How company nearly lost rare rosewood worth Sh2 billion in fraud scheme

A Kenyan and a Taiwanese national have been ordered to pay over Sh500 million for fraudulently derailing the exportation of 646 tonnes of Malagasy rosewood worth $13 million (Sh2 billion) to Hong Kong.

The more than 4,000 pieces of wood were sourced from Madagascar for transport to Zanzibar via the Port of Mombasa, but the shipment was interfered with, resulting in a six-year legal dispute.

Peter Liu alias Liu Ing-Ming and Salma Mbauro will pay the Kenya Ports Authority (KPA), Kenya Revenue Authority (KRA) and the Hong Kong-based Shihua Industry Alliance Company Ltd the money.

Mombasa High Court Judge Magare Kizito directed Mr Liu and Ms Mbauro to pay general damages of $3 million (Sh480 million) for fraud, fraudulent misrepresentation, inducement, and conspiracy to defraud Shihua.

The duo will also pay the cost of the suit at $122,000 (Sh19.5 million), $12,000 (Sh1.9 million) to KPA and $24,000 (Sh3.8 million) to the KRA.

“Special damages of $12.8 million (Sh2 billion), payable by Liu and/or Mbauro or their personal representatives, successors and or assigns if the woods are released to them by KPA, KRA or Maersk Kenya Ltd whether by their officers, employees, servants and or agents,” said Justice Kizito.

The Kenya Wildlife Services (KWS) had in May 2014 seized the consignment at the Mombasa port after the shipping records listed the cargo only as “wood” headed for Hong Kong. Rosewood, a rare species of timber under the Convention on International Trade in Endangered Species protection, is often trafficked for its highly prized red colour.

Read: 642 tonnes of rosewood seized in Mombasa

Documents filed in court indicate that Shihua bought the timber from the State of Madagascar for shipment to Hong Kong. The cargo was to pass through the Mombasa port to Zanzibar before heading to the Asian country.

However, when the consignment arrived at Mombasa, Mr Liu believed to be a citizen of Taiwan, signed a resolution to himself and purported to act for Shihua, while Ms Mbauro claiming to be a Kenyan resident caused the Chief Magistrate to release the consignment to them.

They did this through an application filed in court in 2018 where they sued the KWS. The KWS, however, managed to halt the release of the consignment through a court order.

Wild goose chase

The two then filed an application to export timber. Shihua’s attempt to join the case was unsuccessful, so it filed its own application asking the court for several orders, including payment of general and special damages, waiver of the storage charges, and release of the goods.

The company also asked for a permanent injunction restraining KRA and KPA from releasing the wood or facilitating its release to Mr Liu and Ms Mbauro for purposes of transhipment.

Through Yau Bao, Shihua Industry Alliance Company Ltd said Mr Liu and Ms Mbauro used fraudulent means to cause the goods to be released to them when they were not the owners of the consignment.

Read: Clearing firms now fault kicking out of inspection agents from Mombasa port

He told the court how the timber was bought in Madagascar for export to Hong Kong before the two hijacked the process through the judicial proceedings.

Mr Liu and Ms Mbauro did not file any documents in response to the company’s case.

Court records indicate that he opted to engage in shenanigans to obfuscate issues and involve the court in a wild goose chase.

Justice Kizito in his ruling noted that the Magistrate Court that handled the matter had no jurisdiction to deal with the multimillion-shilling 34 containers of wood.

“The suit was fraudulently filed. It was meant to steal not only a match but also timber. The same is not binding on the company. I am not surprised that the fraudsters sued KWS regarding matters of timber,” said the judge.

The judge stated that the magistrate court’s decisions on two related consignment cases were obtained through fraud and were therefore not valid.

Justice Kizito also ruled that the evidence tabled showed Shihua as the owner of the timber in the 38 containers and that Mr Liu and Ms Mbauro were not just busybodies but fraudsters.

Court records also indicate that the bill of landing lists the consignee and the notified party as the same entity, Shihua, without specifying separate places for the two.

Further documents show that Mr Bao made the order in Madagascar, while Mr Liu and Ms Mbauro were not involved. The certificate of importation and that of origin show Mr Bao as the sole director of Shihua.

“They have caused timber to be lying from 2017 to date. The loss is immense. I therefore direct that Mr Liu and Ms Mbauro shall pay damages for fraud. They are wrongdoers but have kept the plaintiff stuck. I therefore award a sum of $3 million (Sh480 million) against them for damages suffered as a result of the fraud,” said the judge.

They have also been directed to bear a cost of $115,000 (Sh18.4 million) to the firm. In addition, KPA and KRA have been directed to release the cargo to the firm and waive any accrued charges on storage.

Any previous orders issued in relation to the consignment have been declared null and void and overridden.

Also, any fraudulent documents showing that the firm appointed Mr Liu and Ms Mbauro to act as its attorney have been declared null and void.