Kenyans risk losing billions of shillings in a new a scheme hatched by disgraced tycoon Kamlesh Pattni.
Mr Pattni is locked in a vicious court battle with the Kenya Airports Authority (KAA) over the control of the lucrative business in duty free shops.
The dispute is threatening to delay the multi-billion shilling expansion of the Jomo Kenyatta International Airport to make it a regional aviation hub.
At the centre of the controversy is the control of duty free shops in the new Terminal 4, whose construction is expected to be completed early next year.
Mr Pattni claims all the shops in the new terminal and those to be constructed in the future belong to him and cannot be rented out without his permission.
The battle was triggered by a tender advertisement by KAA inviting interested parties to bid for shops in the new terminal.
Mr Pattni rushed to court claiming that his World Duty Free Company had exclusive rights to shops in all airports built by KAA. He cited a 1991 agreement with the government that gave him indefinite lease over the premises.
On November 8, 2012, the court cancelled KAA’s tender and upheld Mr Pattni’s claim that he had the exclusive rights to operate the business infinitely.
Personal properties
The court directed KAA to cancel the tenders by last Thursday, failing which the personal properties of the managing director, Mr Stephen Gichuki and Corporation Secretary Joy Nyaga would be seized and forfeited to the State.
“I find and hold the respondent (KAA) through its principal officers — the managing director and the corporation secretary — to be in contempt of court and the managing director and the company secretary of the respondent to also be personally in contempt of court for having knowingly and deliberately disobeyed the order of this court dated September 17, 2008,” ruled Justice Joseph Mutava.
Mr Pattni had gone to court earlier in 2008 and obtained a temporary injunction restraining KAA from awarding any tenders for the development, management or operation of duty free shops A, B and C within the airport.
Mr Justice Mutava is under investigation by the Judicial Service Commission over allegations of impartiality in his rulings on companies associated with Mr Pattni.
The Law Society of Kenya (LSK) has in the meantime asked its members to submit any information they may have regarding Mr Pattni’s cases since August 2011.
“The Law Society is compiling data on the manner in which certain matters have been listed and heard in the Judiciary as from August 2011 to date. This is to request all members who have had any matters for or against one Kamlesh Pattni and or his companies to let us have information on the following. . .” says the notice signed by LSK secretary Apollo Mboya.
Among the information being sought is the date of filing the case, the parties involved, how it was filed (certificate of urgency or not) and the presiding judge.
The dispute over duty free shops dates back to an agreement between the original owner of World Duty Free and the Kenya government on April 27, 1989.
The owner of the company – and the man who introduced duty free shops in Kenya – is businessman Nassir Ibrahim Ali who has since said that he paid a $2 million (Sh170 million by today’s exchange rate) bribe to former President Moi to be allowed to start the business.The International Centre for Settlement of Investment Disputes in Washington found that the bribe was indeed paid, rendering the agreement illegal.
After the ruling, Mr Pattni wrote to KAA informing the organisation that he would henceforth trade under the name Diplomatic Duty Free, having transferred interests of the previous company to the new outfit, save for some two per cent shares.
The agreement was signed by Mr Pattni and a top official at KAA without the board’s approval.
In making the move, Mr Pattni was evading the possibility that the government would nullify his contract with KAA to run duty free shops on the basis that it had been found to be illegal because of the $2 million bribe. Surprisingly, the government did not enforce the ruling.
Mr Pattni’s fight with KAA is running concurrently with another in which a bank associated with Mr Pattni has sued the Central Bank of Kenya for an estimated Sh5 billion.
Last week, Oriental Bank went to court over botched transactions that can be traced back to the Goldenberg scandal in the 1990s. Oriental Bank then traded as Delphis Bank and was controlled by Mr Pattni and businessman Ketan Somaia before him.
The latest move by Mr Pattni – a self-professed televangelist - adds to the long list of schemes he has used to acquire obscene amounts of wealth and ensure that law enforcers are always a step behind him.
The November 8 court ruling has been described as a “miscarriage of justice” and would compel the KAA to operate at the whims of Mr Pattni.
The authority has appealed Justice Mutava’s decision.
“There has been a grave miscarriage of justice in the decision of the High Court and hence there has been no fair administrative action,” it says.
Duty free shops
Mr Pattni is also claiming an estimated Sh6 billion ($70 million) from KAA after the parastatal brought down duty free shops that were blocking access to one of the boarding gates.
This followed pressure from airlines demanding more space for picking and dropping passengers to avoid the congestion that was choking operations at the international departure terminal.
Sources familiar with the case say Mr Pattni had ignored notices to move the shops and the matter is still pending in court.
The businessman has also refused to relocate a bonded warehouse that stands on the path linking Terminal I and Terminal 4. This has slowed down the construction works and could mean more financial burden for the taxpayers if KAA forcibly pulls it down and Mr Pattni rushes to courty for compensation as he is wont to.
Currently, JKIA lags behind other international airports by offering almost similar products for sale through small, crowded duty-free shops in cramped space.
Terminal 4 is part of the airport’s upgrade project, which began in 2006 and is being carried out in three phases.
Phase one, which involved the building of parking space has been completed while the other phases are going on concurrently.
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