How the genuine gold traders end up on the wrong side of the law

Simon Kimwele was charged with obtaining Sh2.9 million through false pretence that he could supply gold to one Raphael Wachenje.

However, after the trial, Justice Joseph Sergon acquitted him after finding that there was no evidence to prove he received the money from the complainant.

"The evidence presented by the prosecution was mixed up and could not be said to prove any offence committed. The accused did not even pretend to possess gold for sale to warrant the prosecution," ruled Justice Sergon.

Kimwele is among several businessmen and gold traders who have been arrested and charged in recent months over conspiracy to defraud millions of shillings in the lucrative gold trade.

In the last two months alone, more than 20 individuals and their companies have been charged in court with various offences ranging from conspiracy to commit a felony to obtaining money by false pretence and stealing.

The charges have raised questions of whether the booming business is infiltrated with fraudsters as licensed mineral dealers raised alarm over increasing fake gold traders who are conning millions of shillings from unsuspecting foreigners.

Some of the registered and licensed mineral dealers and gold traders have also found themselves in the crossfire by being dragged into the fake gold claims.

But despite the publicity of arrests and prosecution, there has not been a high-profile conviction as many of the cases end up being withdrawn or the accused persons end up being acquitted for lack of evidence.

It is the predicament that befell businessmen Nicholas Otieno Ndolo and Patrick Ngare Muchina and lawyer Thomas Otieno Ngoe who were charged with obtaining money by false pretence despite supplying gold to the complainants.

"These are cases where gold scammers are taking advantage of the genuine and licensed dealers who are now being falsely accused. These are people who bring millions of dollars into the country through foreign trade and should not be persecuted," said a lawyer representing the traders.

Ndolo, the proprietor of DSI Mining and Minerals Limited, and Ngoe who is the proprietor of Africorp Legal Consultants were jointly charged on April 4 with three counts of obtaining money by false pretence, conspiracy to commit a felony, and forgery.

The prosecution claimed that they obtained $1 million (Sh136 million) from a US citizen in February on the promise that they will supply him with 3,000kg of gold.

However, documents produced in court and seen by The Standard show the business transaction was clean and that the gold bars which were supplied were tested by the ministry of Mining and confirmed to be genuine.

One document was from the Ministry of Mining dated January 17, 2013, where DSI Mining and Minerals Ltd took 50 bars of gold weighing 50.12kg to the directorate of geological services for testing and the laboratory test confirmed it was genuine gold and issued him with a certificate.

"The sample weighing 50.12kg was subjected to various tests, analysed and found to have gold composition amounting to 97.92%, zinc composition amounting to 0.76% and silver composition of 0.59%," indicated the testing certificate signed by Joseah Chumo on behalf of the geological services.

The second sample of the company's gold bars weighing 3kg was also taken for analysis and found to contain 91.10% of pure gold, silver composition of 8.46% and palladium composition of 0.41%.

Another sample nugget weighing 2kg was again supplied by the company to the geological services and the test confirmed that it had 98.86% gold, 0.64% zinc and 0.49% silver while the third test showed that a sample of yellow metallic bars weighing 5kg contained 96.45% gold.

As confirmation that DSI Mining and Minerals Limited has been trading in gold for the last 15 years, the company produced several receipts from the Ministry of Petroleum and Mining showing they have been paying royalties to the government.

Two of the latest receipts obtained by the Standard showed the company paid to the government a total of Sh353,920 as royalties for mining, exporting and trading in gold.

Although the prosecution charged Ndolo with a third count of making a fake Mineral Export Permit, the businessman has produced in court a permit that was issued and signed by the Director of Mines.

"Permission is hereby granted to the applicant, DSI Mining and Minerals Limited, to export minerals whose particulars are specified in the mineral export permit from the date of issuance of this permit," read the permit signed on behalf of the CS for Mining.

According to the document, DSI Mining and Minerals Limited was issued the Mineral Export Permit upon payment of all royalties.

The lawyer involved in the transaction also said he could only release the money he was holding in trust for the complainant to the seller after receiving instruction which he was granted and confirmed by the parties.

After all the transaction was done and the complainant was satisfied, DSI Mining and Minerals Limited wrote to Africorp Legal Consultants on February 11 requesting that they advance the money to their accounts.

The accused persons in their defence said they do not understand why the Director of Criminal Investigations concluded that they had duped a foreigner to pay millions of shillings when all transactions were clean.

"We do not understand why the DCI decided to charge without investigations. They should have gone to the ground to establish the truth since the client even verified that the gold was genuine. It is wrong to conclude that some genuine traders are also gold scammers," they said.

Patrick Ngare faced the same predicament when he was charged alongside Kelvin Mwaura Ngotho and Congolese Muke Mansoni Didier over allegations of defrauding Iranian businessman Sadegh Sadeghain Abolfazi $500,000 (Sh64 million).

The businessman is said to have paid the trio the amount for the supply of 60kg of gold between May last year and April this year.

But Ngare in his defence says the case was brought up out of malice since he has never met the complainant, did not have any transaction with him or received the money and has instructed his lawyer to file an application at the High Court to stop the prosecution.

"This was a case of malice brought in bad faith to stop the businessman from doing his legitimate business. He did not receive the money as alleged," his lawyer said.

He has also instructed his lawyer to file a defamation suit against the Iranian businessman for making false allegations to drag his name into the fake gold racket.

The businessman has also filed in court copies of licences issued by the Ministry of Mining to prove that he does not deal in fake gold and that the allegations are false.

"This is to confirm that Patrick Ngare Muchina is licensed to trade in gold, silver and precious metal groups after satisfying all requirements and paying the requisite fees," said the licence from the Ministry of Mining.

According to the businessmen, it is not possible for the Ministry of Mining to issue them with licences every year if they are dealing in fake gold.

The Mining Act (2016) provides for strict requirements for one to be licensed as a gold trader and gives power to the Mining CS to reject any application which does not satisfy the requirements.

Section 10 of the Act provides that a person shall not search for, prospect or mine any mineral, mineral deposit or tailings in Kenya unless that person or company has been granted a permit.

"The directors of the company shall be required to demonstrate the required technical capacity, expertise, experience and financial capacity. The company must also be operating in its registered office within Kenya," read the Act.

This is in addition to requirements under the Mining (Licence and Permit) Regulations which require that all traders in precious stones must comply with the conditions of the licence and any directions issued by the Cabinet Secretary or authorised officer or have their permits revoked.

The regulations require that the traders and their companies must provide their full name, address of permit holder, name and registered address of the company, types of minerals they are dealing in, details of their experience and financial resources.

According to the traders, it would have not been possible to have their licences and permits to be renewed every year if they were trading in fake gold as alleged by the DCI and the Director of Public Prosecution.

"The traders have licences from the Ministry of mining and have done business with many companies and individuals across the world for many years without any complaint. The DCI is abusing its powers by charging them even without evidence," said their lawyers.

According to the businessmen, there is no way they can supply fake gold to their clients since the buyers always come to the country to confirm the consignments are genuine based on testing from the geological department before they complete the transactions.