Imagine walking into a state-owned bank today and taking a Sh796 billion loan — the equivalent of Kenya’s budget deficit for the 2022-2023 financial year — and using land as security for the loan.
When you default in repaying the loan, the bank opts to sell your land, possibly as the last debt recovery mechanism available under the law.
However, the bank discovers that the land you used as collateral is actually owned by the government, and how you obtained title deeds for the prime property is a mystery that is not easy to unravel.
Nearly three decades later, the bank has collapsed. But you’re walking free, and even manage to run for president, with thousands of people voting for you.
What sounds like a cock and bull story is actually one of the highlights in the life and times of former Lugari MP Cyrus Jirongo, who did exactly that in the 1990s.
The recent questioning of Jubilee Party vice-chairman David Murathe and former National Assembly Speaker Kenneth Marende by the Ethics and Anti-Corruption Commission over millions of shillings received from Mr Jirongo has led the Nation to the tale of how the politician has ended up with a Sh40 billion debt to the taxpayer,
Bank collapse
Mr Jirongo almost single-handedly led to the collapse of Postbank Credit Ltd, a state-owned bank that collapsed in the 1990s.
When Kenya’s budget was Sh45 billion in the 1993/1994 financial year, the country was short by Sh2.7 billion and borrowed to plug the deficit.
At the same time, Mr Jirongo had borrowed a similar amount from Postbank Credit. Partially to honour an ambitious National Social Security Fund (NSSF) real estate project in Nairobi, which fell through after Mr Jirongo doubled his asking price to more than Sh2 billion, and partly for his personal use.
But the land he used as collateral was technically public property that could not be auctioned to recover the debt.
In 1993, Mr Jirongo was one of the most untouchable people on the land. He chaired the Youth for Kanu 1992 (YK-92) campaign group that had successfully campaigned for President Daniel Arap Moi’s re-election a year earlier.
In 1993, Mr Jirongo was one of the most untouchable people on the land. He chaired the Youth for Kanu 1992 (YK-92) campaign group that had successfully campaigned for President Daniel Arap Moi’s re-election a year earlier.
As has been the norm in post-independence Kenya, Mr Jirongo was rewarded with special status that saw him do virtually anything he pleased.
By then, Mr Jirongo had incorporated several companies that were sealing questionable deals with government institutions, some of which came back to bite the taxpayer hard.
One of his companies, Offshore Trading Company, borrowed Sh1.1 billion from Postbank Credit and used a 1,000-acre piece of land in Nairobi’s Ruai area as collateral.
A year later, another company of his, Sololo Outlets, applied for a Sh1.65 billion loan at the same bank. To secure the loan, Mr Jirongo used another title deed for a 2.5-acre piece of land in Mukuru kwa Reuben, Nairobi County.
Sh40 billion debt
Neither of the two loans has ever been repaid, and their interest has left Mr Jirongo with a Sh40 billion debt.
The first loan of Sh1.1 billion has ballooned to over Sh20 billion, according to court records filed by the Kenya Deposit Insurance Corporation.
At the time Mr Jirongo borrowed the money, Kenya had not enacted the ‘in duplum’ rule that prohibits the growth of interest rates beyond the amount borrowed. And the interest rates in the 1990s were not friendly.
Postbank Credit was among 17 banks that collapsed in the 1990s after politically connected individuals borrowed billions and failed to repay.
More than Sh80 billion was borrowed by individuals and went unpaid.
Aside from the obvious effect of sinking lenders, billions of shillings saved by hard-working Kenyans in such banks went up in smoke and triggered an economic crisis.
The Deposit Protection Fund (DPF) was appointed receiver manager, and later liquidator, of Postbank Credit. Part of its mandate was to recover unpaid loans. The DPF has since been replaced by the Kenya Deposit Insurance Corporation (KDIC), which is liquidating Postbank Credit and holds title deeds for both properties.
Brick wall
While chasing Mr Jirongo’s debts, the KDIC hit a brick wall.
UDP party leader Cyrus Jirongo during an interview at his Mayfair Suites offices in Nairobi on October 28, 2021.
It turned out that the Ruai land was actually owned by the Nairobi Water and Sewerage Company (NWSC), but its title deed was somehow transferred to Mr Jirongo and his network of companies.
In 1986, the government had 13,000 acres in Ruai, which was earmarked for the expansion of the Nairobi Water and Sewerage Company’s treatment plant. The land was intended to expand the company’s treatment plant and ensure a steady water supply in the city whose population was ballooning each year.
It was subdivided and registered to Nairobi Water in 1996 following a presidential directive.
Almost immediately, most of the land was transferred from Nairobi Water to politically connected individuals. Nairobi Water was left with barely 3,000 acres.
In 2018, Mr Jirongo signed a Sh15 billion deal with Sheikh Rakadh Group, a firm associated with the UAE royal family, to put up a city on the Ruai land. The deal, however, fell through after Mr Jirongo asked the Dubai royals for Sh1 billion to pay the Postbank Credit loan and recover the title deed.
The Mukuru kwa Reuben land is also owned by Nairobi County and hosts AEF Reuben Primary School, a police station, a maternity clinic and a vocational centre. But the title deed is registered to Mr Jirongo’s Kuza Farms and Allied Ltd.
The Catholic Church founded AEF Reuben Primary on the property in 1986.
As children with the potential of being Kenya’s future were learning at AEF Reuben Primary, military boss Augustine Cheruiyot was acquiring a title deed for the land the school sits on. In 1990, Mr Cheruiyot sold the land to Mr Jirongo’s Kuza Farms and Allied for an undisclosed sum.
Three years later, Kuza Farms handed the title deed to Postbank Credit as security for a Sh1.65 billion loan Mr Jirongo’s other company, Sololo Outlets, applied for.
Again, Mr Jirongo’s companies did not repay the loan.
Out-of-court deal
In Mukuru kwa Reuben, all was silent until 2014 when Mr Jirongo sued the school and City Hall, claiming ownership of the 2.5-acre land.
Despite the fact that Mr Jirongo did not have the title deed, in 2016 City Hall reached an out-of-court deal with the politician that would see him get a Sh250 million one-off payment for the land.
But the deal had conditions. Mr Jirongo was to clear any encumbrances on the land, including loans. He was then to ensure that the title deed was formally transferred to City Hall.
Cyrus Jirongo in a Nairobi Court on September 11, 2019, during the mention of the case where he was charged with inducing Post Bank Credit Limited to accept a bank charge in respect of a parcel of land in the name of Soy Developers Limited, to enable him to secure an overdraft facility of Sh50 million to Cyber Projects International as valuable security on September 25, 1992, in Nairobi.
In 2019, Mr Jirongo sued City Hall to demand that the Sh250 million be released. But the Postbank Credit loan still remained unpaid, and the title deed was still with the KDIC and registered to Kuza Farms and Allied.
High Court judge Samson Okong’o dismissed the suit and ordered Mr Jirongo to either transfer the title deed to City Hall or get no money.
Still, City Hall somehow released the full Sh250 million to Kuza Farms and its owner Mr Jirongo before the land was transferred to it.
The KDIC was not involved in the dealings between Mr Jirongo and City Hall. Ordinarily, any money made from dealings with the land should have gone to the KDIC to clear the outstanding loan, which has grown to more than Sh18 billion.
After Mr Jirongo got the City Hall payout, he sent money to several influential individuals: Cotu Secretary-General Francis Atwoli (Sh60 million), Pan-African Parliament MP representing South Sudan Albino Aboug (Sh38 million), Mr Murathe (Sh25 million), former Vihiga Senator George Khaniri (Sh5 million) and Mr Marende (Sh3 million).
And their windfall has now attracted the attention of the Ethics and Anti-Corruption Commission (EACC).
Mr Atwoli, Mr Murathe and Mr Marende have said that the money they received was from transactions not related to the land or Mr Jirongo’s other deals.
The Cotu boss held that he received part payment for a friendly loan advanced to Mr Jirongo and which is part of a court-ordered award. He advanced Mr Jirongo a Sh100 million loan that the latter was unable to repay, prompting a court case that Mr Atwoli won.
EACC summoned Mr Murathe to explain the purpose of Sh25 million he received from Mr Jirongo on July 23, 2020.
Mr Murathe denied knowledge of the land deals that have put Mr Jirongo in trouble and maintained that the funds he received were to settle a debt the former Lugari MP owed him.
The 2020 payment, Mr Murathe explained, was part of a Sh60 million debt Mr Jirongo owed him.
Mr Marende said the funds he received were in relation to legal fees for a client he represented.
Before the 1993 loan, Mr Jirongo had in 1992 obtained a Sh50m loan from Postbank Credit.
At the time, the politician was buying a piece of land from another company, Soy Developers.
He had paid Sh10 million, half the price, as a deposit.
He presented the land’s title deed to Postbank Credit and borrowed Sh50 million.
Mr Jirongo defaulted and Postbank Credit’s receiver manager auctioned the land to ASL Ltd.
Soy Developers owners – Sammy Boit Kogo and his wife Antoinette – have been in and out of court seeking damages from Mr Jirongo.
Their attempt to file a criminal complaint was thwarted by the Supreme Court, which ruled that there was unnecessary delay by authorities to bring a criminal case and Mr Jirongo would be disadvantaged in defending the suit because several crucial documents have since been lost. BY DAILY NATION