Raila now turns Eurobond heat on two American banks

Opposition leader Raila Odinga Thursday turned his guns on two American financial institutions — the Federal Reserve Bank of New York and JPMorgan Chase — insisting only they can tell Kenyans the truth about the Sh100 billion Eurobond funds at the centre of a political storm that has persisted since last year. 

Mr Odinga said there was no credible paper trail to support the Treasury’s claim that the money was transferred to the Consolidated Fund, adding that documents provided so far appear to have been fabricated.

“The Federal Reserve Bank of New York should give a full account for where the Eurobond proceeds went after they were deposited in that account,” Mr Odinga charged.

The US bank, he said, owes Kenyans, in whose name the money was borrowed, a clear account detailing the movement of the Eurobond proceeds as proof that it was not party to what he termed an elaborate money laundering scheme. 

Mr Odinga, a former prime minister, demanded the resignation of senior Treasury officials, including Cabinet Secretary Henry Rotich, Principal Secretary Kamau Thugge and Accountant-General Bernard Ndung’u for “concocting documents and misleading Parliament” on the Eurobond transactions.

Through a financial expert, Mr Odinga gave an account of Eurobond funds movement from the receiving bank JP Morgan Chase (New York) to other entities, including the Consolidated Fund account at the Central Bank of Kenya (CBK) – insisting that documents the Treasury had posted on its website did not show the transfer of $999 million (about Sh100 billion) to Nairobi.

Mr Odinga said that the money had moved from JP Morgan Chase (New York) account to the Federal Reserve Bank New York but no one can tell where next it went thereafter. 

Mr Rotich who had earlier dismissed claims that money was ever transferred to the Federal Reserve Bank of New York, insisting all proceeds of Eurobond were transferred directly from JPMorgan Chase to the CBK Sovereign Bond Account (Kshs) in Nairobi.

Mr Odinga said suspicion had been heightened by the fact that JPMorgan Chase, Johannesburg is the one that issued bank statements on the Eurobond transactions yet the Kenyan government was a client of the bank’s New York branch. 

Kenya in June 2014 offered a $2 billion bond in two tranches of $1.5 billion over 10 years and a five-year $500 million bond whose proceeds it deposited in JPMorgan Chase, New York.

Auditor-General Edward Ouko in his 2013/14 fiscal year report said that Sh54 billion ($604 million) of the total proceeds was drawn to settle a syndicated loan that the government took in 2012.

READ: Taxpayers lost interest on secret Eurobond account

Another Sh34 billion (US$ 395 million) was transferred from the same offshore account to the Exchequer to fund infrastructure projects but two separate narratives have since emerged on what happened to the remaining $999 million (Sh1 billion).

Mr Rotich had earlier told the Business Daily that documents on the Treasury’s website indicated that the money was wired straight to the CBK in Nairobi.

But Alexander Owino, the financial expert who traced the transactions to the media on behalf of Mr Odinga, claimed that another set of documents given to the Parliamentary Public Accounts Committee (PAC) showed the money was transferred to the Federal Reserve Bank.

Mr Owino said that the PAC documents further showed that the money was drawn from the New York bank in seven separate transactions and transferred to the Consolidated Fund.

Instructions to transfer the amounts were reportedly contained in seven, one-sentence letters from the Treasury, which he said were questionable and whose authenticity could not be verified.

“The folio numbers of the letters are referenced and sequenced haphazardly starting at folio 25, then 22, then back to 25 again,” he said.

“Accountable documents for transfers of this magnitude need to have unique document references for clear identification and accounting purposes,” Mr Owino said, adding that two letters purporting to transfer Sh25 billion on September 15, 2014 and another transferring Sh15 billion on October 28, 2014 had the same folio number.

Mr Owino said there was no evidence that the CBK had acted upon the letters unlike the proceeds of the $750 million tap sales that were clearly received in December 2014 and the amount credited in the Consolidated Fund.

Treasury officials had not replied to our queries on the issues the opposition Cord leader raised by the time of going to press.

Mr Odinga made public his account after months of pressure on the government to explain the banking transactions and show Kenyans the projects it financed with the Eurobond money.

Mr Rotich has since said that the government cannot show any projects because the Eurobond proceeds were lumped together with ordinary government revenue and disbursed to ministries, making it difficult to pinpoint specific projects.

Cord’s insistence that some of the money was looted saw the Ethics and Anti-Corruption Commission (EACC) launch investigations into the matter before reporting that it had found no evidence of embezzlement.

The EACC has since recommended that the investigation file be closed but the Director of Public Prosecutions, Keriako Tobiko, who received the file has asked the Auditor-General to conduct a forensic audit on the transactions and report to him.

Mr Odinga dismissed the EACC’s investigation as a public relations exercise and questioned the agency’s capacity to probe the matter.

Both JPMorgan Chase and the Federal Reserve Bank of New York have not directly responded to the swirling Eurobond questions that have clearly put their credibility on the line.

The two banks are seen as respectable international financial institutions and the allegations of underhand transactions could dent their image.

Mr Odinga asked President Uhuru Kenyatta to institute an international forensic audit into the Eurobond issue and an inquiry into the projects funded by the proceeds.

“(He should) implement immediately the Treasury Single Account (TSA) to remove the plethora of opaque revenue collection accounts such as the so-called Sovereign Bond Account through which corrupt government officials divert revenue before they are paid into the Consolidated Fund,” he said.

The opposition chief also urged Mr Kenyatta to remove the office of the Auditor-General from the purview of the Executive and place it under Parliament besides establishing the Budget office within the Presidency as the latter had promised late last year.

The Jubilee government has dismissed Cord’s insistence that part of the Eurobond proceeds was stolen, terming the uproar a politicisation of the issue ahead of the 2017 General Election.

The corruption claims come on the back of several others, including the theft of Sh791 million from the National Youth Service and inflation of prices of items procured at the Devolution and Planning Ministry.