How Stanley Githunguri’s scheme dealt blow to the dream of a planned Eastlands

Former Kiambaa MP Stanley Githunguri. 

Former Kiambaa MP Stanley Githunguri and Lillian Towers in Nairobi. 

Photo credit: File | Nation Media Group

Before he left for Tel Aviv, Israel, Jewish real estate developer Joseph Goldberger was taught a painful lesson by the master of impunity Stanley Githunguri.

By the time Githunguri died last week, the story of how he messed up planned housing in Nairobi's Tena and Donholm estates had largely been forgotten.

But it is a story well known in the circles of “old money” – after Goldberger sought justice over a Sh50 million swindle, the case was heard on camera.

Apparently, Githunguri, unwilling to have the scandal publicised, told the judge that some of the evidence he was about to give touched on “national security”.

It was a lie, but Justice Simpson only realised later that Githunguri had duped him.

So famous was the Israeli millionaire in Nairobi’s Jewish circles that his memory is etched on a stained glass window at the city’s Jewish synagogue, donated by his family to celebrate his legacy. In Nairobi’s Industrial Area, the family ran an engineering firm, East African Hydraulic and Metal Industries Limited.

By acquiring more than 900 acres of modern-day Donholm, Tena, Savannah, Greenfields and Tassia estates from the estate of James Kerr Watson, the Israeli co-opted politicians out to get a slice of the land. By doing this, he thought he was secure.

Goldberger’s Continental Developers Limited was registered in 1973, with a nominal share capital of Sh200,000. The tycoon had listed the company’s head office as LR 209/4390 along Dar es Salaam Road, which also housed his engineering firm.

To protect himself, Goldberger had listed President Jomo Kenyatta’s daughter Margaret, Dr Njoroge Mungai (Kenyatta’s first cousin) and Harun Muturi (Kenyatta’s in-law) as co-directors.

Before Githunguri threw him into financial turmoil, Goldberger had first developed Old Donholm and had started developing Mountain View estate. Then, he ran out of cash and decided to sell some plots on the expansive Donholm farm.

First, Goldberger subdivided 98 acres of modern-day Tena estate into 900 plots after Teachers of Nairobi (Tena) Sacco agreed to purchase them for its members. In the initial arrangement, Continental was to design the houses to maintain a look similar to the neighbouring Buruburu. Goldberger’s dream was to have an organised Eastlands with laid-out infrastructure.

To raise money, Yoji, as Goldenberg was known in Nairobi, sold the Old Donholm shopping centre to Ignatius Nderi, the director of the Criminal Investigations Department. He then sold some land to a former auctioneer, David Munene Kairu, whose company was to develop the modern-day Savannah estate. Kairu was a close ally of then Finance Minister Mwai Kibaki.

It was during this period that Goldberger, known for his deep love for classical music, was introduced to the man who would change his life – the executive chairman of the National Bank of Kenya (NBK), Githunguri, the president’s banker.

While Muturi was Continental’s managing director, the man who ran the show was Goldberger – after all, he was the main shareholder. So Muturi would sign the chequebook leaves and leave them with Goldenberger.

Court records indicate that on November 19, 1976, Goldberger and Muturi went to see Githunguri and they executed a debenture, or rather signed a loan of Sh10 million from NBK to develop Donholm estate houses. That was the first loan.

Meanwhile, Goldberger had agreed to sell part of the Donholm farm to Githunguri’s Tassia Coffee Estates Limited, a move that would give rise to the land chaos in Tassia estate, Nairobi.

As the High Court would later find out, Githunguri intended to defraud NBK with that Tassia land.

To do that, Githunguri had organised to have Continental build some 814 houses for Sh164 million on the Tassia land, which he now owned.

NBK had agreed to advance Sh85 million to Goldberger's company while the balance would be paid on completion and after production of the occupation certificate. Interestingly, the bank was to purchase all the houses for its employees after completion. As the paperwork was being done, Kenyatta died in August 1978, throwing most of his loyalists off-balance.

Resolution

Continental’s directors then passed a resolution to borrow some Sh85 million from NBK – some three days after Kenyatta was buried. That resolution was signed by Goldberger and Muturi on November 3, 1978 as the chairman and managing director, respectively. They then took it to NBK headquarters where they signed a personal guarantee of up to Sh85 million.

On November 9, 1978, Goldberger and Muturi received a letter, Ref.AKN/vmm/11/6678 from AN Ngwiri, a chief branch manager at NBK’s Harambee Avenue branch, confirming that the headquarters had authorised a loan of Sh80 million, “bringing the total indebtedness to us to Sh83,032,116”.

With that letter, Goldberger was asked to execute a first legal charge for Sh80 million over the 900 acres on LR No 212/3, which is the modern-day Donholm estate, valued at Sh200 million then.

In another paragraph, Goldberger was told that the whole amount owed must be liquidated within two years from the sale proceeds of the Donholm houses. That letter was copied to M/s Waruhiu and Muite advocates representing the bank.

What was not being said was that the Donholm houses were on land already owned by the bank’s executive chairman. In essence, NBK was financing a developer to build houses on land owned by its executive chairman and then buy back the complete houses, ostensibly from the developer, but in essence, it was Githunguri who would earn the profits.

During the court hearing that followed, Justice Simpson remarked that “there was a great deal that (Githunguri) did not wish to disclose”, perhaps the reason why the matter was heard on camera.

Once Goldberger signed the loan contract and handed over the Donholm title to NBK, Sh80 million was credited to the developer’s account. But before they signed, as they told Justice Simpson, they held a meeting in Githunguri's office. He asked them to withdraw Sh50 million from the loan account as he promised to bank it in an interest-earning account. They then signed what became known as “NBK Donholm House Scheme”. Tassia, as per the records, was not featured in the scheme. It was their secret.

Goldberger told the court that Githunguri asked him to return to his NBK office with the company’s cheque book. He went accompanied by a Mr Benjamin, his manager. As he told Justice Simpson, Githunguri asked him to write two cheques for Sh15 million and Sh20 million in favour of a Ms Njeri Njoroge and another cheque of Sh15 million in the name of Jenkinson & Parekh, a company that had been mentioned adversely in the 1966 maize scandal involving Cabinet Minister Paul Ngei’s wife Emma.

Trusting Githunguri and perhaps without questioning why he was writing cheques to strangers, Goldberger handed over the cheques.

During the in-camera hearings, Githunguri denied giving such instructions or offering to place the Sh50 million in an interest-earning deposit account. But the court found Githunguri’s initials on each of the cheques and wondered whether he was truthful given that he had “evasively denied any connection with Tassia Coffee Estate”, in which he then owned a 90 per cent stake.

Justice Simpson was at a loss: “I find it very difficult to believe that Mr Goldberger and Mr Muturi would pay out Sh50 million to strangers merely on a verbal promise by the executive chairman of the bank. However, I have no doubt that Mr Githunguri did indeed ask that the cheques be made out in the names of the two payees.”

Was NBK liable? Justice Simpson thought that Githunguri asked for these transfers in his private capacity.

“I do not believe he was acting as executive chairman of the bank, nor do I believe that either Mr Goldberger or Mr Muturi thought he was so acting,” he said.

After Githunguri was removed from the bank in 1980, Muturi decided to follow up on the Sh50 million deposit with a letter dated February 26, 1980. He thought it would still be intact. However, after discussions with the managing director, Mr JAC Smith, he realised there was no such account.

Muturi realised that Continental was paying interest on a Sh50 million facility that it could not access – and NBK was deducting the money from its current account.

Ballooned

Meanwhile, the bank started demanding that Continental repays the loan advanced to it – including the Sh50 million. This ballooned to Sh127 million.

“It follows that (Continental Developers) owes money to National Bank and National Bank owes no money to Continental,” ruled Justice Simpson.

As the NBK project collapsed, the ruins were legally on land owned by Githunguri.

As auctioneers descended on his estate, he tried to salvage part of the land, now Tena estate. One of former President Daniel Moi’s sons, Raymond, had agreed to develop some 88 bungalows. But Raymond ran short of cash and Goldberger took over the project. For many years, these were the only houses, not high-rise apartments, within Tena – signifying Goldberger’s dream.

As Goldberger’s project collapsed, Githunguri’s fortunes seemed to rise – he started developing Lilian Towers in the early 1980s. He found peace within Nairobi’s Freemason Lodge, while Muturi went for the bottle. He would later find solace in building Nairobi’s Mamba Village.

Finally, Goldberger, who never built a house for himself, left his Sh50,000 a month rented house in Riverside for Israel.

Tena, his dream scheme, saw new developers build uncoordinated houses. As a result, only Goldberger’s road network remained intact, and the face of Eastlands was forever changed.

[email protected], @Johnkamau1

Welcome!

You're all set to enjoy unlimited Prime content.