How One Of Kenya's Biggest Scammers Ended Up On The Ballot

Planet Money looks at a candidate for parliament in the recent Kenyan elections, Kamlesh Pattni, who was responsible for the largest financial scam in Kenyan history.

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Kenya recently held national elections and many of the people on the ballot had controversial histories. But one candidate's notorious past stood out. His name - Kamlesh Pattni. Most Kenyans know him as the man who orchestrated the biggest financial scam in Kenya's history, one that cost the country 10 percent of its GDP.

Reporter Julia Simon, with our Planet Money team, has the story of that scam and how the man behind it became a candidate for the Kenyan parliament.

JULIA SIMON, BYLINE: The story begins with the fall of the Berlin Wall. In the years preceding, during the Cold War, Kenya was one of the West's only allies in Africa. And so the West would give them these very generous loans. But when the Wall came down, Kenya stopped being so important and the loans stopped.

PETER WARUTERE: $350 million which the government was expecting as part of the budget was not there.

SIMON: This is Peter Warutere, an economist in Nairobi. And notice he says dollars. Kenya had its own currency, the shilling. But to buy the stuff it needs from the rest of the world, it had to have dollars and other foreign money known as foreign exchange. So the Kenyan government was stuck until a solution seemed to come along.

Terry Ryan worked in the Kenyan Ministry of Finance at the time. And he remembers his boss calling him into his office and saying...

TERRY RYAN: We have a proposal here for a way of solving the foreign exchange. Could you give an opinion?

SIMON: The proposal came from a company called Goldenberg, which was owned by the star of our story: Kamlesh Pattni. Goldenberg was a gold and diamond export company which Pattni promised would bring in tens of millions dollars and other foreign exchange. And so the Kenyan government signed a deal. For every $100 of foreign exchange that Goldenberg brought in, the Kenyan government would kick in an additional $35 in Kenyan shillings - a huge bonus. By late 1990, Goldenberg was up and running.

MICHELA WRONG: The trouble is that, as far as I'm aware, Kenya didn't have any gold mines or gold industry.

SIMON: This is Michela Wrong. She's a British author who lived in Kenya for many years and has written about Goldenberg. She points out what many people who've looked at this scandal point out. This should have been the first clue something was wrong with Goldenberg. It was claiming to export something that did not exist in Kenya.

But Terry Ryan, in the finance ministry says, we knew that. We just figured it was smuggled gold.

RYAN: Gold has been smuggled through Kenya from time immemorial.

SIMON: Wait a second. So you always knew that Kenya didn't have gold? You were just...

RYAN: Oh, yes. Oh, yes. Oh, definitely.

(LAUGHTER)

SIMON: So how could the Kenyan government have been willing to pay for gold that they knew was smuggled?

(LAUGHTER)

RYAN: If you have no foreign exchange, I assure you, you will look for it wherever you can.

SIMON: Unfortunately, this imperfect, last-ditch plan was even more imperfect than Ryan thought because there wasn't even smuggled gold - there was no gold.

Here's economist Peter Warutere.

WARUTERE: There was nothing being exported. It was basically paperwork. All they required were the stamps on the papers, without exporting anything.

SIMON: There were a lot of people in the Kenyan government involved, from clerks in the export office to the head of the Kenyan security service, this incredibly scary guy, famous for torturing dissidents. He co-owned Goldenberg with Pattni.

But while the government was playing along, the banks were getting suspicious. Terry Ryan says that the foreign exchange, when it came at all, would come in these weird ways.

RYAN: For instance, they're saying, well, the foreign exchange has come but it's in travelers' checks and it's in all - travelers' checks for paying for gold? That doesn't sound right.

SIMON: But despite these warning signs, Pattni's scam continued and in fact grew bigger. He managed to secure his own bank and branch into all sorts of other scams involving government treasury bills, fake checks, a luxury hotel development.

What finally brought the Goldenberg affair to an end was a guy named David Munyakei. Author Michela Wrong met him and she said he worked at the Central Bank of Kenya.

WRONG: A fairly lowly job - a clerk.

SIMON: His job was to process the paperwork that was paying Goldenberg their 35 percent bonus.

WRONG: And I think he began to realize there was some massive scam going on and that he was a part of it. And that bothered him.

SIMON: So Munyakei blew the whistle. He alerted the opposition and the local newspapers and that was the end of Goldenberg. Less than three years after it began, it was shut down in 1993. But in that short time, it did enormous damage to the Kenyan economy. The country was plunged into a recession. The national debt nearly doubled.

All told, economists estimate that the total cost to the Kenyan economy was $1 billion U.S., 10 percent of the country's GDP at the time.

In the years following Goldenberg, there were several trials, a government commission, yet no one was punished, not even Kamlesh Pattni.

(SOUNDBITE OF MUSIC)

SIMON: This was the sound of a recent Sunday at Hope International Church. In a big tent-like structure, thousands of people. And up above, a huge poster of Kamlesh Pattni. After the scandal, he converted to Christianity and built this place. His followers know him as Brother Paul. I scheduled two separate meetings with Kamlesh Pattni, but both times he cancelled.

But I did talk to one of his supporters, a teacher named Eric Wanambizi. He waited five hours early on Election Day to cast his vote for Pattni.

ERIC WANAMBIZI: He's very much in touch with that person who is down - down, down, down. He want to bring his person out of that pit.

SIMON: Have you heard about this thing called Goldenberg? Have you heard of it?

WANAMBIZI: Of course, I have heard. And if it was a genuine case, then the court would have found him guilty.

SIMON: Wanambizi also says Pattni's a Christian now, all his past sins have been absolved. And there's another reason people might support Pattni - he's wealthy. He owns a couple businesses, including a bunch of casinos. Wanambizi says that on the campaign trail, Pattni would often go out into the slums and hand out gifts - food, flour, even money.

WANAMBIZI: Where I need to be, where I need to be.

SIMON: Is that illegal?

WANAMBIZI: No. Okay, okay. Competing, according to the constitution, it is illegal.

SIMON: Corruption in Kenya, it didn't end with Goldenberg. In the past few decades, the Kenyan government has been implicated in many more scams. One big one called Anglo-leasing. More recently, scandals involving corn and gas. Author Michela Wrong says that on some level, Kenyans expect corruption. The fact that a guy like Pattni is allowed to stand for office, that thousands of people go to his church, that at Pattni's trials little kids went up to him to get his autograph, Michela Wrong says it tells you a lot about modern Kenya.

WRONG: Pattni, in many Kenyans' eyes, is a bit of a sort of scoundrel, but he's admired. He's widely admired for what he did. He's regarded as having pulled off something remarkable. And instead of being humiliated and outcast by the society, he continues to thrive here.

SIMON: But while some people look up to Pattni, not everyone does. Pattni lost his bid for a seat in Parliament. And in the slums, before the elections, when Pattni came around and gave out money, there were plenty of people who took the money and then didn't vote for him because as one guy told me, that money he gave us, it's our money. For NPR News, I'm Julia Simon.

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