[mak&emoto]

Originally Posted by Tactician

I think we are missing some key legal and factual points here which affect the public tendering rules and why Kimunya did not follow them.

One - The Grand Regency Hotel (GRH) was not public property. It was Pattn's property. Here is the explanation.

Pattni owned Exchange bank. Exchange Bank owed CBK KShs 2.5 billion and did not pay up. As in any normal transaction, CBK secured a charge over the GRH which the Pattni/Exchange Bank owned. That's why there was a CBK receiver at the GRH. If GRH was built using public money, CBK could not have placed a charge over it - ie how can u charge a property u already own?

Give us some credit, this is not bar room talk.

If GRH is/was as you state not CBK property then why were they purporting to be selling it? Legally speaking, the moment Pattni surrendered the hotel and registered the consent in court, it became CBK property.

Originally Posted by Tactician

Two - the valuation of GRH does NOT matter in this case. All CBK could recover from the sale of GRH was the amount of the charge over the hotel which in this case is KShs 2.5 billion.

Even if CBK had sold it for KShs 100 billion, all CBK would get was KShs 2.5 billion. The difference would have gone to Pattni. Otherwise, CBK would be benefitting from the misfortune of Pattni's bankruptcy. That is the law

This is why we hear of people complaining about mortgages when they default. A guy has a house worth KShs 5 million but he owes a mortgage institution (HFCK for eg) KShs 1 million which he has defaulted in paying. The mortgage institution (bank) has a charge over the house. To recover its money, it sells the house for KShs 1.1 million yet the property is worth 5 times that amount. The owner (Borrower) is left asking WHY ?

Cos the bank is onley owed KShs 1 million. It does not care about how much the property is worth. If it sells the house for Kshs 5 million, it has to refund the KShs 4 m diff to the owner. To get this 5 m, the bank has to wait for time before it can get a buyer willing to pay that value. And of cos the bank cant just wait to get this buyer just to recover KShs 1 million - so it goes for the quickest buyer at KShs 1m fire sale.

If the law allowed the bank to sell the KShs 5m charged property for Kshs 5m and then keep all the KShs 5m, all banks would do is to wait for borrowers to repay 90% of the loan then unilaterally declare the borrower bankrupt. Then they profit - in this case, the bank would make a profit of KShs 4m (Kshs 5 million which is the value less the amount owed of KShs 1 million) and profit from the foreclosure.

Good attempt, but not applicable in the present situation.

When you owe a bank money, do they only recover the principal amount and forgo the accrued interest?

The single mistake that Kimunya and his co-conspirators made in the deal was to legally take possession of the hotel from Pattni before selling it. The moment they did that, the ownership transfered from Pattni to GOK and it became public property.

If they were bright, they should have simply entered into an agreement with Pattni so that Pattni would sell the hotel and pay back his debts. There would have been no questions asked.

Originally Posted by Tactician

Three - There is the accusation that Kimunya did not follow the pubic procurement and disposal rules. That is true. On that he is guilty of not following the letter of the law.

But lets look at the spirit of the law. The law requires that the Privatisation Committee do a tender of the property (GRH) so that it can get the best price.

In this case, even if the Privatisation Committee had recommended and executed an auction or even did an IPO of the Grand Regency, how much money would CBK have recovered from the sale? Exactly KShs 2.5 billion. No more. In fact, had the auction/IPO got proceeds of less than KShs 2.5 billion, CBK would have lost money on the deal.

So in fact, had the GRH been auctioned to the highest bidder or sold via an IPO and got lets say KShs 7.5 billion, the govt would have only recovered Kshs 2.5 billion and given the diff to Pattni. So why go through all these procedures just to benefit Pattni or run the risk of selling the hotel for less than the charged amount? Especially when u have a ready buyer who is ready and willing to immediately pay the required KShs 2.5 billion?

So Kimunya simply followed common sense. The only problem is that he seems not to have informed his cabinet colleagues - but as time passes, we now hear he has challenged Raila, Wako and Ringera to deny - something they have yet to do.

If I was Kimunya, I would sit tight and let the facts come out - otherwise right now MPs are just doing mob justice! not forgetting they dont want to pay taxes!

To start with the law is followed in letter and not in spirit. No court of law in this world, excluding Central Lesotho's, will acquit you for having broken the law then pleading in mitigation that you were possessed by the spirit of the law.

Secondly, now that you are pleading that Kshs. 2.5 Bn is all that matters, can you explain/justify why interest was not charged on the decade long debt that Pattni/exchange bank owed CBK?

Then on the issue of CBK refunding Pattni the excess of the proceeds, let us not kid ourselves here.

The legal process that Pattni and KACC chose to take involved the blanket surrender of the hotel to CBK in exchange for amnesty. The agreement did not state anywhere that CBK was obliged to sell the hotel. That was CBK's call to make and what if they had decided to keep it, would you still be postulating that Pattni has a stake and the very day that CBK recovers 2.5 Bn in revenues from the hotel then the ownership should revert to Pattni?

[bolingo na ngai]

Originally Posted by missed call

since raila, wako and ringera were well briefed and were part of the deal, how then does raila chair a committee investigating the deal? who is fooling who here? all the involved people should be brought into books! hata kama ni kibaki!

the kimunya guy thinks that kenya assets are mutura in kiamaiko,wako is on record as saying he was not briefed,Raila was not briefed otherwise he could have told orengo to go slow.
In conclusion one mount kenya mafia must go, bye the way kenyans have less money in the pocket since he took over.
we should try a finance minister from outside mount kenya mmmmmh,just an idea bacause this mokimo math is really not adding up.

[missed call]

Originally Posted by bolingo na ngai

the kimunya guy thinks that kenya assets are mutura in kiamaiko,wako is on record as saying he was not briefed,Raila was not briefed otherwise he could have told orengo to go slow.
In conclusion one mount kenya mafia must go, bye the way kenyans have less money in the pocket since he took over.
we should try a finance minister from outside mount kenya mmmmmh,just an idea bacause this mokimo math is really not adding up.

ur statement looks so true and viable in a political rally. not in such a forum.
nevertheless, i am pro-pnu, but kimunya's statements that he had briefed raila, orengo, ringera and wako should not just be thrown into a politically instigated euphorial dustbin. that though, doesnt mean that kimunya is clean. he should go! he should be fired like yesterday.
kimunya, raila etc .. should all be investigated. and the point here therefore is, who is raila to chair that investigation committee? he should also tell us what he knew about the sale. facing the journalists' cameras boldly with fluent english full of political and business jargons should not be used as a way of determining the truth in the whole saga.

[ghetto4nr]

For the tenth time ODM side tried to stop this sham of a sale, why do you think Orengo's ministry was compromised in the wee hours of the morning? The next day he quoted the sh1.8 billion. And who do you think Orengo answers to? You're clutching at straws, get it together.

[Tactician]

Originally Posted by mak&emoto

Give us some credit, this is not bar room talk.

To start with the law is followed in letter and not in spirit. No court of law in this world, excluding Central Lesotho's, will acquit you for having broken the law then pleading in mitigation that you were possessed by the spirit of the law.

Secondly, now that you are pleading that Kshs. 2.5 Bn is all that matters, can you explain/justify why interest was not charged on the decade long debt that Pattni/exchange bank owed CBK?

Then on the issue of CBK refunding Pattni the excess of the proceeds, let us not kid ourselves here.

The legal process that Pattni and KACC chose to take involved the blanket surrender of the hotel to CBK in exchange for amnesty. The agreement did not state anywhere that CBK was obliged to sell the hotel. That was CBK's call to make and what if they had decided to keep it, would you still be postulating that Pattni has a stake and the very day that CBK recovers 2.5 Bn in revenues from the hotel then the ownership should revert to Pattni?

If GRH is/was as you state not CBK property then why were they purporting to be selling it? Legally speaking, the moment Pattni surrendered the hotel and registered the consent in court, it became CBK property.

Sober points u have - this is what i like - merits and demerits without any insults/politics/broad statements. let me reply.

Let's say you borrow money from a bank to develop your hotel. After a few years, you default on payments to the bank. What will the bank do?

It will attach your hotel, put a receiver manager to manage it. Cos if they let u manage it you can decide to milk all the cash and leave the assets in bad state thus yielding nothing on sale etc. A case in point regarding this was in 2003/4 when Narc had came into power and KCB started going after bad debts. Mugoya owed KCB some billions and the security/collateral were the earthmovers/caterpillars etc that Mugoya had bought using the loans from KCB. As soon as Mugoya suspected KCB was about to put it (Mugoya) under receivership, it moved all these charged property off premises to avoid receivership. Its only like a month ago that a criminal case against Mugoya was finalised after Mugoya repaid its debt.

If the bank cannot recover its money, it then sells the hotel to the bidder who will repay all the debts that you owe the bank.

This is what happened. CBK is selling GRH since it is the one which registered a charge on GRH. It does not own GRH. Had Pattni for example come up with the amount owed and paid to CBK, CBK would simply have de-registered the charge at the ministry of lands and GRH would continue belonging to Pattni but without any charge on it.

When you owe a bank money, do they only recover the principal amount and forgo the accrued interest?

I agree here with you. Question is, how much is CBK owed? CBK says its owed KShs 2.5 billion - how that is broken between the principal amount and the accrued interest I do not know - I am taking it that the KShs 2.5 billion encompasses both.

As I have enumerated above, CBK did not at a single moment own GRH. It simply had an interest in the hotel to the extent that it was owed money. All along, the property had been registered in the name of Pattni and his companies - just that at the Registrar of Titles, the register shows that the property is charged to CBK.

For example, if a bank wants to lend u money and u give your Title Deed as security, the bank will ask one of its lawyers in the conveyancing dept to ascertain if that land is already charged. If it is not, the bank is registered having established a charge on the property. The land is still yours but you are now restricted on what you can do with it. For example, you cannot sell it/get another loan using the same land etc without the consent of your bank.

You might as well ask then, why is Pattni involved in this deal? Cos he had to be party to the sale. Otherwise, CBK would have sold it without any recourse to Pattni.

CBK could not keep and own GRH for the simple reason that its not in the business of owning hotels/land. Just like u have never heard of any commercial bank owning a restaurant/bar/factory etc....they simply sell off the charged property and recover their money - Does anyone remember the Matiba case with Barclays Bank - all Barclays did was place a receiver manager to cater for its property and then proceeded to sell the hotel. Barclays could not run the hotel.

Secondly, would u imagine what would happen if what ur saying was the legal position? A bank would then lend u KShs 5 million and as soon as u repay 4.5 million, it declares u bankrupt and possesses ur property. It then sells it for lets say KShs 6m (after several years the property has appreciated in value).

The bank would thus make KShs 6 million plus the 4.5 million you had already paid. Banks would never let anyone repay their loans in full - all of us would be bankrupt! thats what the law is as it is - the lender should not benefit from the misfortune of the borrower. The lender should only recover what it is owed. Nothing more.

[mak&emoto]

@Tactician
let me table evidence so that we don't beat around the bush

Originally Posted by standard newspaper article of july 3rd 2008

pattni and his lawyers agreed with kacc officials on april 19 that all suits against him be discontinued and terminated. kacc has powers to recover property believed to have been acquired irregularly. the settlement was later registered in the high court under section 56b(2) and (4) of the kacc and economic crimes and agreed that: pattni and uhuru highway development limited relinquishes, assigns, reconveys or otherwise transfers ownership and all rights and interest in the property known as land reference no 209/9514 to the central bank.[/u][/b][/color] the two were to give efforts to the transfer and in default the deputy registrar of the high court would execute such instruments. The joint receiver managers appointed pursuant to a consent order dated may 31, 2004 were discharged forthwith and the ownership and management of the assets transferred to cbk accounts held by any bank in the name of joint receivers/receiver together with funds held therein be transferred to cbk. Kacc discontinues civil suit no 1111 of 2003 and pending applications. Cbk was to abandon other claims against defendants. Mrs fathuma sichale of kacc signed the agreement.

Your argument would have been valid if we were strictly dealing with a case of property foreclosure or collateral redemption. Fortunately for kenyans, the legal position after the settlement between pattni and cbk is that the hotel's ownership was transfered to cbk without any conditions on what they would then do with it. Whatever cbk gets from the sale, whether more or less, is for cbk to keep.

[Tactician]

Originally Posted by mak&emoto

@Tactician
let me table evidence so that we don't beat around the bush



Your argument would have been valid if we were strictly dealing with a case of property foreclosure or collateral redemption. Fortunately for kenyans, the legal position after the settlement between pattni and cbk is that the hotel's ownership was transfered to cbk without any conditions on what they would then do with it. Whatever cbk gets from the sale, whether more or less, is for cbk to keep.

If what you have written above is true, then I agree CBK would be the owner of GRH. In which case, the purchase and sale agreement would never mention Uhuru Highway Development Limited (UHDL) which is one of Pattni's property.

But look at the sale and purchase agreement below:
http://www.nationmedia.com/dailynati...ment030708.pdf

Read sections A, B and C.

From these sections, it is clear that CBK is the chargee i.e.the one who created a lien on property belonging to the chargor (borrower) UHDL.

If CBK is the owner of the property, why does the sale agreement refer UHDL? If CBK were the owner, the agreement would simply say CBK is the owner of the property and is selling it with no mention of UHDL.

Again, read section A and B again and u shall see that GRH had a charge and was the security on money owed to CBK. Again, its clear that CBK is not the owner.

[missed call]

Originally Posted by Tactician

If what you have written above is true, then I agree CBK would be the owner of GRH. In which case, the purchase and sale agreement would never mention Uhuru Highway Development Limited (UHDL) which is one of Pattni's property.

But look at the sale and purchase agreement below:
http://www.nationmedia.com/dailynati...ment030708.pdf

Read sections A, B and C.

From these sections, it is clear that CBK is the chargee i.e.the one who created a lien on property belonging to the chargor (borrower) UHDL.

If CBK is the owner of the property, why does the sale agreement refer UHDL? If CBK were the owner, the agreement would simply say CBK is the owner of the property and is selling it with no mention of UHDL.

Again, read section A and B again and u shall see that GRH had a charge and was the security on money owed to CBK. Again, its clear that CBK is not the owner.

what i want to see is raila also telling us what he knew about the sale. not him being investigating chairman. period! raila was busy telling off mugabe and not kimunya. isnt this funny?
kimunya must go followed by all the participants. no politics.

[Tactician]

Originally Posted by mak&emoto

Give us some credit, this is not bar room talk.

...

Then on the issue of CBK refunding Pattni the excess of the proceeds, let us not kid ourselves here.

The legal process that Pattni and KACC chose to take involved the blanket surrender of the hotel to CBK in exchange for amnesty. The agreement did not state anywhere that CBK was obliged to sell the hotel. That was CBK's call to make and what if they had decided to keep it, would you still be postulating that Pattni has a stake and the very day that CBK recovers 2.5 Bn in revenues from the hotel then the ownership should revert to Pattni?

Just to table more evidence, here is some piece of legislation that in principle establishes the law that after selling a borrower's property, any surplus over and above the debt shall be surrendered to the borrower:

This is section 73 of the Bankruptcy Act (CAP 53 of the Laws of Kenya)

::..Kenya Law Online..::

73. The bankrupt shall be entitled to any surplus remaining after payment in full of his creditors, with interest, as by this Act provided, and of the costs, charges and expenses of the proceedings under the bankruptcy petition.

I hope that settles it ie even if CBK had done an auction of GRH and got KShs 100 billion, CBK would only recover KShs 2.5 billion and the costs of the law suits, expenses etc..

Also, there was the issue of why the amount has remained at KShs 2.5 billion since 1993 when GRH was CBK was first secured the charge over GRH.

Once a bank puts your business under receivership, it's up to it (the bank) to recover its money as fast as is possible. So there can be no accrued interest thereafter cos the bank is already operating the business. Otherwise, the bank can delay realising its debt by selling the property for as long as it wants - eg the bank can decide to take 15 years like in this case--and Pattni did not prevent them from selling it.

[Tactician]

Originally Posted by mak&emoto

Give us some credit, this is not bar room talk.

...

Then on the issue of CBK refunding Pattni the excess of the proceeds, let us not kid ourselves here.

The legal process that Pattni and KACC chose to take involved the blanket surrender of the hotel to CBK in exchange for amnesty. The agreement did not state anywhere that CBK was obliged to sell the hotel. That was CBK's call to make and what if they had decided to keep it, would you still be postulating that Pattni has a stake and the very day that CBK recovers 2.5 Bn in revenues from the hotel then the ownership should revert to Pattni?

Just to table more evidence, here is some piece of legislation that in principle establishes the law that after selling a borrower's property, any surplus over and above the debt shall be surrendered to the borrower:

This is section 73 of the Bankruptcy Act (CAP 53 of the Laws of Kenya)

::..Kenya Law Online..::

73. The bankrupt shall be entitled to any surplus remaining after payment in full of his creditors, with interest, as by this Act provided, and of the costs, charges and expenses of the proceedings under the bankruptcy petition.

I hope that settles it ie even if CBK had done an auction of GRH and got KShs 100 billion, CBK would only recover KShs 2.5 billion and the costs of the law suits, expenses etc..

Also, there was the issue of why the amount has remained at KShs 2.5 billion since 1993 when GRH was CBK was first secured the charge over GRH.

Once a bank puts your business under receivership, it's up to it (the bank) to recover its money as fast as is possible. So there can be no accrued interest thereafter cos the bank is already operating the business. Otherwise, the bank can delay realising its debt by selling the property for as long as it wants so as to increase its accrued interest