From extradition to acquittal: Yagnesh Devani's troubling saga

Yagnesh Devani, Controversial billionaire and oil tycoon [File, Standard]

Kenyans were pleasantly surprised when it was announced in January 2024 that runaway business mogul Yagnesh Devani had been extradited from the United Kingdom to face criminal charges over economic crimes.

They would, however, be treated to a rude shock, when the fugitive alleged to have been the mastermind of the Sh7.6 billion Triton oil scandal in 2008 was set free last week, barely 10 months after his repatriation.

The man’s arrest after 16 years was a major breakthrough and music to taxpayers and local companies who lost huge sums of money over a decade ago.

Kenya Pipeline Company (KPC) allegedly connived with Triton to starve other oil marketers, which not only illegally gave it a lion’s share of the business but also created serious economic crimes that almost crippled the country.

After abusing that privilege through hoarding and other malpractices and then failing to pay creditors, Devani, the owner of Triton Oil Company escaped to the United Kingdom in 2008, to join a long list of other tycoons of Asian origin who have in the past fled after getting involved in mega corruption scandals.

His release came as a shock because previous administrations had invested a lot of resources both locally and internationally to bring him to justice. The elusive fugitive allegedly stole 318,356 tons of jet oil and 2,000 metric tons of automotive gas oil in 2008.

He then fled the country after KPC and some contracted oil companies complained that they had been scammed by Triton.

And consequently, while acting on a request for action from the Kenya government to arrest the fugitive, Interpol listed him as a most wanted suspect in 2013.

Lack of cooperation

Kenya has for many years expressed frustration and complained about lack of cooperation by western countries for their alleged failure to return fugitives who have fled the country after committing mega economic crimes.

Devani’s repatriation was, therefore, a rare successful case of collaboration with a western power to fight crime. No official reaction has been heard from the UK government or its representatives in Nairobi after Devani’s dramatic release this week.

Eyebrows were first raised when the prosecution raised no objection to his bond application after a brief detention at Industrial Area police station upon his extradition to the country in January.

Until last year, when the Kenya Kwanza government introduced the so-called Government to Government oil importation model, that was quickly suspended with little transparency of the deals and the amount of oil imported, Kenya’s oil importation and trading arrangement was based on the Open Tendering System (OTS).

In 2008, OTS was also operated by the Ministry of Energy, where oil marketers competed and whoever provided the best offer was permitted to import monthly oil requirements, that they could then sell to other marketers at an agreed price.

The Energy minister in President Mwai Kibaki’s government was an old time friend from his Democratic Party of Kenya days lawyer Kiraitu Murungi, who later served as the second governor of Meru county.

When the Triton scandal exploded, as expected senior officials in the Energy ministry led by Kiraitu and his Permanent Secretary Patrick Nyoike absolved themselves from blame. The PS said KPC never informed him about their deal with Devani and Triton.

And so detectives arraigned some alleged accomplices in court, with fugitive Devani also charged in absentia, and among the witnesses listed to testify was Kiraitu.

Kenyan newspapers had in 2009 asked the minister to accept political responsibility for the failures at KPC.

Suspended

The minister denied any responsibility, claiming that the scam was perpetrated by officials of KPC and Devani. He also ordered a forensic audit by PriceWaterhouseCoopers and an investigation by the then Kenya Anti-Corruption Commission and also suspended both the KPC Chairman and the Managing Director.

Investigating the scandal, The Standard reported at the time that officials at the Ministry of Energy were calling KPCs’ scheduling office directly with instructions to release fuel to preferred oil companies.

Reports also indicated that oil marketers had long complained of criminal activities taking place at KPC and Kenol Kobil, one of the major players in the oil industry at the time, accused KPC of giving Triton preferential treatment, which allowed Devani’s company to speculate by hoarding fuel stocks pending price increase.

Kenol Kobil, then among the most dominant in the great lakes region accused KPC of preferentially allowing Triton to take storage space at Kipevu Oil Storage Facility (KOSF) despite its lack of a retail distribution network.

In 2008, businessman Yagnesh Devani joined a long list of other tycoons of Asian origin who have in the past fled after getting involved in mega corruption scandals

Triton appeared to have used its influence to manipulate the OTS by corrupting senior officers at KPC, because a successful bidder in the lucrative business could without scrutiny get an assured short term credit facility from banks to pay for the oil shipment from the Middle East.

“The import was in some instances guaranteed by financiers under a Collateral Financing Agreement (CFA),” said a report published by Africog on Devani and Triton in 2009. That is how KCB ended up losing a lot of money.

The CFA was described as an arrangement that was introduced in 2004 by KPC to enable oil marketing companies use their stock within the company’s transport and storage system as security in order to secure financing.

Under the scheme, banks issued letters of credit committing to pay 80 percent of the total cost of the imports, while importers signed an agreement committing to only release the oil in the KPC system with the authority and instructions of the financing institutions.

It was also reported that the agreement obliged KPC to release regular statements on stocks held in trust at agreed intervals to financiers, and oil marketers would then only access their share from KPC on the written authorisation of the banks after they had paid for their entitlement.

In 2011, Kenya’s Attorney General filed a case in UK courts, seeking to get Devani send back to Kenya for trial for allegedly defrauding KCB and Emirates Oil Corporation of Singapore both cited as financiers of Triton’s oil imports.

The case was also filed in the High Court in Nairobi and among the charges Devani and his company faced were that between April 23 and December 4, 2008, at Kipevu Oil Storage facility in Mombasa, he together with others stole 318,656 metric tonnes of jet fuel valued at $365,974, and 2000 metric tons of gas oil worth $215,934, all belonging to Kenya Commercial Bank.

Industry rule

The court further heard from the prosecution that between May 15, 2008 and December 4, 2008, also at Kipevu, he jointly with others again stole 418.134 tons of motor spirit premium valued at $438,031 belonging the same bank.

From the above charges, it can be seen he was operating from Kipevu, because the industry rule was that oil marketers hold ullage (storage) space at KOSF in proportion to their market share.

The scheme collapsed when oil prices plummeted to below USD 50 per barrel in November 2008, meaning the company could not sell its huge stocks at KOSF and the imported consignment at a price that would enable it to recover its costs.

Triton then started experiencing serious difficulties in paying creditors, meaning it could not get money for more imports, which reportedly caused fuel shortages locally and in the region.

It was around that time, that the managing director Yagnesh Devani fled the country, leading to the long fight for his extradition to face the law.

While pleading for his release, the Director of Public Prosecutions and the Ethics and Anti-Corruption Commission said they could not be forced to proceed with the case when key witnesses like Kiraitu become uncooperative or unwilling to testify.

“This court finds itself in a precarious position as it was ready to proceed with the case but the DPP has expressed difficulties in leading testimony because witnesses are unwilling to adduce testimony.

He is, therefore, left with no option but to withdraw the case until such a time when he finds evidence,” said the judge.In the withdrawal affidavit, the DPP listed the death of some of witnesses, Kiraitu’s reluctance to testify and failure to trace Emirates National Oil, said to have relocated to Singapore.