Military

DATE=FEBRUARY 24, 2003

TYPE=CORRESPONDENT REPORT

TITLE=KENYA CORRUPTION (L-O)(CQ)

NUMBER=2-299985

BYLINE=JOSIAH OBAT

DATELINE=NAIROBI

CONTENT=

VOICED AT:

/// RE-RUNNING TO CORRECT TYPO -- THE FIGURE IN THE SECOND PARAGRAPH OF THE TEXT SHOULD READ 600 (six hundred) MILLION, NOT 60 MILLION AS ORIGINALLY SENT ///

INTRO: Kenya's president has named a commission to probe one of the country's biggest financial scandals during the era of former president Daniel Arap Moi. Josiah Obat reports from Nairobi.

TEXT: A statement from President Mwai Kibaki said he appointed a commission of four high-court judges to investigate what has become known as the Goldenberg scandal in Kenya.

The Goldenberg scandal involved two cases of alleged fraud, one by a company called Goldenberg International and the other by Exchange Bank. The treasury is believed to have lost 600-million dollars in the scheme, which involved gold and diamond exports in the early nineties.

Under this plan a Kenyan named Kamlesh Pattni and his brother allegedly were paid that amount by the central Bank of Kenya for exporting gold and diamonds.

The office of the auditor general later determined that Kenya does not possess any meaningful gold or diamond deposits, and that none was actually exported.

The statement appointing the commission said it is necessary to disentangle and get to the root of the Goldenberg scandal because it is having detrimental effects on Kenya's economy and government.

The formation of this commission by President Kibaki paves way for the Attorney General to terminate all Goldenberg-related cases that have been dragging in the courts for the past 10-years. It is also expected to come up with ways of punishing those it will find guilty.

The Goldenberg scandal is one of the reasons donor agencies such as the World Bank and the International Monetary Fund stopped financial assistance to the government of former President Daniel Arap Moi.

The donors lamented that the government was not committed to bringing to justice those involved in the scandal. At the same time, some political observers charged the ruling party used some of the money to buy votes during Kenya's first multi-party elections in 1992. (SIGNED)

NEB/OBAT/AWP/RAE/FC