Kroll Report Shows Kenya’s Corporate Sector Lacks Credibility

Posted on 5 September 2007. Filed under: Corruption |

Kroll Report Analysis Part III

In our Part III of the Kroll Report analysis, we look at possible reasons why the NARC government opted to archive the explosive report even as it contained solid leads towards the arrest and prosecution of corrupt power brokers of the previous regime. It is also apparent that Kroll investigators used intelligence tactics in gathering data and their informers were mostly individuals who fell out of favour with power brokers. It is also a possibility that Kroll used bribery – a common means of getting information – on what it calls “targets”.

A lot of water has passed under the bridge since the delivery of the report to Government of Kenya in 2004 and many of the things taking place in Kenya’s corporate world in the last four years may just tell us why the Kroll Report made the Government of Kenya develop cold feet.

One individual who is very influential in Kenya’s business circles is Naushad Meralli – Chairman of Sameer Investments in Kenya. He is listed in the Kroll report as a business associate of former cabinet minister Nicholas Biwott. The Kroll Report describes Biwott as “someone who has accumulated much power and has established an enviable business empire, touching on almost every sector of the Kenyan economy, whilst he has remained in active politics”.

The Kroll Report also names Naushad Merali “as one of the richest Asian businessmen in Kenya who owns substantial holdings in numerous businesses. As a significant player, he is linked to such people as the Biwotts, Mois and the Kenyattas.” Merali is further listed as a front man of “Target 3” Nicholas Biwott with shareholding in several companies in and various others abroad.

Naushad Merali provides telling linkages of the Kroll Report to the Kibaki Government. It now becomes clearer why the then Justice and Constitutional Affairs Minister Kiraitu Murungi, who personally contracted Kroll and later received its report on behalf of the Government of Kenya, failed to release it or even act on it as recommended by the authors. It also becomes apparent why Government Spokesman has come out fast and dismissed the report as ‘inaccurate and incomplete’.

According to a report that appeared in the East African Standard in January 2005, Naushad Merali is the latter day cord that runs through the first families of Kenya in Kenyatta, Moi and presently the Kibaki business connections. Merali is shareholders with the Kenyatta family at the Commercial Bank of Africa where the later has majority shareholding, and at the First-American Bank where Moi’s have shareholding through Gideon Moi. Merali is also the founder and main shareholder in the Equatorial Commercial Bank and Gideon Moi is similarly a shareholder at this bank. Confidential sources at the Nairobi Stock Exchange confirmed to The Standard that two senior Cabinet ministers in the Kibaki government bought substantive share-holding in Equatorial Bank sometime midway into Kibaki’s rule and after receiving and reading the explosive Kroll Report. These two are widely suspected to be Chris Murungaru and Kiraitu Murungi who incidentally worked very closely with Kroll and Associates at the time of compiling their investigative report. This bank is has been named in the Kroll Report as one of those used by Gideon Moi to “quietly convert and transfer proceeds overseas”.

The Standard also reported that Merali sold to the Kibaki family a 500-hectare piece of land on the Nanyuki-Timau road. The land is next to Lewa ranch. A group associated with former cabinet minister Christopher Murungaru and current Energy Minister Kiraitu Murungi was also reported to have acquired significant interest in the 45,000 Lewa Conservancy from Mr Ian Craig. The later has for long fought behind curtains to have influence over the Kenya Wildlife Services.

A clear signal that Merali, a formidable business feature of the Moi era, was not in the bad books of the big guns in NARC came in September 2004 when he was pictured at State House, Nairobi, personally handing over a cheque worth half a million shillings to President Kibaki for the National Famine Relief Fund.


It did not escape notice that whereas all other donors to the famine fund – including those with bigger cheques than Merali’s – had been trooping to the Harambee House office of the then Special Programmes Minister Njenga Karume to hand in their donations, Merali went directly to State House. It was even more remarkable, given the fact that Kibaki, unlike his predecessor, had initially shown that he had no time for cheque receiving, and that Merali be the very first to be so honoured.

Merali’s door to the corridors of power opened in 1983. At the time he was working as an accountant with Ryce Motors, when he registered a company by the name Sameer Investments, with himself as the Managing Director. The new company hit town with a storm when it immediately acquired majority shareholding in the then Firestone East Africa (1969) Ltd and re-named it Firestone Kenya Ltd. Besides Merali, the other two directors of Firestone were listed as James Kanyotu, then Director of Security Intelligence and Mr F.J. Addley, then working for the law firm, Stratton and Kaplan. Lawyer Addley was retired President Moi’s nominee in many companies.

The acquisition was not without controversy. It began with an April 1983 visit to Kenya by then vice-president of the US-based Firestone Tyre and Rubber company, Mr A.G. Kraemer. At the time the US based firm owned 51 per cent equity in Firestone East Africa. The rest of the shares (49 per cent) were owned by the Industrial Commercial Development Corporation (ICDC). While in Kenya, Kraemer made an announcement that his firm intended to sell its entire stake in Firestone East Africa to indigenous tyre dealers. Subsequently, then Firestone East Africa managing director Steve Fabian arranged for a consortium of five leading indigenous tyre dealers to purchase the shares from the US company. The consortium included Mutaratara tyres, Buckley Tyres, Kirinyaga African Rubber, Kenya Tyre Enterprises and New Tyre Enterprises. Upon negotiating the sale agreement with the American industrialist, the local consortium applied for foreign exchange from the Central Bank of Kenya in those days of controlled money regime. CBK rejected the forex application without giving any reasons as was required by law. Recalling the incident, the MD of one of the bidding companies, Buckley tyres, Mr Samuel Magua says: “There was a strong reason to believe the CBK was ordered not to allocate us forex to buy Firestone. Our worst fears were confirmed when we learnt that the visiting American CEO had been to State House with Mr James Kanyotu, who ended up as a Director in the new Firestone company.”

The consortium of five was just about to head for the courts when the American firm announced it was selling its shares to Sameer, who already had the forex and a higher offer. Sameer’s acquisition of the additional 49 per cent shareholding by ICDC was to come in 1995 and in similar controversial circumstances. According to the 1995 report of the Auditor-General, Corporations, the now defunct Parastatal Reform Committee had demanded that ICDC offload its shares at the Nairobi Stock Exchange at Sh100 million, a fifth of their true value. Prior to the sale, Sameer Investments had placed pre-emptive rights on the ICDC shares to lock out competition. It acquired them and three years down the line, Sameer re-floated the same shares at the Nairobi Stock Exchange for Sh1.5 billion, effectively making a 1,500 per cent profit.

Merali, through Sameer Investments, purchased Vivendi Telecom International shares in KenCell at $230 million and sold them to Celtel the very same day for $250 million, making a cool profit of $20 million. It was followed by an announcement that Celtel would extend its reach in a roll-out project to be financed by a local consortium of financers, with the CFC Bank at the forefront. Absolutely nothing fishy in all that. However, it was not lost on pundits in business circles that the lists of shareholders and directors of Alico, Heritage AII, Celtel, and CFC Bank read almost the same. Some of these companies are listed in the Kroll Report and have individuals connected to the Kibaki regime directly or indirectly.

Two directors of Alico, P.K. Jani and H. Da Gama Rose (Business Associate and Frontman in Kroll Report), are also directors of Heritage AII and CFC Bank. Others in CFC Bank and Heritage AII, but not in Alico, are Mr Charles Njonjo and Mr J.C. Kulei (Target No. 1 in Kroll Report)

In Celtel Kenya Ltd, the principal shareholder is Sameer Investments where Naushad Merali and H. Da Gama Rose are directors. Jani, Kulei and Da Gama Rose are widely believed to represent business interests of retired President Moi. Sources contend that at the end of the day, money was quite probably changing hands from the left to the right.

That is the genius of Naushad Merali, who is described in the company website as the “Seer behind Sameer”.

It is obvious that such deals could have whetted the appetites of some individuals in the NARC government who see an opportunity to enrich and entrench themselves as the movers and shakers of big money in Kenya’s business circles. To release the Kroll report would have jeopardised their chances of pulling any mega deals, without risking a backlash from the public and donor community.

Acknowledgement: The East African Standard

Make a Comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

6 Responses to “Kroll Report Shows Kenya’s Corporate Sector Lacks Credibility”

RSS Feed for Kenya Environmental & Political News Weblog Comments RSS Feed

Why is Private sector corruption reported rarely?

Ever heard of Dennis Kozlowski, well if you haven’t, he is the former CEO of a manufacturing company called Tyco in the United States. Kozlowski was last year involved in a high profile corporate scandal where he was found guilty and sent to jail for grand larceny and conspiracy, falsifying business records, violating business law and stealing hundreds of millions of dollars from the company. One of the accusations against Mr. Kozlowski is that he hosted lavish party on an Italian island, allegedly paid for with company funds. Other cases such as Enron fall in the same category. Why is it that you never hear of CEOs and other top officials of Kenyan companies or those operating in Kenya, being charged and sentenced for engaging in corruption? Is it that corruption is non existent in the Kenyan private sector? Early this week the US justice department announced that Hundreds of high-ranking company officials have been convicted in corporate fraud schemes since 2002. In all, the department says prosecutors have won 1,236 convictions in corporate fraud cases and reaped hundreds of millions of dollars in payback for victims over the last five years. At least one-third of the convictions came against company chief executive officers, presidents, counsels and other high-ranking officials. The convictions are as a result of enhanced vigilance following the formation of a government task force aimed at curbing corporate corruption in the aftermath of the Enron scandal, which wiped out thousands of jobs, and more than US$60 billion in investments. Kenya has a problem with corruption. Almost on a daily basis, the press carries stories of public employees lining their pockets. However it is rare to come across stories where top officials in the private sector have been charged and convicted for failing to be transparent and accountable in the positions in which they serve. Is it that corruption is non existent in multinational corporations operating in Kenya? is it that the state does not have the capacity to investigate the private sector or is it that the reluctant media. The Kenyan media is reluctant to report corruption activities existing in local and multi national corporations because of the fear that they will lose advertising revenue from these companies. According to steadman , a consumer research company, Alcohol advertising constitutes nearly 10 per cent of the total advertising revenue that stands at about Sh12 billion annually. The attitude taken by media houses is that they are not freedom fighters hence they are not ready to loose revenue because of a story. In fact most media houses go step further and highlight events that otherwise wouldn’t have made it to the press, simply because the event is sponsored by a major advertiser. Recently, one of the major media group lost millions of shillings in advertising revenue, after a major advertiser cancelled all its scheduled advertisement bookings. A newspaper affiliated to the media group ran a report that cast doubt on the transparency and accountability practiced by a multi billion shillings company operating in the communications industry. Sales and marketing officials of the media outlet are now working overtime to appease the angry advertiser whose advertising budget runs to billions of shillings. The fact that a huge chunk of Kenya’s advertising revenue is provided by a few firms which happen to be the most profitable, is a factor that encourages corporate or private sector corruption. They know that the media can’t touch them. The other factor is that government has not developed the capacity to investigate corruption in the private sector. Apart from relying on the Kenya anti corruption commission, a section in the attorney generals office that is specifically aimed at prosecuting corporate corruption should be formed. The move will compel companies to be transparent and accountable to its share holders by giving good information regarding the company’s performance. With good information, shareholders can easily realize when books are being cooked, and roundly punish the corporate officers involved.

It is not just credibility,but unwillingness to pursue the culprits as a result of being corrupted and being insincere to the political promises made during the political campaigns.

Once Narc took power,no one imagined that It could fall into play with KANU whom they kicked off from power,particularly with Kiraitu’s utterances that ex-president Moi to go home and grace cattle quitely or else he misses his retirement package,and kARUA’S tough talking that you can run but not hide.

Perhaps Moi was right when he said that Moi must come,and for sure,Moi is back as Kiraitu and Karua are on the side line with all the corruption reports in their hands.

Mr. Naushad Merali is a man to be be admired for his work and generosity.

In my opinion, the big question to ask is, when will the money looted by Moi, his sons, the Kenyattas, the Mehralis, Kuleis, etc be restituted to Kenya so as to really abolish poverty and hunger, and not just “alleviate” them??

[…] sources: (1) SEC filing (2-3) Kroll report (4) Media report (5) Analysis of Kroll report, Part III (6) Media report (7) Kenya Gazette (8) Kaplan & Stratton Website (9) Kenyan Gazette (10) Media […]

Where's The Comment Form?


    A blog created to cover environmental and political information in Kenya with a view to promoting POVERTY ALLEVIATION through creating awareness of the Millennium Development Goals


    Subscribe Via RSS

    • Subscribe with Bloglines
    • Add your feed to Newsburst from CNET
    • Subscribe in Google Reader
    • Add to My Yahoo!
    • Subscribe in NewsGator Online
    • The latest comments to all posts in RSS


Liked it here?
Why not try sites on the blogroll...

%d bloggers like this: