How pyramid scheme money vanished through shell companies in Panama

What you need to know:

  • Using a Nairobi law firm, Iseme, Kamau & Maema Advocates, Peter Alfred Ndakwe, the chairman of Clip Investment Sacco Ltd, registered the two shell companies Sun Jopkins SA and Pentkinson SA to hide the ownership of 11 local companies.
  • The names of the 11 companies sent to Panama are: Alpek Ltd, Geomax Ltd, Dowkinstar Property Management Ltd, Dorkip Ltd, Dovlin Ltd, Petsun Ltd, Pektas Ltd, Perkinstar Ltd, Ndasun Ltd, Kingdom Press Ltd and Suvlinx Ltd.
  • Kenyan lawyers were interested in doing business with Mossack Fonseca, a firm that had been founded in 1977 by German-born Jurgen Mossack and a Panamanian man named Ramón Fonseca and which had become famous for creating dummy companies in Panama via its affiliated offices in 44 countries.

The man who vanished with Sh1.9 billion of pyramid scheme money set up two offshore dummy companies and is among several Kenyans named in secret records of a Panama law firm notorious for helping register firms for oligarchs and dictators.

Using a Nairobi law firm, Iseme, Kamau & Maema Advocates, Peter Alfred Ndakwe, the chairman of Clip Investment Sacco Ltd, registered the two shell companies Sun Jopkins SA and Pentkinson SA to hide the ownership of 11 local companies.

The names of the 11 companies sent to Panama are: Alpek Ltd, Geomax Ltd, Dowkinstar Property Management Ltd, Dorkip Ltd, Dovlin Ltd, Petsun Ltd, Pektas Ltd, Perkinstar Ltd, Ndasun Ltd, Kingdom Press Ltd and Suvlinx Ltd. The companies were registered by the same firm of advocates.

There is no suggestion of wrongdoing by Iseme, Kamau & Maema Advocates. Lawyers register companies for clients all the time and they have no say what the client does with the company once it is registered.

By having the two shell companies own his local firms, Mr Ndakwe thought, he would never be caught and the ownership of his properties would never be traced to him. In total, Kenyan investors lost about Sh8 billion in the Ponzi-like schemes that started in 2006.

With the two companies set up in Panama, its pseudo Panama owners and directors purported to give Mr Ndakwe power of attorney to open bank accounts on their behalf “to draw against the same and determine the other person or persons who may jointly or individually do so, and establish the rules for the operation of the same, deposit funds into those accounts and endorse checks payable to the Company.”

The power of attorney was last renewed on June 9, 2014.

These details are now contained in massive global data leaks obtained by the Washington DC-based International Consortium of Investigative Journalists to lay bare how the world’s wealthiest citizens transact businesses and hide their financial records from the public.

The leaked offshore data from Panama has for the first time shed light on what might have happened to the billions of shillings lost in the pyramid schemes, which left thousands of victims financially wrecked.

It all started over lunch on February 22, 2006: Two Kenyan lawyers William Maema and James Kamau had a date with Amauri Batista, an official of Mossack Fonseca (MF), which registers shell companies in Panama for clients who want to hide their faces. Mr Batista was in Nairobi shopping for business and met partners of several law firms.

Kenyan lawyers were interested in doing business with Mossack Fonseca, a firm that had been founded in 1977 by German-born Jurgen Mossack and a Panamanian man named Ramón Fonseca and which had become famous for creating dummy companies in Panama via its affiliated offices in 44 countries.

Mossack Fonseca had a long list of shy clients. It has been reported, authoritatively, that the firm uses a closely-linked firm, MF Corporate Services, to help these clients set up shell companies. These clients include Rami Makhlouf, the richest and most powerful businessman in Syria, believed to be President Bashar al Assad’s “bagman” plus associates of Muammar Gaddafi and Robert Mugabe. Others include an Israeli billionaire and business oligarch named Lázaro Báez.

PYRAMID SCHEME VICTIMS

The Kenyan client was Mr Ndakwe, an author of several Christian books and whose born-again credentials endeared him to the pyramid scheme victims. Mr Ndakwe also ran another company, Kings Script Publishers Ltd, which not only published his books, but also collected money from the public.

Contacted for comment, Iseme, Kamau & Maema Advocates, a reputable firm, asked to respond after the Easter holiday but had not done so by the time of going to press. “In the meantime, please desist from publishing any material that might be defamatory of the firm or any of its partners,” warned Mr Maema.

As the founder of Clip Investment Sacco Ltd, Mr Ndakwe was accused by his 5,846 victims of fleecing them of more than Sh1.9 billion. That case is still in court. Clip was the second largest pyramid scheme after Deci — founded by George Odinga Donde and Mary Odinga — which took Sh2.4 billion from its 93,485 members.

Now, eight years after this collapse, the new data from Panama has flung open the secret chambers and reveal how Kenyans have been opening shell companies in Panama — where the owners cannot be traced. This is because a local client can secretly appoint foreign directors as pseudo-owners of the company.

Mr Ndakwe’s two companies Petkinson, SA and Sun Jopkins SA were registered on July 26, 2006.

“This is good news,” wrote Mr Maema in an email dated Thursday, July 27, 2006. “Please advise which is the official registration number for each company … I will forward a copy of Dr Ndakwe’s passport shortly. I will also be sending you in soft copy the pages of the Memorandum and Articles of Association of some 12 companies which we are incorporating in Kenya and which will be owned by the 2 off-shore companies.”

The prefix SA after Petkinson and Sun Jopkins stand for sociétés anonyms, used to refer to anonymous companies. That way, it was hard to trace the beneficial owner of the company.

Legally, at the Kenyan registry of companies, Mr Ndakwe’s local companies would appear to have been registered on behalf of foreign interests, while in essence the whole exercise was meant to mask his interests.

“I will ask that the 2 companies subscribe to those pages and you courier them back to us. Please let me know if you require the entire Memorandum and Articles of Association for each of the 12 companies or we can just email the relevant pages,” said Mr Maema in the email.

In another email dated August 1, 2006, a Mossack Fonseca official Sara M Montenegro P tells Mr Maema: “Your client may perfectly appoint his own directors who can be either Panamanians or/and foreigners. In this sense, you will be free to conduct business elsewhere without having our nominees signing all papers.”

The first directors of the companies which had an authorised capital of Sh10,000 each, were a George Allen as director and president and three directors: Carmen Wong, Yvette Rogers, Jaqueline Alexander and Verna de Nelson.

“Once the two companies have been duly registered, the issuance of shares will be of one share certificate for 100 shares of US$100 being the total of the authorised capital in favour of Peter Ndakwe,” reads an email to Mr Maema from Julisa Jaramillo.

NAIROBI LAWYERS

“In the other hand (sic), we will issue for both companies a power of attorney for opening bank account as per the proforma attached. Therefore, please let us have your comments, the name of the person who will be the authorised signatory in the account and the name of the bank in order to complete the information in the minutes for each company.”

The reason Mossack Fonseca was doing the registration faster was that they wanted to impress local law firms so that they could get more business. A note written by MF lawyer Batista after the Nairobi meeting shows that he was optimistic Nairobi lawyers would give them business.

“We also talked about MF Trust and MF Managers services and I gave him the brochures and CD with all our information. They were very interested in foundations and asked several questions about it. They mentioned they could have some clients interested in it. They have use (sic) Mauritius usually as an offshore jurisdiction, but are also very interested in Panama,” says the note.

“They said that if the correspondent (MF & Co.) is good, they have no problem working with a jurisdiction in the other side of the world. They were very impressed with our operations, and also liked the idea of having the administration of companies from Panama,” the note adds.

The Nairobi meeting went well. “They thanked us for the information and insisted on paying for lunch. I think we have good chances of working with them soon, and they will surely be in contact,” says Mr Batista.

Mossack Fonseca got Mr Ndakwe as their first client introduced to Panama and at the time when Mr Ndakwe’s Clip pyramid scheme was weltering in financial deceit.

According to a Task Force Report on Pyramid Schemes tabled in Parliament, Mr Ndakwe is alleged to have also bought plots in Runda — L.R 14970/15, 14970/14, 14970/7 and 14970/6 — worth Sh 200 million and had transferred the properties to Perkinstar Ltd owned by this new Panama firms, Sun Jopskin SA and Pentinkson SA.

The two companies’s registration expired in 2014 and were duly renewed after Mossack Fonseca & Co. were paid “reactivation fee” of $10,697 (Sh1 million). While this amount was used to only reactivate Sun Jopkins, Mr Maema protested in an email: “We and our clients were under the impression that it covered the reactivation of both companies.

Our client is currently undergoing treatment in India and is not in a position to pay a similar amount for the other company. In light of this and given the long and mutually beneficial relationship that we have had over the years, would you please consider writing off the charges for the second company and apply the funds we have forwarded to you towards the reactivation of both companies? We shall continue supporting you with work in future and would greatly appreciate your indulgence in this matter, owing to our client’s present circumstances.”

Mossack Fonseca, of course, is not alone in setting up shell companies used by the world’s crooks and tax evaders. Across the globe, there are vast numbers of competing firms, and many of them register shells that are every bit as shady as Sun Jopskin SA and Pentinkson SA.

Panama has for long been used by dictators to hide their loot and by individuals who pilfer their country’s money hoping that they will never be found out.

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