Deal too good? Fake gold, cons and the money

Wednesday April 10 2019

GOLD

Gold bars. In 2012, the UN gave Kenya a list of 15 suspected gold traffickers whose activities, it said, were funding wars in DR Congo. PHOTO | FILE | NATION MEDIA GROUP 

ABIUD OCHIENG
By ABIUD OCHIENG
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With all the publicity about fake gold business in Kenya, one would be tempted to believe that the number of people being conned is falling.

However, two cases presented in court on Monday show that the trade could still be vibrant and that the amount of cash being lost is actually going up.

In the first case, Mr Benjamin Onyango Oguok was charged with obtaining Sh2 million from Mr Sam Kazal, a Briton, by pretending he that could sell him three kilogrammes of gold.

Mr Oguok denied the charges and was released on Sh500,000 bail.

In the second case, Ms Consolata Achieng, Mr Washington Libese and Mr Enock Mugwana were charged with illegally obtaining $1,059,000 (Sh100 million) from Mr Kavalenko Henneddi, a Ukrainian.

It is this amount that sent alarm bells ringing among investigative agencies.

BUYERS WARNED

But even as police scratch their heads, the number of foreigners claiming to have been conned of millions of shillings in the counterfeit gold trade has lately been on the rise despite Kenya not being a significant producer or exporter of the precious metal.

So much has the concern been over the last 10 years that in 2017, the Mining ministry warned that rogue dealers were issuing certificates purported to be from the government showing that the fake gold had been tested and graded.

“The victims have been unsuspecting Kenyans and foreigners,” the then Mining Cabinet Secretary Dan Kazungu said in an advert in the government publication, MyGov, on September 26, 2017.

Apparently, the warning to prospective gold buyers did not reach the targeted audience, given the number of complaints lodged with the police and those that have ended up in court after the warning was issued.

PRODUCTION

A common trend in the fraud cases is that there is demand for hefty upfront payments to facilitate the processing of documents, after which no export takes place.

Two factors make gold traders fall victim easily to fraudsters operating from Nairobi.

First, Kenya is and has never been a mass gold-producing country. In fact, the little gold produced is dug up from unconventional mines and river beds in western and northern Kenya.

According to the World Gold Council, the country had an average of just 1.76 tonnes of gold reserves last year. Only 160 kilogrammes of the metal was mined in the same period.

Second, the Democratic Republic of Congo is said to sit on $23 trillion worth of minerals, but the vast country has been ruined by internal conflicts for many years.

SMUGGLING

As a travel and commercial hub of the region, Nairobi has for long been the conveyor belt for goods and services coming in and out of East and Central Africa.

These include minerals smuggled from the DR Congo.

It is the proceeds from the sale of these minerals that the United Nations blames for fuelling the bloody conflicts in that country.

In 2012, the UN gave Kenya a list of 15 suspected gold traffickers whose activities, it said, were funding wars in DR Congo.

Eight years later, fraudsters have found a way of convincing buyers that they can link them to cheap gold from the country.

On Tuesday, a kilo of gold in the international market was retailing at $42,000 (Sh4.2 million).

In Nairobi, fraudsters pretend they can get gold from the DR Congo for between $20,000 and $25,000 per kilogramme.

CON ARTISTS

It is this huge price variation that makes traders think they can make a killing if they get gold from Kenya.

Once they land, the foreigners are given first-class treatment from the airport to being booked at top hotels.

The con artists then ask them to pay the export processing fees after being provided with documents that appear genuine.

After making a payment, excuses crop up, making the clients part with more money until they give up.

Just last week, Mr Malinzi Lucey Kwesiga was charged with obtaining €19,000 and $20,000 from Mr Patrick Guy between March 8 and March 26 by pretending that he could sell him gold.

He denied the charge and was freed on a Sh500,000 cash bail. The case will be heard on May 14.

SUSPECTS

And on March 18, police found counterfeit dollars and fake gold bars at Barclays Bank Queensway branch in Nairobi valued at Sh2 billion.

On February 25, Mr Gideon Zeddie Otieno and Congolese Ishikunga Andre Kongolo alias Joseph were charged with stealing 200 kilogrammes of gold valued at Sh56 million from Mr Ibrahim Kostoeb Kostoev.

According to the police, Mr Kostoev had travelled to Uganda in December and met a Congolese named Rajabu Pulush in Kampala who said he could sell him 50 kgs of gold at $28,000.

Soon after depositing part of the payment, the story changed and he was required to make an additional payment.

A row ensued and the buyer was later informed that the gold had been taken back by the Ugandans.