The Standard Blog

Pyramid scheme fraudsters must be punished

Published on 06/06/2009

By Roseleen Nzioka

The sentencing of the world’s largest investor fraudster Bernard Lawrence Madoff is scheduled for June 29, 2009. Madoff faces a maximum sentence of 150 years in prison and $170 billion in restitution.

He is currently an inmate at the Metropolitan Correctional Center, New York City, NY.

Bernard Lawrence Madoff is an American former businessman and former non-executive chairman of the NASDAQ stock exchange who was convicted of operating a Ponzi scheme (what we Kenyans call pyramid scheme) that has been called the largest investor fraud ever committed by a single person.

It took just four short months for him to be arrested, charged and convicted of the crimes. On March 12, 2009, Madoff pleaded guilty to an 11-count criminal complaint, admitting to defrauding thousands of investors. Federal prosecutors estimated client losses, which included fabricated gains, of almost $65 billion. Madoff surprised everyone by refusing to name his accomplices, instead choosing to take all the blame.

In Kenya a task force, headed by former minister Francis Nyenze, has finally compiled its report, after almost one and a half years, which lists the masterminds of pyramid schemes that cost Kenyans a whooping Sh34 billion. Majority of the schemes collapsed in 2007 leaving many investors destitute. At least 20 Kenyans, victims of the schemes, committed suicide and many families were separated because of losing their money through the pyramid schemes.

Cooperative Development minister Joseph Nyaga told Parliament on Thursday that he would reveal the full list of the masterminds in two weeks. The task force to investigate the fraud was formed in February 2008, and toured the country, collecting views and registering victims who lost money in the schemes.

Although some investors took initiative and instituted court cases against some directors of the pyramid schemes no one has been punished for the fraud to date.

Nyagah said the taskforce had identified 169 pyramid schemes, adding that 16 were later registered as co-operative societies.

Meanwhile some MPs took advantage of the parliamentary privilege and named names of those implicated with defrauding Kenyans in the ponzi schemes. The list of suspects reads like the who’s who in Kenyan politics, business and religious circles. But for now they remain innocent until proven guilty.

How did the ponzi schemes work in Kenya? Simple. Depositors were encouraged to deposit their money with the schemers, with the promise of earning high interest on their deposits.

The investors were actually paid monthly or bimonthly interest rates of between 10 and 16 per cent on their deposits.

The more one invested the more interest one earned. Naturally greed got the better of Kenyans and people started depositing millions of shillings with all manner of pyramid schemes that sprouted all over the country. And then it went bust!

Kenyans are now demanding justice. The fact that the law is vague on ponzi schemes is no excuse for the fraudsters to go scot-free. The fraudsters used pretentious means to acquire people’s money and made off with it. They are thieves. And no doubt the law is very clear on how to deal with thieves.

 

 

 
COMMENTS

1. On Monday June 8, 2009, 8:46 AM , limo alfred, Kenya wrote:

the government was behind the scheme, how did they get the registration to be cooperative societies? it was a scheme aimed at defrauding kenyans with an aim of raising campaign money


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