Friday, August 17, 2007

Peculiar Recalling Habits

If Michael Joseph did actually attempt to mislead Parliament's Public Investment Committee by presenting forged documents as alleged in the committee report, shouldn't he be in jail? What are we to make of the fact that the principals cannot agree on when or why Telkom transferred 10% of our shareholding in Safaricom to Vodafone Plc? Why do the Safaricom CEO and government officials keep insisting that the company has only two shareholders when all evidence points to the contrary?


Anonymous said...

Bwana Gathara,

Excellent depiction of what's wrong with the SafCom issue. Can I repost your cartoon?

Gathara said...

No problem. You're welcome to it. Just be sure to link it back to my post.

Anonymous said...

asante sana!

Xuxa said...

Hey Gathara,

Seeing as you've become my point of reference for all things legal, can't the PIC stop the sale of Safcom shares?

It looks like we're hurtling towards the sale with little acknowledgement from the govt. of the issues raised.

Gathara said...

Section 46, subsection (1) of our Constitution states:

Subject to this Constitution, the legislative power of Parliament shall be exercisable by Bills passed by the National Assembly.

I am no lawyer but as I understand it, the PIC report is just that: a report. At least till it is adopted by the House. And while a resolution of the House calling for the cancellation of the Safaricom IPO would undoubtedly send a strong political message, I do not suppose even that would impose a legal obligation on Kimunya to stop the sale.

However, in the case of Michael Joseph's alleged mendacity, Section 21 of the The National Assembly (Powers and privileges) Act states:

Any person who before the Assembly or any committee intentionally gives a false answer to any question material to the subject of inquiry which may be put to him during the course of any examination shall be guilty of an offence under section 108 of the Penal Code and liable to the penalty prescribed by the appropriate section for that offence.

Section 108 of the Penal Code, referred to above, deals with the offence of perjury and states in subsection (1)(b):

It is immaterial whether the testimony is given on oath or under any other sanction authorized by law.

Section 110 of the Penal Code then prescribes the appropriate punishment thus:
Any person who commits perjury or suborns perjury is liable to imprisonment for seven years.

Xuxa said...

So we are going into this IPO with this thing hanging over us?

As I understand it the ammendments made on the ownership agreements were not signed off. Would it be too optimistic to hope that they are therefore not legal?

I can't believe that even in retirement that old man is still screwing with us. I'm having extremely violent thoughts right now.

pesa tu said...

Ahh.. Gathara u didn't read what i suggested to you last year?

Gathara said...

pesa tu,
You still maintain that Kenyans lost nothing in the deal to transfer Safaricom's shares to Mobitelea Ventures?! Have you read the PIC report? Here's the relevant extract from the Fifteenth report of the Public Investments Committee on the Accounts of State Corporations - Appendix I (courtesy of the good people at Mars Kenya.)

Gathara said...

You make a good point. Perhaps if someone were to institute a lawsuit against Telkom Kenya on behalf of all the defrauded Kenyans.....hmmmm. I'll ask a few lawyers about this possibility. There may yet be another opportunity to milk the cash cow.

Xuxa said...

lol! cynic.

But you're probably right.

Anonymous said...

The plans for the public interest lawsuit are in progress and it is likely to take place any day. The PIC indicated that they would also be contacting the Serious Fraud Office of the UK (which has already visited Kenya prior to the hearings) amongst other agencies but they left out one aggressive authority which would surely go after Vodafone as a US listed company, the US Department of Justice, and as is known, one of the key principles of Mobitelea is already banned from stepping on US soil, fortunately anyone and not only PIC can take the initiative to report this matter to the Fraud Office. Secondly shouldn't the Investment secretary recuse herself from the IPO due to a conflict of interest in that her father has been mentioned as an owner in Mobitelea? The arrogance with which the Minister is exhibiting in proceeding with the sale and cover up might just be met with measures he never envisioned:


Kenyans own Telkom Kenya; a company that we all have invested our taxes in, and therefore, Telkom is a public asset. Telkom once owned Safaricom entirely. Safaricom, in the last three years, has been the best performing company in Kenya. At some point, Telkom decided to sell part of Safaricom and struck a deal with Vodafone of the United Kingdom, which bought 30 percent of the shares. Telkom was left with 70 percent. However, to date Telkom owns only 60 percent of the company. This is a story of who owns the 10 percent and how that percent was illegally and fraudulently acquired. This is a case against the 'ghost owners' of Safaricom who are reaping where they did not sow and secondly, want the public to buy what they literally stole from the Kenyans.

1. *From Telkom to Vodafone*

Part of privatization process, initially pushed as part of World Bank conditionalities, involved off-loading some of the 100 percent ownership of Safaricom, which Telkom held since the establishment of the company. Telkom sought a partner and sold off the 30 percent of the shares. Vodafone bid and got the deal, getting 30 percent of the shares. All paper work regarding legal and company transfer was complete, and hence Safaricom was jointly owned by Kenyans and the company based in the United Kingdom.

2. *From Vodafone to Vodacom Kenya Ltd.*

Vodafone is known to have made a formal request for an extra 10 percent of shares held by Telkom. Rather than bid directly, a 'subsidiary company' by the name Vodacom Kenya Ltd, did the bidding. This company managed to get the 10 percent from Telkom. However, there is no legal paper work that was undertaken. No legal transfer from Telkom to Vodafone and then to Vodacom was carried out. At some point, Vodacom is said to have off-loaded 5 percent of the shares back to Vodafone but this did not last, as the shares were 'returned' to Vodacom Kenya Ltd.

In fact, part of the fraud involved two critical issues that the Parliamentary Investment Committee (PIC) documented in their recent report. First, the Safaricom Chief Executive Officer, Michael Joseph, claimed not to know who owners of the 10 percent shares are. Secondly, a forged letter, which was backdated to year 2000, was produced by Michael Joseph as evidence but this was unacceptable to the PIC. Therefore, from Telkom to Vodafone, the deal involving 30 percent shares was legal. However, the deal of 10 percent from Telkom to Vodafone, then to Vodacom, back to Vodafone and then back to Vodacom was illegal and compounded by mystery and secrecy.

1. *From Vodacom Kenya Ltd to Mobitelea*

Vodacom has since changed its name to Mobitelea. Mobitelea is registered in Guernsey, a small island within the territory of the United Kingdom, adjacent to the English Channel. This is an island ill-famed for money-laundering but is gradually working on such infamous attributions. The 'ghost owners' of Mobitelea are reportedly: former president Daniel Toroitich arap Moi, Nicholas Kiprono Kipyator arap Biwott and the son-in-law of Biwott. If these allegations are confirmed, then the owners cease forthwith to be 'ghost owners'. The three gentlemen, are reaping where they did not sow. Other than being transferred 10 percent of Telkom holding of Safaricom shares illegally and without paying a penny for it, they have been reaping dividends which today amount to Kshs 850 million. Mobitelea owes Kenyans, not just the initial value of the shares that they never paid for, but also the accrued dividends arising from the profits made by Safaricom and forwarded to Mobitelea. This is illegal, unjust, and unacceptable to owners of Telkom and by extension Safaricom – the Kenyan taxpayers.

1. *From Mobitelea to Safaricom IPO*

Safaricom Initial Public Offer (IPO) has already been set in motion. The Government of Kenya (GoK) has announced that it wants to off-load 25 percent of the shares Telkom has in Safaricom. GoK, represented by the Minister for Finance, has said that the IPO is unstoppable. With an unwarranted smile, the Minister for Finance is asking Kenyans to be part of the glory that Safaricom has become. No doubt, anyone wants to be part of the billions in profit that Safaricom mints every year. However, before Kenyans get financially excited, they should and must ask the question: which shares are on sale? First, do the 10 percent of shares, which were stolen from the public by Mobitelea, part of the 25 percent on offer? Secondly, is the GoK off-loading 25 percent of the remaining 60 percent? Third, why should Kenyans buy shares in Safaricom without confirming who the other shareholders are?

1. *Breach of the Laws *

The Minister for Finance argues all laws have been observed and that the Privatization Act is the only ammunition that Kenyans can have to stop the Safaricom IPO. Nothing could be further from the truth. There are many other laws, which have been breached. Beginning with the Privatization Act however, the Minister for Finance should tell Kenyans why Treasury, despite assent by the President, had to wait for a warning from National Assembly Speaker Mr Francis ole Kaparo to make moves to operationalise it. This has not been explained by the smiling Minister for Finance.

Secondly, the Anti-Corruption and Economic Crime Act has ably defined corruption to involve attempted or actual fraud. Other laws, such as the Companies Act, Communications Act, and State Corporations Act have been breached. The Capital Markets Act (Regulations) has also been breached, to the extent that the intended Safaricom IPO has not been accompanied by disclosure to the potential shareholders, who are the actual owners of Mobitelea. Therefore, with or without operationalizing the Privatization Act, the GoK, through the Minister for Finance, has breached several other Laws of Kenya.

* *

1. *Final Word: Stop Safaricom IPO, Do not Buy what is Yours*

Safaricom IPO needs to be stopped in its tracks. Kenyans could be part of the process to cover up fraud or legitimizing it, when participating in the impending Safaricom IPO. The fraud involves looting from the public asset – Telkom – by Mobitelea. Secondly, in the process Kenyans are likely to be floated some or all the 10 percent of shares owned by Mobitelea. This would be tantamount to buying from oneself. Do not buy what is yours. Third, a Public Interest Litigation (PLI) is being instituted by civil Society Organizations (CSOs) in the High Court. The Application seeks a Court Injunction to stop the Safaricom IPO, pending the ownership of Safaricom, is disclosed to the public. Be part of the process to stop the Safaricom IPO, as engaging in it will be the second fraud of public property: Safaricom, a property which you have paid taxes to establish and sustain.