The grand coalition government of president Mwai Kibaki and prime minister Raila Odinga is faced with its biggest financial scandal since it was formed four months ago.

The controversy concerns the recent sale of the Grand Regency Hotel in Nairobi by finance minister Amos Kimunya to the Libyan Arab African Investment Company for a song.

The five-star hotel overlooking Uhuru and Central parks was allegedly sold for KSh1.8 billion against an estimated value of at least Ksh4.5 billion without being advertised in the local or international media or put to tender.

The sale comes after the former proprietor, billionaire Kamlesh Pattni, surrendered ownership of the hotel to the Central Bank of Kenya (CBK), to which he owed KSh2.5 billion, in April.

Pattni had been accused by the Kenya anti-corruption commission (KACC) of fraudulently receiving billions of shillings from CBK in the early 1990s through a foreign exchange deal for exporting fictitious consignments of gold and diamonds in the so-called Goldenberg corruption scandal. The director of KACC, Aaron Ringera, has now apparently