Kenya: Civil Society Statement on Anglo Leasing and HSBC

In Parliament on the 10th of May 2007, the MP for Ntonyiri, the Hon Maoka Maore tabled copies of what are or appear to be Irrevocable Promissory Notes, issued by the Treasury on behalf of the Government of Kenya. These Irrevocable Promissory Notes, (IPNs) were issued in respect of a contract signed on 29th September 2003 – or about 9 months after the current government came to power.

The initial contract agreement was between the Government of Kenya, (GoK) and US-registered GloboTel Inc and was for the provision of a Multi-channel secure telecommunication network for the Kenya Administration Police for a consideration of Euro 49.65 million, (Ksh 4.4 Billion). Under a financing arrangement in support of this contract, GoK turned to a company called Midlands Finance and Securities ltd, ostensibly to provide refinancing for the completion of this contract.

The terms of this refinancing agreement were that GoK issues a commitment fee of Euro 4 Million and quarterly instalments of Euros 2,536,000 commencing 29th May 2003 and a final payment of Euro 2,538,000 on 29th June 2009. It was expected that at that date a total sum of Euro 67,402,000, or (Ksh 6.1 Billion) at an interest rate of 5% would have been paid to Midlands Finance & Securities ltd.

There are a number of problems with this contract and the financing arrangements:-

1. Midlands Finance & Securities ltd does not and never did exist. The Controller & Auditor General have established as much. Its registered office in Geneva, Switzerland is fictitious and there are no records confirming that it ever operated in that country.

2. Even though 36 promissory notes Nos GOK/OP/APTCN/01 to GOK/OP/APTCN/036 were issued, and Euros 4Million paid under the terms of the financing agreement in favour of Midland Finance & Securities to be credited to its account in HSBC Republic Bank (Suisse), the telecommunication network that was the subject of the contract was never supplied. Minister of Finance Amos Kimunya confirmed as much in Parliament on 2nd May 2007.

3. In a legal opinion dated 17th June 2003, Kenya’s Attorney General Amos Wako stated, “ The BUYER, (GOK) has the power to enter into this AGREEMENT and has taken all necessary actions which are required for the execution, delivery and performance of the AGREEMENT,”… The Attorney General further confirms that “The Agreement was signed for and on behalf of the Buyer by MR JOSEPH MBUI MAGARI, PERMANENT SECRETARY, MINISTRY OF FINANCE as authorised by HON. DAVID MWIRARIA the Minister in charge of Finance in the Government of the Buyer.” The AG’s opinion is silent on the identities of those that signed on behalf of the financier or indeed the supplier.

4. According to the Controller & Auditor General, Midland Finance Security ltd, (which did not really exist) also did not provide any credit in favour of Globotel Inc under the terms of the issuance of the Irrevocable Promissory Notes in its favour. In the Attorney General’s Legal Opinion, he states, “In my opinion the Credit has been fully authorized and delivered on behalf of the buyer and is legally binding upon the buyer in accordance with its terms.”

Finance Minister Kimunya has stated in Parliament and on several occasions outside Parliament, that, “no promissory notes were issued against this project. There is no refund against the said project because no payments were made.”

This is simply untrue. According to the Controller and Auditor General the total amount paid in respect of this contract (as of June 30th 2005) is Ksh 687,725,491.50 – made of payments against the principal sum of Ksh 613,500,529.60 and Ksh 74,225,411.90 against interest. According to the C & AG, in total the Government had paid Ksh 687,725,491.50 as at end June 2005. In the external public debt register with amount repaid on the so-called loan as of June 30th 2005 being Ksh 613,500,530. In John Githongo’s dossier on Anglo Leasing, discussions John Githongo had with then Permanent Secretary in the Office of the President, Dave Mwangi in 2004, corroborate the existence of this contract and payments already made to the ghost financier.

As members of the civil society, we wish to ask all Kenyans to join us in asking the following questions:
1. We would like Attorney General Amos Wako, to identify the principals acting on behalf of Midland Finance that he engaged with before rendering his legal opinion. We would also like Mr. Wako to produce to Kenyans the evidence that he used in rendering his opinion that Credit had been delivered by Midland Finance on behalf of the Government of Kenya.
2. We would like former Finance Minister David Mwiraria and Permanent Secretaries Dave Mwangi and Joseph Magari to be compelled to reveal the identities of the parties that they engaged with in contracting Midland Finance.
3. We would like Minister of Finance Amos Kimunya to table in Parliament the Promissory Notes listed above that he claims to have in his possession. If indeed some of these promissory notes were somehow returned, by persons as yet identified, we would like Minister Kimunya to table the relevant documents of indemnification against any future debt arising from the government undertaking to make payments under the contract.
4. We would like the HSBC Republic Bank (Suisse) to recognise that in the eyes of the Kenyan people, it is complicit in an attempt by a few criminally minded Kenyans and foreign businessmen to defraud the Kenyan public. It must deny these criminals the forum to continue to receive anonymity and receive payments for the supply of little more than hot air. HSBC’s Corporate Social Responsibility pact looks “to address the expectations of our customers, shareholders, employees and other stakeholders. Being one of the world’s biggest banks means the decisions we make can have a big impact. We aim to lend and invest responsibly, avoiding projects where the potential for social and environmental damage outweighs the economic benefits.”

Today HSBC is one of the largest banking and financial services organisations in the world. By the end of 2006, the bank had pre-tax profits of US$ 22 Billion - slightly more than Kenya’s current Gross Domestic Product and had global Assets of US$ 1,861 Billion – a little more than 3 times the Gross National Incomes of all the Sub-Saharan African nations.

Today Kenya remains one of the poorest countries in the world. Where is the justice in condemning millions of Kenyans who live below the poverty line and shackling them to a repayment agreement with a Swiss Bank from whom these Kenyans never borrowed or received a cent? Today civil society puts HSBC Republic Bank Suisse and all other commercial entities who may hold such unconscionable debt instruments as those associated with Anglo Leasing on notice – we will do our utmost to highlight the injustice of the debt they seek to enforce and their complicity in allowing corrupt government officials to fleece their countries such as has been the case in Kenya (past and present).

Kenyans will not pay these Anglo Leasing debts. Not now not ever. This statement should serve as an international caveat emptor to HSBC. The World Bank and the IMF which have gone ahead to dismiss Kenyans’ concerns about graft in our country and their respective Country Directors and Resident Representatives are also put on notice that there are Kenyans who can see through their mad desire to lend at all costs and damn the consequences. We will be directing representations on this matter to their respective head quarters today.