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Viewing cable 06NAIROBI1720, CORRUPTION IN KENYA: AUDITOR GENERAL REPORT

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Reference ID Created Released Classification Origin
06NAIROBI1720 2006-04-24 05:48 2011-08-25 00:00 UNCLASSIFIED Embassy Nairobi
VZCZCXRO1810
OO RUEHGI
DE RUEHNR #1720/01 1140548
ZNR UUUUU ZZH
O 240548Z APR 06
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1144
RUEHLMC/MILLENNIUM CHALLENGE CORP IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
INFO RUEHXR/RWANDA COLLECTIVE
UNCLAS SECTION 01 OF 02 NAIROBI 001720 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
 
SIPDIS 
 
DEPT FOR AF/E, AF/EPS, EB/IFD/OMA 
USAID FOR AFR/DP WADE WARREN, AFR/EA JEFF BORNS AND 
JULIA ESCALONA 
MCC FOR KEVIN SABA AND MALIK CHAKA 
TREASURY FOR LUKAS KOHLER 
LONDON AND PARIS FOR AFRICA WATCHERS 
 
E.O. 12958:    DECL: NA 
TAGS: ECON PGOV EAID EFIN KCOR PREL PINR KE
SUBJECT:  CORRUPTION IN KENYA: AUDITOR GENERAL REPORT 
DETAILS THE COSTS OF GRAND SCALE GRAFT 
 
Ref: A. Nairobi 1439, B. Nairobi 944 
 
NAIROBI 00001720  001.2 OF 002 
 
 
Sensitive-but-unclassified.  Not for release outside USG 
channels. 
 
1. (SBU) Summary: A long-awaited audit into the 18 suspect 
Anglo-Leasing-style procurement scams has been tabled in 
Parliament.  Its detailed findings confirm and confer even 
greater credibility to the Githongo dossier and to the 
recently-adopted parliamentary report on the Anglo-Leasing 
and similar scandals.  The audit report has again reminded 
Kenyans of the staggering economic costs to the country of 
grand scale corruption.  End summary. 
 
--------------------------------------------- 
Auditor General's Report Tabled in Parliament 
--------------------------------------------- 
 
2.  (SBU) Kenyan Finance Minister Amos Kimunya on April 19 
tabled in Parliament "The Special Audit Report of the 
Controller and Auditor-General on Financing, Procurement 
and Implementation of Security Related Projects."  The 
report had been ordered by Kimunya's predecessor, David 
Mwiraria, over 18 months earlier, in September, 2004, in 
response to public and donor demands for greater 
accountability in government contracts following earlier 
revelations of the Anglo-Leasing procurement scams.  At 
that time, Mwiraria stated that the "forensic audit" would 
cover the two Anglo-Leasing contracts, plus 16 other deals 
of a similar nature. 
 
------------------------------------- 
Grand Scale Corruption by the Numbers 
------------------------------------- 
 
3.  (SBU) The audit report notes that the 18 projects 
investigated were worth a combined KSh 56.8 billion ($800 
million).  Of this amount, 59% is from contracts signed 
before the current administration came to power in 2002; 
41% is from deals signed after that time.  Only three of 
the 18 were completed; the others were frozen by the 
government when the audit was first ordered in September 
2004.  The upshot of the report is that all of the 
contracts were either of zero value or vastly overpriced. 
But because the Auditor General was blocked by relevant 
ministries in assessing the value of the goods and/or 
services delivered under the contracts, it was unable to 
accurately assess the exact price tag to taxpayers.  The 
report only goes so far as to say at least $230 million was 
expended for certain. 
 
--------------------------------------------- - 
The Staggering Opportunity Costs of Corruption 
--------------------------------------------- - 
 
4. (SBU) These numbers are not new, just a bit more 
precise.  The Githongo dossier estimated a loss of $700 
million to Kenya as a result of the 18 Anglo-Leasing-style 
contracts.  The numbers are nonetheless staggering in the 
context of Kenya's economy and the challenges it faces.  To 
gain an idea of the opportunity costs of grand scale 
corruption, it is useful to note that the $800 million the 
government spent (or intended to spend) on the 18 contracts 
is equivalent to: 
 
-- more than a year and half of all foreign assistance 
provided to Kenya by international development banks and 
bilateral donors. 
 
-- more than twice the amount budgeted by the central 
government for roads in this fiscal year. 
 
-- close to twice as much as all money budgeted for health. 
 
-- close to the government's entire budget deficit forecast 
for this year. 
 
-- three and half times the value of emergency food aid for 
drought-stricken Kenyans, as per the GOK's February appeal. 
 
5.  (SBU) The Auditor General's report makes a number of 
 
NAIROBI 00001720  002.2 OF 002 
 
 
useful recommendations based on its findings, including 
greater parliamentary scrutiny of security and intelligence 
related projects and the formation of special parliamentary 
committee to perform this role. 
 
------- 
Comment 
------- 
 
6.  (SBU) The audit report adds an additional layer of 
objective credibility to the Gitongo dossier, made public 
beginning in January, and to the report of Parliament's 
Public Accounts Committee (PAC), tabled on March 30 (ref A) 
and subsequently adopted by the full House on April 18. 
Finance Minister Kimunya deserves a pat on the back for 
tabling the report.  It is an action civil society and 
donors have long pushed for from the GOK.  But to keep this 
gesture of greater transparency in perspective, the GOK sat 
on the report for probably as long as a year, and only 
tabled it publicly when the cat had already been out of the 
bag as a result of the public release of the Githongo 
dossier and then the PAC report.  The staggering 
opportunity costs of the Anglo-Leasing-style deals again 
remind Kenyans of the direct connection between grand scale 
corruption and the grinding poverty most suffer under. 
These costs should also remind the U.S. and other donors 
that these are not victimless white collar crimes.  To the 
extent the USG can take action against the perpetrators of 
these crimes by revoking or denying visas (ref B), we 
should not hesitate to do so. 
Bellamy