No shoulder to weep on as State abandons pyramid scheme victims

A UK court last Wednesday found Kevin Foster — a former cab driver who turned his hand to investment — guilty of defrauding clients of 34 million pounds (Sh38 billion) through a pyramid scheme that ran for nearly a decade.

And last June, a US judge jailed Bernard Madoff for 150 years for running a similar scheme, signalling the significance of the crime based on the number of victims, the amount of money he stole and the extent of the damage he caused.

But as all this was happening, in Kenya, investigations into a similar fraud––orchestrated through pyramid schemes hit the country two years ago––seem to have ground to a halt.

Grown weary

A report, prepared by a taskforce, which shed light on the activities of the pyramid schemes, is beginning to gather dust inside government offices despite the hullabaloo that occasioned its launch in June 2009 and its tabling in Parliament three months later.

The 20,000 Kenyans who lost Sh8 billion cumulatively in the collapsed pyramid schemes are in for a long wait as the Government drags its feet in implementing recommendations of the taskforce.

Even men and women who helped investigate the fraud have grown weary of waiting for government action and are demanding that the authorities pursue the crooks, some of them well-connected, nine months after the experts handed over the report.

The taskforce chairman is a disappointed man.

“The State has done very little, if anything, since none of our proposals has been implemented,” said former MP Francis Nyenze who chaired the Ministerial Taskforce on Pyramid Schemes.

The fraud has been linked to loss of lifetime savings, family and matrimonial break-ups, suicides, depression and exacerbation of illnesses such as diabetes and high blood pressure.

“These people who defrauded Kenyans are still driving around in town. We see them every day and nothing is being done,” said Joseph Kinyua of the National Pyramid Scheme Survivors Initiative, based in Nairobi.

“This is state-sanctioned impunity and must be stopped,” he added.

Apart from the expected victims’ compensation, as proposed in the taskforce report, what has been of more importance to many investors is whether or not the financial system — whose loopholes were blamed for the fraud—will be reformed to protect investors and deal with crooks.

Some analysts reckon that the financial system cannot be fixed until there is a candid assessment of who let things get out of control, allowing the pyramid schemes to thrive in an economy that boasts of having one of the most stringent systems in the region.

The report points an accusing finger at legal gaps within the financial system, which allowed the schemes to operate as savings and credit co-operative societies (Saccos), companies, and non governmental organisations (NGOs).