Corruption - The Con Man Who Took Down His Own Country (Then Ran For Office)

This is a business dynamics & systems thinking analysis of the Goldenberg scam which caused the Kenyan recession in 1993. Please listen to this podcast available here: http://www.npr.org/blogs/money/2013/03/26/175382519/episode-447-the-con-man-who-took-down-his-own-country-then-ran-for-office

Causal loop diagram explaining the Kenyan policy for increasing foreign capital in the country and the ability of Goldenberg to exploit the policy.

Causal loop diagram explaining how Kamlesh Pattni was able to leverage his advantage after Goldenberg shut down, despite being a famous scam artist

 

Policies that could have kept Pattni from succeeding after the initial scam

·         A mandatory requirement that allowed purchase of government treasury bills, only after or at the same time as the stated amount of U.S dollars was deposited. This would have prevented Pattni from doubling his earnings from interest after defaulting on his deposits at the end of the three month period, despite being charged a 3% penalty. (See the ‘Recession Cycle’ loop)

·         A law which required a more thorough and external (possibly outside auditors/investigators) review of any individual(s) who filed for a banking license, prior to issuing one. Pattni received his banking license too easily and amid suspicion and speculation among banks of a then potential scam. (See the ‘Goldenberg Scandal’ & ‘Expected Reaction’ loops)

·         It was mentioned in the podcast that Pattni was acquitted of all his charges by the Kenyan court of law. This only served to reinforce his then transformed image as a catholic preacher and further disguise his misdoings, positioning him to stand for office. Surely, a more detailed investigation and verdict would not have been farfetched considering the available and obvious evidence against him. Moreover, his community service and handouts were clear signs of him attempting to cover up the scam. (See ‘Goldenberg Scandal’ & ‘Expected Reaction’ loops)

·         The entire Goldenberg scam could have been avoided altogether, had the Kenyan government chosen not to turn a blind eye to the export of smuggled gold. This would not have been all that difficult since they were already aware of the practice and a basic policy which regulated the export of such gold would have crushed the whole operation. However, this can also be attributed to the imperfections, inefficiencies and corruption which was widespread within the government itself. (See the ‘Leveraged Advantage’, ‘Charity’ & ‘Politics’ loops)