How a Sh50m cheque messed up Eastlands housing plan for good

Children play in Doonholm Estate, in Nairobi.

What you need to know:

  • Joseph Goldberger hobnobbed with the political bigwigs of both Moi and Kenyatta era.
  • He was a short, stout Israeli real estate millionaire with a deep love for classical music.

When he died in November, 2000, Joseph Goldberger, or Yoji to some people, was little known until you mentioned Nairobi’s Doonholm estate, which he developed, and Tena Estate; land that he owned.

In Nairobi’s elite social circles, where he hobnobbed with the political bigwigs of both the Moi and Kenyatta eras, Goldberger was the ultimate Mr Nice; a wealthy, short stout Israeli real estate millionaire with a deep love for classical music. If you read the story here of Harun Muturi, the Nairobi tycoon who is part of the ongoing Moi-USIU land saga, then Goldberger was his partner but on another controversial land.

Recently, some drinking buddy of Mr Muturi and Goldberger called me and said, ‘boy, you left out a very important man – Joseph Goldberger. Go, and do some digging about him.’

It is only when you start digging that you start to connect some political-cum-business dots.

At the Nairobi Jewish synagogue, Goldberger’s memory is etched in a stained glass window donated by his family to celebrate his legacy thanks to his daughter Marie and his son, Andy, who used to run the family’s engineering business, East African Hydraulic and Metal Industries Limited in Nairobi’s Industrial Area.

It was that company that gave rise to Continental Developers Limited – perhaps one of the most important companies in the development of Nairobi’s eastland properties.

By purchasing the more than 900 acres of what is today Doonholm estate, Tena, Savannah, Green Field and Tassia from the estate of James Kerr Watson, Nairobi’s pioneer architect, Goldberger was inheriting a piece of land that the government had sought to purchase in order to build housing schemes.

Goldberger knew how to play politics and his Continental Developers Limited included President Kenyatta’s daughter Margaret, Dr Njoroge Mungai (Kenyatta’s first cousin), and Harun Muturi (Kenyatta’s in-law).

Registered in 1973 with a nominal share capital of Sh200,000, Continental Developers’s office was Goldberger’s industrial area company on LR 209/4390 along Dar es Salaam Road.

His purchase of Watson’s former dairy farm, which used to supply Nairobi with milk during colonial days and where Kenya’s first cattle dip was built, was a big investment and he knew as much.

Before he landed into financial mess, he first developed what is today known as the Old Doonholm and also started building Nairobi’s Mountain View estate, before he ran out of cash and started selling plots.

His dream was to have organised neighbourhoods, planned housing estates with infrastructure. That is what he had thought of when he (and Muturi) subdivided the 98 acres of what is currently Tena estate into 900 plots. Tena was an acronym standing for Teachers of Nairobi (Tena) Sacco which was to purchase the land for its members. In the initial arrangement, Continental was to design the houses and

Goldberger had promised to develop the infrastructure – but again, he realised later that the cost of the promised infrastructure was higher than the amount he would get from the plots. With that realisation, he started selling part of the project. The first went to President Moi’s son Raymond who developed some 88 bungalows. But Raymond run short of cash and Goldberger took over the project, according to a source familiar with that particular transaction. Some of these houses, now marooned by high-rise apartments, are the only reminder of the dream that Goldberger had in Tena Estate.

Further to the south, Goldberger sold some land to a former auctioneer, David Munene Kairu whose company was to develop the modern-day Savannah Estate. With the advent of multi-party politics, Kairu ventured into politics and was elected Kieni MP on Mwai Kibaki’s Democratic Party ticket.

In Old Doonholm, Goldberger sold the shopping centre to the director of the Criminal Investigations Department, Ignatius Nderi and the real estate business seemed to give him all the glory that he needed.

EXECUTIVE CHAIRMAN

And that was before things became thick after he was introduced to the executive chairman of National Bank of Kenya: Stanley Munga Githunguri. It is an intriguing story that forced the Chief Justice A H Simpson to hear the civil case in camera after the parties conned him to believe that some of the evidence could affect public security. As he would say later, “no such evidence was produced” meaning that he had been duped to hear a public-interest case was in camera.

It all started on November 19, 1976 when Goldberger and Muturi, the two signatories to the Continental account, executed a debenture or rather an unsecured loan of Sh10 million from National Bank of Kenya to develop Doonholm Estate houses.

Two years later, and as the demand for housing increased in eastlands, Goldberger and Muturi entered into a multi-million agreement with National Bank of Kenya. The agreement was simple and the NBK Executive Chairman Stanley Githunguri had held several discussions with the duo. Continental was to build and sell to the bank some 814 houses for Sh168 million. The bank had agreed to advance Sh80 million and pay the balance against the production of the occupation certificate. The bank agreement was signed on September 21, 1978, just as the country was going through the political transition from Kenyatta to Moi.

In order to access the money, the Continental directors passed a resolution to borrow some Sh85 million from NBK. That resolution, signed by Muturi and Goldberger on November 3, 1978 as the chairman and managing director respectively saw the two visit NBK headquarters where they signed a personal guarantee of up to Sh85 million.

Some six days later, Goldberger received a letter, Ref.AKN/vmm/11/6678 from A N Ngwiri, a chief branch manager of NBK’s Harambee Avenue branch confirming that the headquarters had authorised a loan of Sh70 million “bringing the total indebtedness to us at 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 Doonholm Estate and which was valued at Sh200 million then.

“You will further be required to execute a debenture over the entire assets of the company to be supported by director’s joint and several guarantees,” read the letter in part.

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

Before this November 9, 1978 letter was written, both Goldberger and Muturi had gone to NBK to negotiate, according to them, an “overdraft” of Sh85 million.

The two handed over the title of the Doonholm land to NBK to secure the two debentures. Then things went awfully wrong.

Once they had signed the contract with the bank, a sum of Sh80 million was credited to their current account. Now was this the loan, or was it the part payment for the houses?

Before the signing of the agreement, it was agreed in Githunguri’s office that out of the Sh80 million some Sh50 million would be withdrawn and placed in an interest earning account. According to Mr Goldberger, Githunguri said he would deposit the Sh50 million with the bank. This was agreed before the NBK Doonholm House Scheme was signed.

After signing the agreement, Goldberger would later tell the court, Mr Githunguri asked him to return to his NBK office with the company’s cheque book. He was accompanied by his manager, a Mr Benjamin.

Inside Githunguri’s office, he was asked to write two cheques for Sh15 million and Sh20 million in favour of 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.

Muturi, according to a knowledgeable source, used to sign the entire cheque book and leave it with Goldberger as a sign of trust. Actually, he had already signed these cheque leaves. What is intriguing is that without any acknowledgement from the bank and trusting Mr Githunguri, its executive chairman, Goldberger handed over the three cheques of Sh50 million to him.

SUCH INSTRUCTIONS

During the hearings in camera, Githunguri denied ever giving such instructions or offering to place the Sh50 million on deposit. 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” which he then owned a 90 per cent stake.

There was something else about Tassia — and perhaps the reason both Githunguri and Goldberger had agreed to have a hearing in camera. Continental had sold part of the larger Doonholm Estate land, LR 39/1 to Githunguri’s Tassia Coffee Estate for Sh10 million and it was on this land that the National Bank’s housing project was to be built. In essence, the National Bank of Kenya was financing a developer to build houses in land owned by its executive chairman — and then buy back the complete houses. During the hearing, Justice Simpson remarked that “there was a great deal that (Githunguri) did not wish to disclose” — perhaps the reason the matter was heard in camera.

But why did Goldberger and Muturi write Sh50 million cheque to strangers? Even 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. I have no doubt that Mr Githunguri did indeed ask that the cheques be made out in the name of the two payees.”

What Justice Simpson thought was that Githunguri asked for this transfer in his personal 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.”

Githunguri, who owns Lillian Towers in Nairobi, did not stay for long at the bank and was replaced in 1979. Neither Muturi nor Goldberger came out clearly on what the actual intention was and Justice Simpson said that their evidence regarding the Sh50 million cheques and the Sh10 million debit “was less than satisfactory.”

For instance, why did they not complain of wrong entries into their loan accounts?

Interestingly, the bank had on November 8, 1978 opened a loan account in Continental Developers name for Sh70 million. Interest on this loan was debited from the company’s current account plus interest arising from the overdraft arising from the debit of Sh10 million.

As a result of these wrongful debits, Muturi and Goldberger could not finish the 814 houses they were to sell to National Bank; after all, they had signed Sh50 million to some strangers — and left repaying the loans.

Muturi, according to those who knew him, saw it as a betrayal on the part of Githunguri. He also told some confidantes that he thought Goldberger, a man who spoke little English, was part of the scheme to fleece him.

National Bank was demanding that Continental repays the loan advanced to it – including the Sh50 million which had no doubt 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.

By this time, Goldberger was going through financial turmoil. His dream for Tena Estate also collapsed. Finally, he sold some of the plots but never recovered from the financial mess. When auctioneers descended on his estate, Goldberger left for Tel Aviv. He found solace in a lodge, where other Freemasons helped him back into business.

 

[email protected]; @Johnkamau1