The secret sale of Grand Regency

September 15, 2008 12:00 am

, NAIROBI, September 15 – The Central Bank of Kenya (CBK) on Monday said it sold the Grand Regency Hotel secretly to avoid court battles with creditors and receiver managers.

The bank’s Secretary Kennedy Abuga told the commission probing the sale that the disposal was done as ‘a matter of urgency’.

Responding to Assisting Counsel Wilfred Mati, Abuga said that their decision was informed by previous experiences where their efforts had been frustrated by businessman Kamlesh Pattni in court.

The following is an excerpt of the proceedings:

Mati: “Did you consider the fact that earlier on you had sourced for buyers through other means?”

Abuga: “Earlier efforts through advertisement had all ended up in court. The bank had earmarked a serious potential buyer by then and they wanted to proceed and conclude with this buyer.”

Mati: “But the previous injunctions had come from Pattni who was now on board?”

Abuga: "The bank did not want to take chances given the history of this transaction. The bank had a right anyway under the charge to sell either by auction or private treaty."

He maintained that the choice to sell under private treaty was guided by the fact that the Libyan buyers had been introduced to them by the government.

However in his statement last week, Lands Minister James Orengo dismissed the ‘government-to-government’ deal noting that the Cabinet and the Attorney General Amos Wako should have been involved.

Abuga was taken to task to explain why the bank’s management ignored the board’s advice to involve Wako.

“We did not liaise with the AG because he was not party to the civil suits; had there been need for our comments on the criminal matters then that would have been necessary,” he said.

Pattni transferred the hotel to CBK in April this year to end a protracted court battle which spanned more than 15 years.

However it emerged that despite the much publicised handover, the asset was not transferred to the bank but was instead sold in Pattni’s name.

“Transferring would have been a process and the CBK did not want to take that risk in the sense that it could have found itself once again in court,” Abuga said.

Former receiver managers and Westmont Holdings, a company that had wanted to buy the Hotel in 1997, had already written to the bank.

Orengo blew the whistle over the deal and accused the then Finance Minister Amos Kimunya of selling the hotel cheaply and secretly.

Kimunya however maintained his innocence and said that he had only instructed the bank to make sure that it recovered Sh2.5 billion loaned to Pattni. It was finally sold for Sh2.9 billion.

The sale elicited public uproar and culminated into the resignation of Kimunya.

The commission seeks to unravel the role Kimunya, Abuga and the CBK Governor Njuguna Ndung’u played in the sale.

Ndung’u and Kimunya are expected to testify later in the week.


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