On August 31 last year, as the country was glued to the Supreme Court hearing into the presidential election petition, authorities were busting a sinister food consignment – counterfeit rice. But days later, the fake rice was released into the market.
|News
Premium
How State officials and two firms okayed the sale of counterfeit 'Pearl' rice
What you need to know:
- On August 31 last year, as the country was glued to the Supreme Court hearing into the presidential election petition, authorities were busting a sinister food consignment – counterfeit rice. But days later, the fake rice was released into the market.
- Some of the counterfeit rice was already retailing in the market by the time the Anti-Counterfeit Authority had gotten wind of the bogus consignment on July 27, 2022.
On August 31 last year, as the country was glued to the Supreme Court hearing into the presidential election petition, authorities were busting a sinister food consignment.
The shipment from Pakistan comprised of more than 10,000 bags of rice packaged as a popular brand— Pearl—and estimated to be worth Sh150 million. Except that the rice that was stored at a go-down in Shimanzi, Mombasa, wasn’t the well-known brand, it was counterfeit.
Some of the rice was already retailing in the market by the time the Anti-Counterfeit Authority (ACA), the State agency tasked to flag fake goods, had gotten wind of the bogus consignment on July 27, 2022.
The agency had been tipped off by the Thika-based food maker, Capwell Industries Limited, that had discovered the bogus rice in the market bearing its brand.
Also Read: Web of sugar importers with dark legal past
Acting on the tip-off, ACA officials, raided the go-down in Mombasa and impounded the remaining stocks of the counterfeit rice.
The illegal import, documents and email correspondence in possession of the Nation show the rice had been shipped into the country by Varun Distributors Limited, owned by reclusive billionaire businessman Essrani Kumar.
Capwell Industries officials had alerted ACA investigators of the counterfeit rice through a letter.
“... enclosed hereto is a complaint by Capwell Industries Limited regarding goods being marketed and offered for sale using their brand name PEARL, a duly registered Trademark. We kindly request your office to investigate the matter. I therefore confirm that Pearl Biryani rice by M.Amar Industries is completely distinct from Pearl Pishori rice by Capwell Industries Limited. We have attached package images for both suspect products and the genuine CIL’s packages. Your update on the matter shall be much appreciated,” reads the letter dated July 27, 2022.
The letter was signed by Capwell’s legal officer Chepkorir Peninah and quality assurance manager John Bosco Muthama.
Immigration alert
ACA had moved swiftly to place an immigration alert at Jomo Kenyatta International Airport and Mombasa International Airport as authorities traced the importer.
But in a curious twist, all the parties in the case, the rival traders and officials of the State regulator, suddenly began slowing down on the crackdown, setting the stage for a controversial deal that would see the entire consignment released into the market.
Six days after the complaint had been lodged against them, Varun Distributors wrote to ACA’s regional office in Mombasa requesting for alternative dispute resolution with Capwell Industries.
The plan was to convince Capwell Industries that continuing with the case would hurt their popular brands in the market such as Soko maize flour, CIL rice, Pearl Pishori rice, Amaize maize flour, and Ranee rice. And that it would be wise to drop the matter and get compensated on condition that the seized rice would not be destroyed.
In order to facilitate the sale of the counterfeit rice, Varun Distributors was to be appointed regional distributor for Capwell Industries.
“We hereby request your esteemed office to allow Alternative Dispute Resolution with Capwell to enable us settle this matter amicably,” Varun Distributors wrote to ACA in a letter dated September 2, 2022. “Therefore, please grant us permission to discuss the complaint to come up with a solution. We hope this meets your attention.”
The letter set the stage for the deal that would see the impounded rice released into the market.
Capwell Industries, on October 25, 2022, according to the documents in our possession, wrote to ACA informing the government agency that it was withdrawing the complaint against Varun Distributors.
Some of the counterfeit rice was already retailing in the market by the time the Anti-Counterfeit Authority had gotten wind of the bogus consignment on July 27, 2022.
“'That on 1st August 2022, vide form ACA8, Capwell Industries Limited made a complaint to your office in respect to the an infringement of ‘Pearl’ trademark through selling and distribution of rice branded as Pearl Biryani Rice. That your office commenced investigations on the matter resulting to seizure of 10,000 bags of Pearl Biryani Rice on 31st August 2022 by the Anti-Counterfeit Authority at Portside Godown Mombasa,” read the letter from Capwell Industries signed by its Chief Finance Officer Ayon Gupta.
‘Amicably settling the matter’
“That it was established that the seized rice belonged to Varun Distributors Limited , a company based in Mombasa and engaged in the business of importing , distributing and selling goods including rice. That on 7th September 2022, we received a letter forwarded to us by your offices dated 6th September 2022 written by Varun Distributors Limited requesting for an amicable settlement of the matter. That we responded to the letter on 9th September 2022 affirming that we were agreeable to amicably settling the matter as requested by them,” the letter added.
Mr Gupta went on to indicate that following tripartite talks among the parties involved, they had reached an agreement, “to the effect that Capwell Industries Limited has licensed and appointed Varun Distributors Limited as their sole distributor of the goods known as Pearl Biryani Rice seized at Portside go-down Mombasa. Consequently, we hereby withdraw our complaint dated 26th July 2022 in its entirety” .
With that, the investigating officers were directed to release the contested rice. In an email on October 27, 2022, ACA Enforcement Director Yussuf Osman Ahmed directed the lead investigating officer on the case to drop it.
“Dear Hassan Maningo, you are the investigating officer on this matter. We are copied in a withdrawal letter by the brand owner Capwell Industries and advised by the legal director Johnston Adera on the status. Prepare the release memo for onward transmission and approval and remove the red alert by 3pm today without delay. Treat it as urgent,” he wrote.
A day before the email was sent to Mr Maningo, Mr Ahmed had already sent another email to him informing him to remove the red alert ACA had placed with Immigration against Mr Kumar, preventing him from flying out of the country.
Also Read: Why your plate of rice will soon cost more
“Kindly prepare a memo for release of the goods to the importer and remove the red alert imposed by Immigration to facilitate the travelling of the suspect,” reads the email.
“The withdrawal of the complaint marks the end of our power to investigate under the Act. The effect is termination of enforcement action. There is no compelling public interest within the context of Article 157(11) of the constitution to pursue enforcement action in the face of withdrawal of complaint, authorization by way of license and hunger in parts of the country, as the rice can be available in circulation to feed the population. The investigating officer to prepare a memo for formal approval of the release of the seized goods,” Mr Ahmed directed in an email.
Now, the Directorate of Criminal Investigations (DCI) has taken over the matter. Sources told the Nation that so far, ACA chief executive officer Njoroge Mbugua, Mr Adera, Mr Ahmed and other officials have already recorded statements.
Mr Mbugua confirmed to the Nation yesterday that he has been summoned to the DCI headquarters to record a statement on why the counterfeit rice was released back to the market.
He said ACA acted within the law where an aggrieved party has a right to pursue an out-of-court settlement.
“It was more of an IP (intellectual property) issue. IP is a private right and the owner has a right to lodge a complaint, sustain or withdraw it. In this case, those who withdrew the complaint gave a distribution license to the party they had complained about in line with Section 33 of the ACA Act,” said Mr Mbugua.
Mr Adera said he was “not going to comment about the matter. If you want any comment write officially to our CEO”.
ACA chairman Josephat Kabeabea, who is the former Tigania East MP, said he is aware of the matter but it happened before he took office.
“I am aware of the issue after it was brought to my attention ... I know DCI is investigating the matter so allow me not to comment further,” Mr Kabeabea said.
Capwell Industries’ marketing director Chetan Shah refused to comment on the matter and directed the Nation to Ms Chepkorir who said: “I am not able to comment about the issue because it was solved as per Anti Counterfeit Authority guidelines.”
At Varun Distributors, Dave Tajil, who said he is the head of front office, said that Mr Kumar was out of the country and therefore unavailable for coment.
“Mr Kumar is outside the country on medical grounds. Please text me your queries so that I can forward to him for response,” he said.
At the DCI headquarters, Mr Adan Guyo, a senior detective handling the matter, declined to comment without the consent of DCI boss Amin Mohammed, who was not in his office.
Varun Distributors was registered on February 28, 2018 and commenced its business operations on April 30, 2018.
