Posted by on May 21, 2016 in Uncategorized | 0 comments

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The Central Bank of Kenya (CBK) has lost the first round in its quote to be expunged from a case over controversial Sh4billion claim levelled versus it by victims of pyramid schemes.The judgment by the High Court on Friday, declining to remove CBK from the case, has actually however bolstered the 26,249 victims whose next move will be to combat to convince the court that undoubtedly CBK was liable and should therefore compensate them.

The victims had through lawyer Wanyiri Kihoro protected their choice to enjoin CBK stating their assertions versus the regulator were based upon the findings made in the Report of the Taskforce on the Pyramid Schemes provided in 2009 to the then Principal Secretary, Ministry of Cooperative Development and Marketing.

While declining the application by CBK which sought to be struck off the pyramid victims’ case, High Court Judge Isaac Lenaola said that at the hearing, the Report of the Taskforce on pyramid plans will form a central part of the victims’ case.

“If so, the role of CBK in handling the fraud will enter into sharp scrutiny against its mandate in law. It has actually rejected any mandate in that regard, a point contested by the 26,249 victims and therefore a legitimate problem to be attempted by this court,” said Justice Lenaola.

The judge included that to get rid of CBK from the case at this moment will definitely bias the victims’ case without the exact same being heard on its merit.

“The present case is not one where any party should be permitted to walk away from proceedings, at the interlocutory stage,” Justice Lenaola ruled.

The CBK sought to be removed from the case arguing that the pyramid plans were neither licensed nor controlled by it and for that reason it could not exercise any regulatory required over them.

Even more, that the 26,249 victims never called it on any issue relating to the pyramid schemes and all proof available indicate the fact that they understood that the entities ran outside the required of the CBK.

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“No funds from the pyramid schemes were ever transferred to us and the fact that our Banking Fraud Investigation Department (BFID) dealt with a few of the complaints gotten from victims of pyramid plan fraud did not suggest that we were in receipt of any monies from Commercial Banks where the victims had made their deposits. The BFID in its examinations indeed verified that reality,” described CBK in its application seeking to have the entire petition against it struck out.

While declining to get rid of CBK from the case, Mr Justice Lenaola strengthened his findings by specifying that the function of the BFID will have to be dealt with including its role in executing the required of the CBK as well as its particular role in examinations into the pyramid plan.

“In that regard, journalism statement by the CBK outdated May 25, 2007 asking members of the public to report anyone’s soliciting funds in the name of the pyramid scheme, to the Director BFID will likewise require scrutiny,” Justice Lenaola said.

The petitioners, who are members of the National Pyramid Scheme Victims Initiative (NPSVI), state the majority of the 257 outfits which defrauded them an overall of Sh4,152,008,342 in 2006 were registered within an extremely short time after vetting for authenticity by the Attorney General, the Ministry of Co-operative Development and Marketing, or Ministry of Gender, Culture and Social Services.

The schemes were styled as restricted liability business, trusts, sole collaborations, companies, well-being association, non-governmental organizations, foundations, endeavors, investments, micro-finance groups, cost savings and credit societies among others.
“Armed with this registration, the operators of the funds opened a number of savings account under false pretenses of paying high returns on deposits made with them. They approached the petitioners, who were misinformed and transferred various amounts of money in a number of accounts opened in banks and financial institutions,” lawyer Kihoro sent.

He said the federal government policeman’s in the stated organizations and ministries, neglected their tasks as public servants and exposed the petitioners to losses, when they authorized registration of the outfits, which ended up being defunct after perpetration of the scams.

Further, that CBK and the other state organizations committed an illegality by cannot safeguard and supervise the monetary market and institutions leading to massive losses to the victims throughout the 2005 to 2007 duration.

“The fraudulent nationwide operation was brought to an end by an order made by CBK and directed to the banks and other financial institution, that the accounts run by the attire be closed. This verifies the duty of the government organizations, in preventing what occurred from the start,” lawyer Kihoro said.

According to him, the federal government had actually also ordered that the cashes kept in the numerous checking account, where the victims had transferred it, be transferred to the CBK.

Given that the stated business had a nationwide operation, their victims have ended up being spread in all the counties, apart from Wajir and Garissa.

They have actually sued the Attorney General, Principal Secretary Ministry of Co-operative Development and Marketing, the Governor Central Bank of Kenya, Principal Secretary Ministry of Finance and Principal Secretary Ministry of Internal Security and Co-Ordination of National Government.

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