26,000 pyramid scheme victims sue for lost cash

More than 26,000 victims of pyramid schemes have opened a fresh battle to recover the Sh4.15 billion they lost to fraudsters eight years ago.

Through a petition filed at the High Court, the investors are seeking orders authorising use of the assets of the fraudulent schemes that the Central Bank of Kenya confiscated during a 2007 crackdown to pay them.

The National Pyramid Scheme Victims Initiative (NPSVI) argues that continued withholding of the funds, failure to arrest and prosecute the architects of the fraudulent schemes, and reluctance to compel them to surrender the ill-gotten wealth is negligent and unacceptable.

The victims have sued the Attorney General, CBK, and principal secretaries for Co-operative Development and Marketing, Finance and Office of the President for compensation over money they lost in 257 pyramid schemes.

“The petitioners claim this money as of right, with interest and the damages arising therefore. The respondents have impounded the funds that never belonged to them for eight years. The petitioners’ property rights are violated daily by the respondents’ continued retention of the money,” NPSVI chair Samuel Kariuki says.

NPSVI’s suit joins a growing list of individuals seeking compensation from the State. Three years ago, Andrew Gesora, another victim of the pyramid schemes, sued the State on behalf of 26 investors. Loise Nduta also filed a separate suit on behalf of 36 victims.

The victims claim that the successful crackdown on pyramid schemes and implementation of the 2008 Sacco Societies Act was an admission that the fraudulent businesses could have been stopped before they duped thousands of Kenyans.

READ: Watchdog blames CBK over pyramid scheme losses

Mr Kariuki says the government should be held liable for the losses suffered by victims as it has allegedly admitted liability in the past through actions aimed at safeguarding Kenyans from pyramid schemes.

“From 2008, the respondents set up the Sacco Societies Regulatory Authority to control deposit-taking societies. This implied admission of responsibility and liability yet it has not made good our losses,” adds Mr Kariuki.

NPSVI reckons that the victims of pyramid schemes could have been saved from loss if the government had properly vetted institutions that were later found to be fraudulent.

The organisation says its members entrusted their money with the firms in the belief that the government had done its due diligence before registering them.

“The negligent and illegal registration of the outfits enabled them to comply with banking requirements and open bank accounts, where the petitioners paid money. The petitioners cannot just be punished because people unknown to them committed crimes and who should have been arrested,” Mr Kariuki says.

Former Co-operatives Development and Marketing minister Joseph Nyagah in 2009 appointed a task force that published a report identifying 270 pyramid schemes that stole Sh8.1 billion from 121,205 Kenyans.

The unearthing of the massive scam, which took place between 2005 and 2007 had adverse effects on investors, including breaking up their families, suicides and deaths from stress-related illnesses.

“We pray for an order for modalities to be put in place by the respondents to enable peaceful and systematic refund of the money recovered,” NPSVI adds.

The organisation also wants to be refunded for the costs it has incurred in collecting data on details of its members over the last four years.

The organisation holds that the National Treasury has in the past agreed to refund victims of the scams. NPSVI has over 60,000 members, and the organisation claims more will join the suit after tracing documents proving they invested in the companies.