Cont’d from last month…
By Dr Charles Khamala
Bentham describes the chief executive as an office which must have, at its disposal, unlimited positions which to distribute as rewards, together with the salaries attached to such positions; it is therefore is in the character of corrupter-general.
An Enlightenment paradox is that the modern education system has to educate and train persons for scientific and technological high culture – persons who will contribute to the advancement of science and technology and fill the management positions.
No country is immune from the Internet revolution and its cybercrime scourge. In the late 1990’s, long before being elected to judgeship at the Arusha-based UN International Criminal Tribunal for Rwanda, Lee Muthoga argued thus: “The chief executive must commit himself and his government to the discovery of a national morality… a new national ethic.
He must show by example his personal commitment to these values.” However, he conceded “neither good laws nor such Anti-Corruption institutions can make a significant impression in the elimination of this vice without an upright social fabric.”
Nigerian author Chinua Achebe’s “There was a Country: A Personal History of Biafra” (1967) decries the decline of Nigeria and Biafra, since “a man who does not know where the rain began to beat him cannot say where he dried his body.”
His earlier classic, “No Longer at Ease” (1960), perhaps predicted his rhetorical question, “Where did the rain start beating us?” It opens with the trial of Obi Okonkwo. An expatriate Lagos Supreme Court judge cannot fathom why a man with “his education and promise” would stoop to take a measly 20-pound bribe. Obi’s boss, Mr Green, “understands” why “the African is corrupt through and through” since his strength was sapped by centuries of harsh sunlight and an inhospitable environment.
Curiously, Obi’s Umuofia tribe are appalled not by his corruption, but by its pettiness. They have a saying: “if you must eat a toad, choose a fat and juicy one.” Yet Achebe illustrates that Obi’s meagre colonial civil service wages were incommensurate with his lofty status and extended familial responsibilities.
Catalytic effect of international corruption
However, despite Achebe’s diagnosis of Nigerian troubles as bureaucratic corruption arising from modern economic versus traditional cultural contradictions, his perception was undertaken in a pre-information era, and is hence silent on the catalytic or instrumental effect of international corruption exacerbating economic inequalities in Africa.
EACC’s 2016 reports echo my analysis in “Why Corruption Works: Kenyan Myth Debunked” (2007), presented at a Law Society Annual Conference a decade ago, that ordinary wananchi routinely bribe for public services as an “insurance premium” or business cost.
This is because, if corruption is understood as an historical event, associated with the bureaucracies of changing societies, then modern civil servants, who lack sufficient salaries or promotional opportunities within the institutional hierarchy, begin to see their office as a business concern from which they constantly maximise profit.
Yet, from the Western observer’s perspective, “bureaucratic failure,” according to Kwame Ninsin, “is blamed upon African traditional values, expectations and loyalties, while modern social structures processes and norms are celebrated and their innocence is assumed.”
In defence of Ghanaian corruption, Ninsin perceptively observes, “corruption is a form of social behaviour that is characteristic, particularly of societies which are based on production for private use, emphasising private accumulation.” His thesis is that corruption is specific to capitalist development, exacerbated by the compelling need to make profit from the laws governing imperialism. The bulk of the total profits accruing from neo-colonial production are expropriated to the absentee capitalist class in the Northern and/or Western countries. Furthermore, the national ruling classes retain only a tiny fraction of the Gross National Product. Therefore, the ruling elite in such dependent economies tends to indulge in illegal or primitive accumulation.
Ninsin’s assertion that “the primary motive of capital is the accumulation of profit” is not only in accordance with Benthamite utilitarian ethics, which place Enlightenment Man’s individual self-interest at the centre of economic and political policy. It is also consistent with Marxist analysis of bourgeoisie capital’s impoverisation of the proletariat countries.
Ninsin concludes, “The state has the onerous duty of creating the requisite conditions for the realisation of this ultimate goal.”
At this juncture, it is important to recall that the 1989 “Washington Consensus” did not include either anti-corruption or good governance as part of its ten priorities. In the transnational economic trade situation, multinational corporations whose incomes far exceed developing country Gross Domestic Product are, however, controllable under international instruments, such as the World Trade Organisation Rules.
Generally GNP includes a country’s external revenues while GDP is limited to internal income. In 1996, the World Bank revised its priorities to accord anti-corruption and good governance as key developmental criteria. Unfortunately, however, few developing countries have sufficient capacity to negotiate favourable-trading terms in international treaties, such as insisting upon health, labour or environmental standards.
Neither can the Kenya Revenue Authority detect offshore profits or losses of parent companies for multinational investor corporations. This absence of international accounting standards, compounded by MNC’s low desire or inclination to engage in corporate social responsibility, gives rise to unchecked tax evasion by stashing billions of shillings in profits in secret offshore slush accounts.
According to Winnie Byanyime, an executive director of Oxfam International, “offshore companies connected to 44 of Africa’s 54 countries appear in the Panama Papers”. “As the Panama Papers show, so much of the tax avoidance or criminal movement of finance on the continent is made possible by a system that is propped up by a number of banks, law firms and other outfits based outside Africa, working in collusion with African economic and political elites.”
Byanyime recommends that because “African countries lose the most from tax dodging, African governments must therefore do more to push for a full reform of the global tax system, and demand action from countries such as the UK whose financial centres sit at the heart of the global network of tax havens.”
The anatomy of the transfer mispricing phenomenon is extensively discussed in my “Protecting Africa’s Property from Foreign Corrupt Investment” (2015) article. The problem is that there is no uniform formula for assessing the amount of compensation payable to two classes of victims of compulsory property acquisitions or arbitrary takings, e.g. contrary to Article 40 of the Kenyan Constitution.
One class comprises local communities, who are victimised arising from dispossession of benefits sharing from natural resources (e.g. petroleum or minerals), upon expropriation of collective indigenous land rights in the name of “development purposes.” Another class are foreign investors; they suffer trespass to their private property rights. The international legal system is at pains to resolve the tension between two contradictory regulatory mechanisms, which define property rights differently.
On one hand, international human rights law, under regional multilateral treaties, like the 1986 African Charter of Human and Peoples’ Rights, promote informal native property rights. On the other hand, international investment law, under a plethora of ad hoc bilateral treaties, insists on investor’s right to repatriate unbridled profits.
African scholars seek harmonisation between these two incongruent legal regulatory frameworks, so as not only to benefit African native groups, but also for safeguarding individual taxpayers who are vulnerable to lop-sided bilateral (and multilateral) investment treaties favouring foreign “development.” Conversely, corrupt politicians are tempted to grant massive concessions to foreign investors for access to Africa’s vast natural endowments in exchange for kickbacks to finance their individual election campaigns, and in turn, private patrons or ethnic supporters.
Ultimately, if the taxman is denied considerable revenue collections, national capital suffers. “Politicians and government officials know this – they are people too – and so” Byanyime tells them “to say ‘no’ to tax avoidance and evasion, and end financial secrecy.”
Goldenberg and world duty-free
In the latter context, according to the Bosire Commission of Inquiry Report (2006), the infamous Goldenberg Scandal involved not only the payment of Sh13.5 billion as export compensation for transfer of fictitious gold and diamonds from Kamlesh Pattni’s Kenyan corporation to Nasir Ali in Dubai, but also portrays an image to potential investors of the Kenyan government and peoples as being corruption conduits, and therefore risky capital destinations.
Yet looting of the Central Bank of Kenya was just a necessary State evil in the context of the 1989 “Washington Consensus” – remember the privatisation of the economy and the 1992 multiparty elections facing then President Daniel arap Moi, who was desperately seeking to solicit democratic support to stave-off the “Second Liberation.”
Similar fabricated testimony by one Rawson Macharia against Jomo Kenyatta at the “Kapenguria Trial” proved instrumental for the British colonial state to stigmatise the nationalist struggle in the 1950s and delay independence by a decade. Thus, either disuse or abuse of the criminal justice system can effectively legitimise or sanitise the elimination of political opponents through permitting corruption to distort social realities.
Maintaining colonialism’s physical and economic repression, Kanu’s patronage politics remained hegemonic from 1963 through to 2002. But in “World Duty Free Company Limited vs. Republic of Kenya”  a foreign investor registered in the Isle of Man, World Duty Free Company Limited, directed by 90 p.c. shareholder Nasir Ibrahim Ali, of Dubai residency, with dual Canadian and Pakistani passports, claimed to have given then President Moi, a clandestine $2 million (Sh200 million) cash “donation” in 1989 inside a suitcase, for a permit to authorize him to construct, maintain and operate a duty-free shop at Nairobi’s international airport.
Unfortunately, the Kenya government took back control of the shopping complex, and in 1998 the High Court placed Ali’s company under receivership. Basing his claim on local custom – that tenders cannot be awarded without bribes in Kenya – Ali sued the Kenya government before the International Centre for the Settlement of Investment Disputes, an international arbitration institution, established in 1965 for foreign direct investment dispute resolution, seeking compensation for the expropriation of his investments.
However, in 2006 the tribunal held that the investment contract was procured contrary to both international and Kenyan public policy now enshrined in Section 49 of the new Kenyan Anti-Corruption and Economic Crimes Act of 2003, enacted under the successor National Alliance Rainbow Coalition government, because former President Moi, “was not a party to these arbitration proceedings and was not legally represented in these proceedings. He was not heard as a witness,” Ashfaq Khalfan concludes in “Odious Debt: Definition, Application and Context” (2006), and this ruling indicates that even a relatively conservative institution such as an arbitration mechanism established by the World Bank is willing to distinguish between legitimate acts of the Republic of Kenya and illegitimately agreed contracts by the retired Kenyan President. He applauds the finding “that the government was lawfully entitled to avoid contract obligations” under both English and Kenyan law “since…receipt (of the bribe) is not legally imputed to Kenya itself.”
Pending enactment of an Anti-Bribery Bill, blacklisting of bribers is proposed as a remedy to censure the tradition of offering “donations” or kickbacks by foreign investors to secure public tenders. Curiously, Jubilee’s initial approach through “asset recovery” seeks to re-direct the war on corruption to use the sanctions of forfeiture, fine or confiscation of unexplained assets whether from greedy foreign givers of international bribes, or their sheepish local recipients.
However, “despite a flurry of investigations and arrests of high profile individuals named in corruption allegations, the last time such individuals were convicted and jailed was in 2012 when the former Kenya Tourism Board managing director Achieng’ Ong’onga and former Tourism Principal Secretary Rebecca Nabutola were sent to prison for up to four years each for defrauding the ministry. Even then, they served for a little more than two months before they were freed on bail pending the hearing of their cases at the Court of Appeal. This lethargy evinces that the Director of Public Prosecutions continues to ignore local officials who may solicit bribes. Such mollycoddling approaches emphasise censure, but carefully avoid tough custodial sentencing options, which may achieve a goal of corruption prevention, and deter thieving investors.
Disqualification, confiscation or imprisonment?
According to a 2015 Asset Recovery Agency and Financial Reporting Centre report, President Uhuru Kenyatta fired a warning salvo that: “Every company from now henceforth seeking to work with the government both at the national and county level, will have to sign an approved Business Code of Ethics domiciled in the Public Procurement Oversight Authority. I direct that the Cabinet Secretary to the National Treasury gives this code effect through regulations under the Public Procurement and Disposal Act.”
He continued: “Any business that fails to comply with the Code will be disqualified from doing business with the government for a period not less than five years, and the information will be made public. This disqualification will not only apply to the business entity but also to its directors.”
Whether these lenient policy directives been acted upon, remains unclear. Instead, the Assets Recovery Agency, established under the Proceeds of Crime and Anti-Money Laundering Act, 2009, remains blissfully contented with pursuing recovery of bribes already received, but without the DPP prosecuting, or courts harshly punishing, neither local bribe-takers nor foreign bribe-givers.
According to Basel’s Institute on Governance’s International Centre for Asset Recovery (ICAR), for several years, mutual legal assistance facilitated transnational investigation and communication between Jersey authorities and Kenya through the UK Foreign and Commonwealth Office. Then, in February 2016, a Jersey company, Windward Trading, pleaded guilty in Jersey’s Royal Court, to four money-laundering counts.
Amid on-going negotiations for asset repatriation, confiscation orders amounting to £3.6 million (Sh500 million) was imposed. It may be true that the Ethics and Anti-Corruption Commission (EACC) of Kenya has been investigating the public officials responsible for the predicate offense in Kenya, and has sought and received assistance from several jurisdictions in this case, but, it is an overstatement to claim, as ICAR does, that: “The EACC deserves due credit for its commitment to ensuring that matters of public importance and of significant financial loss to the state are thoroughly investigated with a view to punishing the criminals and recovering criminal monies for the benefit of the Kenyan people.”
While it is laudable that “ICAR experts continue to provide assistance and monitor the extradition proceedings underway vigorously and ensuring that assistance is given to developing countries to facilitate the return of looted funds,” nonetheless, ICAR’s view that “recovery of stolen assets and their subsequent return to the country where they originated from sends the strongest possible message that impunity will not be tolerated and there is growing international momentum to present a collaborative front against corruption” is mistaken.
In rhetoric, Jubilee’s selective criminal justice policy merely calls for blacklisting corrupters to ban them from future dealings. Forfeiture is deemed sufficient penance in response to public officials who take bribes from MNC’s. Yet they hide money in secret offshore accounts. In practice, without transnational standards, prosecution and sanction of suite crimes continue to inflict invisible, slow economic violence on African economies.
Moreover, electoral courts lack competence to criminalise culprits of election bribery offences. Notwithstanding judicial and legislative findings, IEBC tribunals lack courage to disqualify, instead encouraging ethnic-cum-political corruption, which, upon successful election, refuels the need by wananchi to routinely bribe for public services.
Conversely, if apprehended for petty corruption, the poor neither possess conspicuous assets to surrender to bargain freedom for their corrupt misconduct, nor the capacity to afford bail or pay hefty “fines,” to avoid jail.
Woe unto those who resort to perpetrating street crimes, whether attempted or successful violent robbery or murder, punishable by the death penalty, or worse extra-judicial killings.
Writer is Andrew W. Mellon Postdoctoral Fellow at Rhodes University, South Africa, and advocate of the High Court of Kenya; firstname.lastname@example.org