbered out of sequence. The first letter bears a file number ending in 25, the second letter bears the number 22, the third letter again bears the number 25, the fourth 44, the fifth 50, the sixth 58 and the seventh 59.

The Treasury is now saying that the confusion in the way the first three letters are numbered is due to "clerical errors".

Well, we've had more than our fair share of "computer" and "clerical" errors coming out of the Treasury in the past few years, haven't we? And in this case, two out of three letters are wrong, apparently. (Tut, tut – in that case, doesn't someone deserve the sack?)

As anyone who has worked in government knows, such "errors" are deeply frowned upon. If any such error is discovered, a motorbike messenger is dispatched with all haste to retrieve the letter and bring it back to be replaced.

These are not genuine errors (of course – how could they be? They are not genuine letters!). These are "errors" caused by indecent panic and haste in establishing a cover-up.

Likewise curious is the numbering of the remaining four letters – 44, 50, 58 and 59.

Presumably something as big as Eurobond has its own file at the Treasury and these purported letters would not be just shoved into some general Treasury file.

So where are all the other letters – that is, those numbered 26 to 43, 45 to 49 and 51 to 57? What are they supposed to be about?

Panic causes harebrained mistakes.

Next, we come to the stamp on these letters, purporting to show they were received at CBK.

But there is no evidence they were ever received by Birech or anyone else in the External Payments & Reserves Management department at the CBK.

Birech's department is in some hallowed offices upstairs somewhere. These seven letters have been stamped as received in the CBK banking division downstairs, the banking hall where the likes of you and me do our money business.

Now, how easy do you think it would be for a Treasury official, looking all important, to approach some lower cadre staff member down in the banking hall, tell this person that Mr Birech has issued instructions for this letter to be stamped, and then ask for the letter back, saying he is "going upstairs to see Mr Birech"?

Which lower cadre officer in the CBK banking hall would have the nerve to refuse? Of course, it is also very easy to make a stamp.

Something along those lines happened. The letters are bogus and the attempt to deceive us concerning the transfer of this non-existent money (at least, non-existent in Kenya – it is still at Federal Reserve Bank in New York as far as we know, remember?) is a breathtaking and blatant lie.

And to complete the cover-up, another letter, dated October 29, 2015, and purporting to be from the CBK but again with no letterhead, neatly confirms that the GoK/CBK Sovereign Bond account now has nothing left in it – all this (fictitious) money having been "transferred", as per the requests in the seven (fictitious) letters, to the Consolidated Fund.

The (fictitious) balance is a big fat zero.

Anyone can type up their own completely invented nil balance. Just as, without the proper certified and official documents that trace the movement of money, anyone can type out fictional accounts of transfers and balances and so on. It's just words on pieces of paper – absolutely meaningless.

The minister has issued all sorts of explanations in answer to questions about this money. He has also issued his own personal table of figures showing what the Treasury purports to have received from the CBK.

This table includes the whole total – reference the seven letters – of all the shillings accruing from the fictitious transfer of the nearly one billion dollars from the US. Rotich puts this total amount in his table as some Sh88 billion.

Once again these are just words and figures on a piece of paper. There are precisely zero documents to support them – nothing from the CBK, nothing from the Federal Reserve Bank of New York – just ..... nothing.

Rotich's table is just a table, typed out by a Treasury secretary who has been told what to do, no questions asked. Anyone can make up any figures they choose to achieve a certain end – in this case trying to persuade us that the billion dollars was received. It was not.

These bogus letters and tables combine to make the FOURTH SMOKING GUN.

***

Last week, Raila Odinga was threatened with lawsuits by people he had named as persons of interest in this affair.

Besides the fact that none of these lawsuits has yet materialised, the following should be noted:

Every senior person in the CBK and the Treasury and every lawyer advising either organisation must be able to look at these facts and figures and letters and tables just as I can, and they know very well what is going on here.

They are thus ALL persons of interest in this affair. They ALL have something to say. Have they been silenced? Have they no courage? No patriotism? Have they been paid? (After all, a billion dollars is an unimaginable sum of money – plenty to spare for everyone.)

The upshot of all this is that we now call on the CBK and the Treasury to publish all the correspondence (unredacted) from the Federal Reserve Bank of New York, which as far as we know is still holding our nearly one billion dollars.

We need the name of the account holder, we need the balance statements, we need the full details of any transactions on the account.

We need relevant letters from the Treasury, letters from the CBK containing the instructions to Federal Reserve Bank to transfer the money, and the resulting correspondence back to the CBK from the Federal Reserve Bank.

If this nearly one billion dollars was transferred to Kenya, we need to see very clearly when and how.

We need to see all the documents and whatever else is available that can constitute accurate, authentic and irrefutable proof that our money is safe.

Without these documents, we can only say that this money is not "missing" or "lost", or "unaccounted for", as it is often politely described, but STOLEN.

And finally, I am sure the US Department of Justice might be quite keen to see all these documents too.

Copyright Sarah Elderkin 2016