Tycoon Yagnesh Devani, whose company, Triton Petroleum, was allegedly
involved in stealing oil from the Mombasa storage facility belonging to
Kenya Commercial Bank. FILE PHOTO | NATION MEDIA GROUP
When British Prime Minister Theresa May visited the country this
week, one of the agreements she signed was on the tracing and returning
of Kenyan loot hidden in UK and its territories.
And that means Britain will not be an enclave for those escaping justice, too. Perhaps.
One
of the pending cases, and which Kenya has been silent on, involves
fugitive businessman Yagnesh Devani — who is still fighting to stop
extradition to face fraud charges in Nairobi.
A
month ago, the Supreme Court refused to give hearing to a UK oil
company, Glencore Energy, which wanted to siphon Sh4 billion from Kenya
Pipeline from of a failed dealing with Triton Petroleum Limited — a
company run by the wanted fugitive, who is the kingpin of the Triton oil
scandal.
CIRCUMVENT LAWS
The importance of this case, besides exposing the tail of the Triton scandal, is it tested a principle in law: Ex dolo malo no ovitur actio. It simply means that no court will lend its aid to a man who found his cause of action on an immoral or an illegal act.
But whether we are going to see some movement in the Triton matter can only be speculated.
The
saga of Triton and Glencore is the tale of two companies that
fraudulently wanted to circumvent laws in Kenya and corruptly do
business. Either they conspired to steal oil or one conned the other.
Before
he surfaced in London, Mr Devani had apparently pulled off one of the
biggest oil scams in the country. With the help of Kenya Pipeline
officials, political and business connections, the fugitive managed to
have 96,000 tonnes of processed petroleum worth Sh7.6 billion released
to him without authorisation from the financiers of the cargo.
FRONT COVER
He
then took off leaving his financiers, who included KCB and PTA banks,
Fortis Bank of Netherlands, Glencore Energy UK Limited and Emirates
National Oil Corporation (ENOC) of Singapore, running helter-skelter
looking for their money. Their rendezvous with the absconding
businessman had come to an end.
But
while these financiers may have fallen into Mr Devani’s trap, the story
of Glencore Energy is different and as it emerged later, the British
company was anything but an innocent financier.
How
this complex game was played was baffling to an extent that the Court
of Appeal finally accused Glencore of hatching an elaborate scheme to
use Triton as a “front, cover and cloak” to carry out illegal oil
trading in Kenya without a license — or what the judges described as a
“flagrant illegality”; perhaps the work of a rascally con man (emphasis
mine).
REAL BETRAYAL
Glencore
is not a run-of-the-mill company, but a multi-billion-dollar empire
founded by the late Marc Rich, an international commodities trader and
hedge-fund manager who was once indicted in the US on federal charges of
$48 million tax evasion, the largest in US history, and making
controversial oil deals with Iran during the Iran hostage crisis. During
the investigations, Mr Rich fled to Switzerland and the media
christened him the “fugitive financier”.
Mr
Rich was, however, never followed since on the day President Bill
Clinton was leaving office, he pardoned the man triggering a huge
uproar, even among the Democrats.
“I was very angry about it,” Barney Frank Frank a Massachusetts Democrat was quoted saying by Washington Post:
“It was a real betrayal by Bill Clinton of all who had been strongly
supportive of him to do something this unjustified. It was
contemptuous.”
POLITICAL FUNDRAISERS
Former
US President Jimmy Carter said: "I think President Clinton made one of
his most serious mistakes in the way he handled the pardon situation the
last few hours he was in office … I don't think there is any doubt that
some of the factors in his pardon were attributable to his large gifts.
In my opinion, that was disgraceful."
Political fundraiser
Apparently,
Mr Rich was very powerful in the Jewish community and in political
fundraisers. His ex-wife, the Manhattan songwriter Denise Rich was
reported to have sponsored various fundraising dinners and contributed
more than $320,000 to Democratic Party — perhaps enough to buy a pardon.
Back
to Kenya, it was the Glencore subsidiary, which was bringing in the
four tankers of oil as the country was clearing the rubbles of the
post-election violence and the man at the centre of the scheme was
Devani. Known to wine and dine with Cabinet ministers, permanent
secretaries and heads of State corporations, how Mr Devani managed to
circumvent the contracts and sell fuel bought by his financiers to
third-parties is still unresolved.
LIBERALISATION
When
he registered Triton Petroleum Limited in 2000, Mr Devani had hoped to
cash-in on an open tender system which had been introduced to help small
indigenous oil companies to access fairly priced crude oil for
processing at the refinery in Mombasa.
While
this refinery, now abandoned, was 50 per cent owned by Caltex, BP and
Shell — and the other chunk by the government — the small dealers had
since the liberalisation of the sector complained that the big oil
companies had monopolised the sector by using their financial muscles
built over the years.
It was Bruce
Pitman, the award-winning Canadian film director, who once remarked that
“projects are usually undertaken to either solve a problem or take
advantage of an opportunity.”
What we
now know is that there was an oil consignment that had come to the port
of Mombasa aboard five vessels, the Bahamas-registered SPT Navigator,
Elka Aristotle’, ‘Chem Marigold’ ‘Artic Blizzard’ and ‘Kara Sea’ in the
months of May and June 2008.
QUICK BUCK
Kenya
was smarting from a violent political upheaval and two months earlier
the Grand Coalition Government of President Mwai Kibaki and Prime
Minister Raila Odinga had been put in place. As Kenyans focused on the
Waki Commission which was investigating the masterminds of the
post-election violence and Johann Kriegler’s Commission on the integrity
of the poll, the businessmen were busy making quick bucks.
Devani,
who knew his workings in the corridors of power, had won a tender to
bring in this huge consignment but had no money: he was a broker, a
nasty broker, and that is when things started going wrong.
He
then came across Glencore Energy, a not-so-straight financier, who
wanted to enter into the oil Kenya market scene without taking the
required licenses and wanted to use Mr Devani’s license to import 72,284
metric tonnes of crude oil which were to be picked up by French oil
marketer, Total Kenya.
In all these,
Mr Devani wore the mask of an insider in the oil trade and had even
convinced Kenya Commercial Bank to back him — at least, in some of the
oil dealings. The bank would badly burn its fingers.
ACCOMPLICE
As
it later emerged, and the Court of Appeal alluded as much, Glencore was
not an innocent financier — but an accomplice in a scheme; nay “an
illegality”.
Like other brokers who
had pulled similar deals, Mr Devani had acquired the relevant licences
which were required: Upon registration, Triton had first entered into a
transportation and storage agreement, dated December 8, 2001 with KPC
and another agreement dated July 7, 2004, which recognised the interest
of financiers for Triton’s oil importation business. But this was just a
ruse; nay a tricky deception. In that agreement, it had been agreed KPC
would not release oil products in its custody without the express
instructions of such financiers. -, although under another clause, the
agreement said the “ownership in the petroleum products at all times
remained vested in Triton.” As such, no third party could claim
ownership.
CONSPIRED
Mr
Devani, and the courts have been told, managed to circumvent the
financiers and had the oil passed on to third parties with the payments
never getting to the joint accounts of the financiers and Triton. This
racket was carried out with the connivance of KPC officials — who most
likely knew that a legal loophole existed in the deal.
The
essence of the case in Nairobi against Mr Devani is that “he
dishonestly procured or conspired with others to procure the transfer
oil to Total” with the knowledge and intention this would result in his
financiers losing security over the product.
While
all the other companies sued Mr Devani for the loss, it was interesting
Glencore decided to sue KPC. Why Glencore did not sue Mr Devani’s
company for the loss of fuel baffled the judges and as KPC lawyers
argued, the UK entity was suing the wrong entity. Actually, the judges
were surprised that Glencore and Devani had entered into “a compact of
mutual immunisation from any suit” which explained why they were not
going for each other.
PUNISHABLE
KPC
lawyer Pheroze Nowrojee said, and the Court of Appeal agreed, that
Glencore had no contract and no direct arrangement with KPC and that it
was entirely possible for Glencore to also release the product directly
to Total Kenya without Triton receiving a drop of that oil.
KPC
would also argue that it held no stocks of petroleum on its own account
but only for oil marketing companies licensed under Section 80 of the
Energy Act. Interestingly, Glencore was not licensed but had cleverly
tried to trade in Kenya without a license.
“It
retained the right to sell in Kenya and did in fact sell to Total Kenya
either wholesale or retail … and this amounted to trading in oil in
Kenya which was not only impermissible, but also illegal and punishable
under Section 80 of the Energy Act as Glencore did not have the
requisite license,” said the Court of Appeal.
LAWBREAKER
What
the court was saying was that Glencore was an accomplice in the oil
scandal and now after burning its fingers wanted to use the courts to
get its money. Under the ex dolo malo no ovitur actio principle, and the
court said as much, Glencore “has no right to be assisted … What the
English courts could not do to assist a lawbreaker, Kenyan courts and
courts anywhere, should not do.”
“No
court ought to enforce an illegal contract where the illegality is
brought to its notice and if the person invoking the aid of the court is
himself implicated in the illegality,” said the judges while dismissing
the award of Sh4 billion awarded by the High Court.
But
KPC, although it escaped the award, was “not virtuous” — only that the
court felt Glencore should carry its cross together with Mr Devani.
SUBSIDIARIES
This is not an isolated incident for those who have followed the workings of Glencore in Africa or its subsidiaries.
British
newspapers say the British white-collar crime prosecutor is preparing
to open a formal bribery investigation into Glencore Plc and its work
with Israeli billionaire Dan Gertler and President Joseph Kabila of the
Democratic Republic of Congo.
The US
has further imposed sanctions on Gertler in December, saying he’d used
his friendship with Kabila to corruptly build his fortune. Gertler
denied any wrongdoing.
Will Britain,
now bring back Devani to face trial? That is the question. But that he
left a British company Sh4 billion dry is a fact.
jkamau@ke.nationmedia.com
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