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‘Honey coated’ pyramid schemes that turnes millionares into paupers

COUNTIES
By Joe Kiarie | January 24th 2015

Mention the words pyramid scheme to Johnson Kivuti and his features suddenly begin to crumple with tears forming in his eyes. And then, just as quickly, the anger follows.

It is hard, almost impossible, to believe that this old man who sits amid the squalor of his simple mud-walled house in Embu County, was once a multi-millionaire.

All Kivuti has now are broken dreams. After investing and losing money in a pyramid scheme, the Kenya Business Community Sacco Ltd, he lost his wife, a son committed suicide and another disappeared without trace. The house they all shared with him in Nairobi’s Umoja 1 estate was auctioned.

Kivuti, 62, is just one of thousands of such victims in Kenya whose lives have been turned upside down by unscrupulous business sharks. In total, there are more than 148,780 others, majority women, who are suffering the consequences of a major financial scandal that rocked the nation when it was first exposed eight years ago. They lost more than Sh8 billion to the schemes.

And while the story of Kenya Business Community Sacco, DECI, and over 250 other money grabbing outfits became well known, the perpetrators have all escaped unpunished.

More significant, men like Kivuti have received not even a cent in compensation. Consequently, many former millionaires like him are today living in destitution, some so poor to even afford their own meals.

Suicides, illnesses, marital breakdowns, regret and despair characterise most victims’ families. Young dependants have gradually wasted away in poverty.

Like Kivuti, the pyramids scam dealt Jane Musimbi double tragedy. Her younger brother, Elphas Kimiywi, was thrown off the eighth floor of a city high-rise building by enraged investors who were demanding their money back from DECI, the organisation he worked for.

Also a banker, Kimiywi had taken up an offer by DECI director, the late George Donde, to join the organisation as the financial controller.

“From his top position, he never suspected ulterior motives in the scheme. He advised me to put more money there and I ended up with over Sh31 million in DECI,” Musimbi reveals.

It was Kimiywi’s death that sparked the seemingly synchronised collapse of the pyramid schemes across the country that saw the mother of four lose all her life savings and retirement benefits. The financial scam also dashed many dreams.

Francis Maina was, in 2006, a young aspiring politician. Then aged 32 and working for an NGO, he had his eyes firmly set on the Kigumo Parliamentary seat in the 2007 General Election.

“I joined hands with three young Kenyans and we invested over Sh25 million at Sasanet Investment Ltd. The company had been duly registered and we did not read any mischief,” says Maina.

Painful experience

Their main motivation, he notes, was the 12 per cent interest they were to receive on the deposit every month. “We engaged a lawyer and had all the requisite documentation to ensure nothing went wrong,” he states.

Maina would proceed to invest an additional Sh4.5 million at Mont Blanq Afrique. He later sold some assets and invested another Sh760,000 at Sasanet. This would, however, prove to be a costly venture as the money vanished in the blink of an eye.

“With no cash, my dream to become an MP was quashed. My social life was really affected as I had to do a lot of re-adjustment from the high life I was used to. I wish this never happens to anyone else,” he states.

Among those mainly targeted by the schemes were workers retrenched by State corporations just as the scam hit its climax. Many ended up trusting the schemes with their retirement benefits, only to be tossed into financial turmoil.

Thomas Begi was among more than 6,000 Telkom Kenya workers retrenched in 2007: “I was given Sh1 million in retirement benefits and invested everything in Kenya Business Community Sacco, then based at View Park Towers in Nairobi,” says the 47-year-old, who worked in the commercial services department.

His wife, who worked with the same company as a secretary, was also retrenched, and proceeded to invest her pension, Sh200,000, in the same Sacco. The results were devastating.

“When the scheme went under and our money became inaccessible, she developed hypertension. With no money to cater for her medication, she passed on in 2010, leaving me with three children to take care of,” Begi explains.

“Life has been tough since. I know of two ladies, one in Kisii and another in Machakos, who also lost their money in the schemes and died last year as a result of stress-related ailments.”

Tragic circumstances

At Mary Kiptarus’ one-roomed cubicle near Muthaiga Police Station, one is met with a peculiar sight. A huge locked padlock dangles from her wide-open door. “The house owner fixed the padlock there early this month and I am no longer able to lock this door,” explains Kiptarus, who is too poor to afford paying house rent.

The 51-year-old widow worked for the National Oil Corporation as a driver but was retrenched in 2005. She invested her retirement benefits amounting to Sh500,000 in various pyramid schemes; but lost it all.

“I invested the money in the schemes for the sake of my three children. After what happened, I could not afford tertiary education for two of my boys and their life has been miserable. The other son is in high school and really struggling,” she says.

Dwindling fortunes forced the sickly Kiptarus to relocate from a luxurious house in the same neighbourhood to the cubicle in which she shares a double deck bed with her youngest son.

“I don’t know where to go if I am kicked out of this house,” she notes faintly.

Pastor Samuel Kariuki, chairman of the National Pyramid Scheme Victims Initiative (NPSVI), says lives of most of the affected individuals were literally torn apart by the scam: “As of last December, 150 of the victims had taken their own lives while many others have died of stress-related illnesses. They just could not come to terms with the fact that they had been reduced to beggars overnight.”

The cleric says many families were rocked by break-ups as the scam took its toll on investors: “Many relationships were broken after spouses’ partners secretly sold family property hoping to benefit from the schemes but ended up losing everything.” 

Kariuki says most of the 61,000 victims he leads, who are drawn from 45 counties in Kenya, were psychologically affected by the loss: “The money was lost in tragic circumstances as the schemes were duly registered by the government. The victims keep hoping that someone will wake up and give them back their money.”  Local churches were among the leading platforms used to market the schemes.

Many clergymen also proceeded to withdraw cash from church accounts and even sold church property in consultation with the leadership and invested in the schemes. Kariuki reveals that this later sparked a silent crisis within many churches.

“There have been deep divisions and multiple resignations by pastors, and even bishops, who could not face their flock when the schemes collapsed. The chairman reveals that many believers also decided to keep off churches, unable to trust anyone else .

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