What happens in courts: Con artists roam free as justice system fuels pyramid schemes

Sasanet Ltd and Sasanet Investment Cooperative Society Ltd spared no one who dared look in its way, as it promised to give investors profit margins never seen before in Kenya.

Florence Soila Ngossor, a former aide for the late President Daniel Moi, was among thousands of Kenyans who fell for the trap and ended up losing millions.

The scheme rode on two registered companies and had even been licensed by government agencies, so investors had no reason to doubt the venture. 

Paupers borrowed with the promise of getting thousands of shillings in returns. Millionaires like Ms Ngossor aimed to break the billionaire barrier.

While most companies shy from holding directors or employees responsible in the event investors lose their cash, Sasanet and the nearly 300 pyramid schemes existing at the time offered to have their directors guarantee any losses.

Instead of giving investors pause, the clause actually provided comfort to those looking for an easy way to earn cash.

And in 2006 the Chief Magistrate’s Court fined Charles Waweru Chege Sh50,000 for defrauding an investor in Sylvia Investment or and gave him the alternative of a 14-month prison term.

Laws on pyramid schemes

Other than a few other fines similar to the one meted out on Mr Chege, the criminal justice system has little to write home about in regard to giving relief to victims of pyramid schemes.

Using a set of outdated laws, the Judiciary is struggling to punish people who take away billions from gullible Kenyans each year as lawmakers remain hesitant to give the law the sharp teeth it needs to tackle pyramid schemes and other suspicious business ventures.

Kenya has no laws specific to pyramid schemes, as architects of the con games are, at most, only charged with conspiracy to defraud.

Under section 317 of the Penal Code, conspiracy to defraud comes with a maximum prison sentence of three years.

And while multiple complaints can ultimately compound the sentence into several years, not many pyramid scheme victims come out to pursue con artists through the criminal justice system.

The law also gives a lot of leeway for out-of-court settlements that have more often than not been violated by con artists to get away with stealing billions.

Victor Olao, an advocate with experience in commercial law and governance, argues that the answer lies with the National Assembly, which needs to formulate laws to combat the changing nature of con schemes.

Mr Olao believes that some of the main reasons pyramid schemes prosper are the gaps in law that create loopholes at two levels – regulation of industries and punishment for con artists.

Vulnerable investors

The lawyer adds that the Sacco Societies Regulatory Authority (Sasra) needs to be more innovative to net pyramid schemes, most of which start as small and informal cooperative societies.

“There is no security for depositors and that’s what makes investors vulnerable. It is high time Sasra develops mechanisms to protect people. Most of these deposit-taking schemes are not mainstream so they wouldn’t fall under the Banking Act. If Parliament can legislate and expand the mandate of Sasra, it would be able to net some of these cons before they grow into full-out pyramid schemes and disappear with billions. That would be a first step towards eliminating these things,” Mr Olao said.

“Formality comes with certain requirements which can help curb some of these things before they happen. If we leave the laws the way they are, then billions will continue to be lost. If you contextualise all those pyramid schemes, it would give the necessity for formulating laws. This is a loophole in society and we need to protect our people.”

Former Ikolomani MP Boni Khalwale in 2012 proposed the Anti-Pyramid Schemes Bill, which sought to have people like VIP Portal’s Alfred Wangai and Sasanet’s Michael Chege fined Sh10 million and jailed for 10 years.

But the bill was yet to be discussed on the National Assembly floor by the time of the 2013 General Election.

Dr Khalwale was elected to the Senate, and no MP took up the Anti-Pyramid Schemes Bill. As is standard procedure, the bill expired and no lawmaker has since tried to propose laws specifically outlawing pyramid schemes.

Since the 2005-2007 wave of con games that swallowed up Sh8 billion from investors, nothing much has changed.

Kenyans throw away billions in pyramid schemes and poorly executed investments as architects of the ventures either walk away scot-free or are given a slap on the wrist before being allowed to rewrite the conning script.

Mr Wangai, his wife Mercy Nkatha, Richard Mutinda, Margaret Wanjiku and John Okwoba conned thousands of Kiambu residents between 2013 and 2014 before they were eventually arrested and their bank accounts frozen.

Loot from victims

There was almost nothing left of the Sh1.2 billion the couple had collected from their targets through VIP Portal at the time their bank accounts were frozen.

The Law Society of Kenya tried to help in prosecuting the couple and a criminal case was eventually lodged against them in 2014.

Barely one year later, the public prosecutor’s office, then led by Keriako Tobiko, withdrew the charges after Mr Wangai and Ms Nkatha agreed to refund their victims.

Mr Wangai and Ms Nkatha did not pay back the Sh1.2 billion they swindled from investors, and both the victims and prosecutors seemingly lost interest in pursuing the couple, who reopened VIP Portal in Kitengela last year.

As if the forex trading con was not enough, someone in the VIP Portal group tried to con the Kiambu Chief Magistrate’s Court of Sh600,000 that had been deposited as bail for Ms Wanjiku, Mr Mutinda and Mr Okwoba.

The bail was paid with a cheque issued by Mary Wangari Njunge. The cheque was delivered to the Kiambu court’s accountant by Isaac Mwangi Muriu.

After the VIP Portal owners agreed to refund victims, Ms Njunge went to the court to claim her Sh600,000. Mr Muriu had also claimed the money but did not show up in court, and hence it was released to Ms Njunge.

Mr Muriu appealed the decision at the High Court, accidentally spilling the beans on how VIP Portal hid its loot from victims.

Mr Muriu claimed that while the bank account used to pay the cash bail was registered to Ms Njunge, she was a proxy of VIP Portal founder Mr Wangai.

Justice for victims

Mr Muriu unsuccessfully asked Justice Joel Ngugi to reverse the order to return the bail money to Ms Njunge.

Unknowingly, his affidavit revealed that Mr Wangai could have used several proxies to hide money swindled from VIP Portal investors.

Another group of 122 investors sued VIP Portal in 2015 and obtained a summary judgment to recover nearly Sh77 million after the company failed to defend the civil suit. But by then the company was just a shell and there was nothing to attach.

New-age pyramid schemes have swindled more than Sh10 billion from Kenyans in the last five years alone, as lawmakers continue to ignore the need for tighter laws to get justice for thousands of victims.

The old con involved a simple promise to double, triple or quadruple investors’ cash.

The new con involves using confidence tricksters to give investors just enough information to make them believe that there is a viable business, but not enough to poke holes in the proposed business.

From promises to deliver greenhouses, to mining cryptocurrencies like Bitcoin or forex trading, the new-age pyramid schemes have seen Kenyans lose billions.

While some individuals have been charged, the criminal justice system’s history in dealing with such fraudsters offers little hope to victims, who may have to accept that they lost their savings and nobody may be punished for the crime.

Last year, the Directorate of Criminal Investigations (DCI) arrested Goldenscape Greenhouses Ltd owner Peter Wangai and arraigned him for allegedly swindling thousands of investors of more than Sh1.5 billion.

Gullible Kenyans

High Court Judge James Wakiaga on June 15, 2021 froze Mr Wangai’s assets and barred any of his employees or agents from transferring any property that is part of the Goldenscape illicit empire.

Mr Wangai promised to put up greenhouses for investors, who were to pay Sh300,000 and earn more than Sh500,000 each year.

But the only things investors received were pieces of paper just barely legal enough to be called contracts.

A group of more than 200 investors have since last year been planning to file a civil suit against Mr Wangai to recover their investments.

At the same time Goldenscape was operating, another agribusiness venture burned the fingers of more than 500 investors.

Diamond Property Merchants promised anyone who invested Sh740,000 in a greenhouse returns running into millions a year. Each greenhouse would sit on an eighth of an acre.

Interestingly, the company had promised to deliver title deeds though Kajiado County by-laws bar the issuing of title deeds for any commercial agricultural business sitting on less than five acres.

The company did put up some greenhouses in Isinya, Kajiado County, and started harvesting tomatoes before the whole venture went bust, and with it more than Sh370 million pumped in by gullible Kenyans.

Last February, police arrested Simple Homes Kenya founder Nuzrat Shariff for orchestrating a scam in which investors believed they would pay rent for houses that would double up as purchase instalments.

Thousands of victims

Simple Homes went down with more than Sh500 million of investors’ cash.

Velox 10 Global promised to invest in Bitcoin mining and offered more than three times one’s investment.

In 2018, shortly after launching operations in Kenya, the firm’s founder, Brazilian Ricardo Rocha was arrested by the defunct Flying Squad branch of the National Police Service.

A former senior Flying Squad officer told the Nation that Mr Rocha spent less than three hours in custody.

A former governor, who was at the time one of the most powerful politicians in Kenya, drove into the Flying Squad’s Nairobi Area head office and demanded Mr Rocha’s release.

The politician’s large entourage whisked Mr Rocha away, and drove him to Jomo Kenyatta International Airport, from where the con artist flew back home.

One of Mr Rocha’s local agents who helped snare thousands of victims, Daniel Karobia, has since been charged at the Milimani Chief Magistrate’s Court with defrauding three people of more than Sh4 million.

In the course of his prosecution, Mr Karobia has attempted to settle the case out of court, albeit unsuccessfully.

Only Mr Rocha and a few of his lieutenants know exactly how much Velox 10 Global swindled from Kenyans, but police officers who investigated the scheme estimated that victims lost more than Sh100 million.

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