Kenyan central bank boss charged with nepotism

NAIROBI, Mar 23 (Reuters) A Kenyan anti-corruption court charged the central bank governor today with abuse of office to benefit his son and three other associates in the latest case targeting graft in east Africa's largest economy.

Andrew Mullei -- who has run the bank since March 2003 during a period of healthy economic growth for Kenya -- was accused of improperly awarding four lucrative consultancies.

''I plead not guilty,'' he said when charges were read out.

Senior principal magistrate M.W. Wachira told the court Mullei had made the appointments, including of his son Silla Mullei, ''without following the correct procedures''.

The case is yet another embarrassment for President Mwai Kibaki, who has already lost three ministers this year in resignations over alleged links to graft cases.

But as with other charges launched last week against a clutch of senior former officials, the case against Mullei may in fact help restore some of Kibaki's damaged credibility in the eyes of disillusioned western donors and Kenyans.

Kibaki came to power in 2002 vowing to crack down on the corruption and nepotism rampant under his predecessor Daniel arap Moi's 24-year rule. But he has been accused of turning a blind eye to continued corruption in his administration.

According to a charge sheet released today, Mullei in July 2004 ''used his said office to improperly confer a benefit on Silla Mullei'' by making him a consultant resulting in a payment of 2.62 million Kenyan shillings (,930) to his son.

He was also accused of appointing Terry Ryan who earned 305,600 shillings in consultancy fees, Melville Smith who earned 3.84 million shillings, and Titus Mwirigi for 2.3 million shillings, according to the charge sheet.

The four could not be immediately reached for comment.

''DISTINGUISHED ECONOMIST'' In a successful request for bail, Mullei's lawyer Mutula Kilonzo described him as an eminent Kenyan.

''He is a distinguished economist and if you look at the charges, they are not the sort of charges for a man of this kind to run away from court,'' he told the court.

Mullei, who spent an uncomfortable couple of hours in a police cell below the court after the charges were heard, was ordered to surrender his passport.

The Kenya Anti-Corruption Commission (KACC) said earlier this month it had investigated Mullei and forwarded recommendations to the attorney general for action.

The central bank governor has been credited with bringing stability in the banking sector after he closed shaky financial institutions -- but some critics have taken issue with his policies on the exchange rate and interest rates.

The Mullei case adds to two major scandals dogging Kibaki's administration.

Five former senior officials under Moi were charged on Monday with fraud and theft in the biggest scam, the so-called Goldenberg case when some 1 billion dollars was lost from state coffers via export subsidies for fake mineral exports in the 1990s.

One of Kibaki's ministers has resigned over Goldenberg, and another two over the more recent Anglo Leasing scam, which started under Moi but continued under Kibaki.

That scandal involved fraudulent tenders for at least 200 million dollars to a fictitious firm for forgery-proof passports, a naval ship and forensic laboratories.

REEUTERS DKS PM1748