After 16 years, the High Court has finally determined that the controversial former Imenti Central MP, the late Gideon Mwiti, Kenya’s version of Bernie Madoff, was a crook running a fake bank from Nairobi — and that he was not entitled to the Sh1 billion he was demanding after his phoney bank was shut down.
Mwiti, like Madoff, was Kenya’s king of pyramid schemes — our Mr Carlo Ponzi, the infamous swindler who paid out returns with other investors’ money. Two years after Mwiti’s bank was closed, he set up a pyramid scheme named Kenya Business Community Sacco, which would later collapse with more than Sh780 million of depositors’ money. He was also associated with another Ponzi scheme, Kenya Multipurpose Business, which also collapsed.
In between — perhaps unrelated — Moses Gituma, the senior Central Bank of Kenya official who led the raid on Mwiti’s bank, was on October 23, 2009 waylaid at his Garden Estate home in Nairobi after he returned home at 2am. Gituma’s wife, Janet Karamana, was accused of sneaking in the four assailants to her home and helping them to escape later that night by driving them towards Thika. Gituma died on March 2, 2010 after 17 weeks in a coma and Janet, described by the High Court as a “cold-hearted schemer” was sentenced to 30 years in prison.
Sh780 million
With the Sh780 million windfall from the pyramid schemes and to protect himself, like some elite thieves do, Mwiti used part of this ill-gotten wealth to mesmerise voters in Imenti central who fell for his money trap after he masqueraded as a saviour, their “development conscious leader”, “the generous harambee man” and other accolades that come with freebies. Mwiti was popular in Meru churches, youth and women groups — where he was nicknamed Livondo, after the tycoon politician Stanley Livondo.
That is how, in 2013, he was elected a member of Parliament and after that, one night in March 2015 at Tana Club on Woodvale Grove in Nairobi’s Westlands, he was alleged to have raped a woman – a charge that has been running for seven years, and is a shameful indicator of how our legal system operates at the speed of a tortoise. By the time he died in July last year, Mwiti was still walking free – though his attempts to stop the rape case had collapsed.
Also, the case against his Kenya Akiba Micro Finance Ltd, the phoney bank he had run, was still dragging on in court. So delayed was the case that those who were in Standard One, when the bank was closed by the Central Bank in 2005, have now graduated from university.
It all started on November 2, 2005, when police accompanying two senior officials of Central Bank, Moses Gituma and Ezekiel Chebii, raided Kenya Akiba offices, on the mezzanine floor of Nairobi’s Lonrho House, and shut down the bank headquarters and its branches in Ongata Rongai and Kitengela. They also arrested its four directors — including Mwiti, the majority shareholder and the mastermind, and froze their accounts.
The move had followed a letter dated October 24, 2005 from Joseph Kinyua, then permanent secretary in the Ministry of Finance, instructing the governor of the Central Bank to investigate Mwiti’s bogus institution following complaints from the public.
Ponzi system
Mwiti knew the Ponzi system, the crafty underworld, and was one of the early architects of the pyramid schemes that emerged shortly after the economic boom that followed the fall of Kanu and election of Mwai Kibaki.
Had the Central Bank not fought back, the flamboyant businessman, who had at one point been cleared by Justice Alfred Mabeya — when he ruled that Akiba was truthful in its affidavit that it was not carrying out banking services and that it engaged in the hire purchase business — would have walked free, perhaps billions richer.
Mabeya stopped CBK and the Attorney General from pursuing Mwiti and tossed out their affidavits, thus stopping the case from proceeded to full hearing.
“I do not think there would be any other and further evidence that a trial in this case will elucidate as far as this issue is concerned … there is no evidence that the plaintiff was carrying out banking business or business of deposit taking. They (Attorney General and CBK) tried before the criminal court and they failed.”
It was true that a criminal case in which Mwiti was charged with running a phoney bank collapsed and he used that case to institute several cases, even as the CBK was appealing the dismissal of the case against Akiba.
High Court
First, Mwiti filed a suit on November 10, 2005, at the High Court seeking orders for the reopening of Akiba, and on November 15, it filed the second suit seeking a permanent injunction stopping CBK from interfering with its operations. It further demanded Sh1 billion as general and exemplary damages.
After the AG filed a defence and asked that Akiba be put to strict proof of the assertion that it was running a hire purchase business for which it was licensed, Mwiti tried to amend the suit by enjoining all the police officers in their personal capacity hoping he could have his way. Despite protests from CBK that Mwiti was changing his original suit and filing a new one in disguise, the court granted him his wish on April 7, 2006. Victory number 2.
After the AG filed his defence — Mwiti, like a sly fox, then abandoned the two suits and filed suit number three on April 9, 2010, seeking the release of his properties. In this suit, Mwiti sought an order that if the AG does not release the seized equipment, he (Mwiti) should be paid Sh2 billion in damages. He also wanted all the defendants to deposit security in court pending the hearing of the case, in a case where the hunter was now becoming the hunted.
The idea seemed to be to keep the CBK busy in court until his criminal case was settled, for when the CBK filed its replying affidavit, Mwiti did not prosecute his case until July 27, 2011 when it was heard orally. But before this third suit was concluded, Mwiti abandoned it and filed his fourth suit on October 28, 2011, shortly after his acquittal by the principal magistrate on September 3, 2011. In this case, he wanted the CBK and the AG’s defence struck out and he also sought damages.
Justice Mabeya determined this case on May 4, 2012, and held that Akiba was not running a bank, but a hire purchase business, and struck out the CBK and AG’s defence. He dismissed the affidavits as “frivolous and vexatious … scandalous, an abuse of court process and a waste of judicial time.”
What this would mean, and according to Justice Mabeya, was that there was no illegality in running an institution with the word “finance” — even though the Banking Act prohibited its use and as long as an institution was not taking deposits.
“The contention that the plaintiff was carrying out banking business is a red herring being raised by the defendants to cushion themselves from liability for blatant, illegal and uncalled for raid … which not only broke the plaintiff’s backbone as a commercial entity but also ruined many businesses of its customers,” said Justice Mabeya.
The CBK appealed.
When the case was taken up by Justice Philip Waki, William Ouko, and Gatembu Kairu at the Court of Appeal, they felt that Justice Mabeya offended all legal principals expounded by Justice J Madan on how to strike out pleadings: “A court of justice should aim at sustaining a suit rather than terminating it … no suit ought to be summarily dismissed unless it appears so hopeless … so weak as to be beyond redemption and incurable by amendment.”
They ruled that Justice Mabeya misdirected himself, and that it was an abuse of the court process to deny a party to civil proceedings access to ventilation of its case.
It is this bench that returned the case to the High Court and excluded Justice Mabeya from hearing it.
Last month, and rather quietly — contrary to the noisy closure of the bank — the High Court in Machakos finally ruled that indeed, Mwiti was running a bogus bank. How the criminal case collapsed seemed to be a thorny issue that the judge did not want to address.
“This court acknowledges the acquittal of accused persons from criminal charges and the matter was on the basis of the standard of proof beyond reasonable doubt whereas in civil proceedings, the standard of proof is on a balance of probabilities,” observed Justice Margaret Muigai.
That the people who trusted Mwiti had to get justice after 16 years is not only a scandal but a big blot on the Judiciary. That Mwiti could be elected an “honourable” Member of Parliament is the shame of our times.
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Select feedback on the stories of Nanyuki’s Mt Kenya Safari Club
You may not know how much we enjoy reading your articles. These are stories we could have died without knowing, but through you we have known (them) and get deeper understanding. I wish you could get a chance to write those articles on a daily basis. Your number one fan, since 2007. Clinton Oduor
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Thanks John for yet another thriller from the colourful moments at Mt Kenya Safari Club and allied events, keep them coming! Just a note that it was Robert Maxwell, not Tiny Rowland, who wanted to grab part of Uhuru Park, with Moi’s help ostensibly to put up a 60-storey complex for Kenya Times newspaper.
Francis Ngambi
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Splendid! A true story that borders on fiction. It’s yet another proof that man’s heart is deceitful above all things and desperately wicked (Jeremiah 17:9). Sometime back you told the story of a man who would excrete on top of Khashoggi’s yacht that he later sold to Donald Trump and he fell over into the sea. We have not heard enough of Khashoggi’s escapades. Kamau Njoroge
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Oh my goodness. I hope you aren’t through yet with this club. The intrigues seem to have gone local since controversial ownership shifted local. I hope you continue. But many thanks for your incisive writings. Fred Wafula BY DAILY NATION