A promised deal on gold was no such thing, lawsuit alleges

Andrew Vilenchik says he'd never heard of the international "Goldenberg scheme" until last year, and by then it was too late.

The 31-year-old Russian immigrant manages a financial services firm based in Crystal and was looking to buy some gold when he learned through a Kenyan consultant that 4 tons of the precious metal could be had for about half the current retail price. After doing what he thought was reasonable due diligence, Vilenchik said, he agreed to make a sample purchase.

Now, Vilenchik claims in a federal lawsuit filed in Minneapolis this week that he was scammed by the Republic of Kenya, its customs agency and its central bank. He's seeking to recover $40 million in lost profits plus $10 million in punitive damages, as well as $400,000 he spent on the deal.

In his lawsuit, Vilenchik says he hired a Minneapolis consultant from Kenya named John Saina in an effort to buy some gold. Saina was approached by a group of individuals who claimed to own a gold mine in the Democratic Republic of Congo, the suit says. The mine representatives claimed they had 3,700 kilos of gold available for immediate sale at $19,000 a kilo, or $70 million.

Vilenchik said some high government officials in Kenya were involved in the transaction, "and that lent legitimacy to the whole thing."

The suit says Community Finance agreed to buy an "initial sample" of 300 kilos of gold for $5.7 million, and in June it wired $350,000 into an escrow account to cover Kenya customs fees. From here the story goes through some complex twists and turns. Suffice to say that the deal fell apart, and according to the lawsuit, some of the Kenyans they were dealing with were operating under false personas.

Vilenchik said that as he and an employee named Cary Larsen were trying to resolve the problems, one of the Kenyans told Larsen "that white people disappear in Africa all the time," making them fear for their lives.

Community Finance reported the dustup to banking and law enforcement officials in Kenya, and a loaded handgun was found on the Kenyan who threatened Larsen, the suit says.

Vilenchik said Kenya pressed criminal charges against that man, but he expects the matter to be dropped. "It was not very safe for us to go over [and testify] without a guarantee for us to come back alive," Vilenchik said.

The Star Tribune provided the Kenyan Embassy in Washington with a copy of Vilenchik's lawsuit, but it did not respond Thursday to a request for comment. Saina, who is not a defendant in the lawsuit, could not be reached for comment in Minnesota or Kenya.

Vilenchik said he learned after the fact that others have fallen for similar gold schemes in Africa. "It was a setup from the beginning," he said. "We found several other victims from other countries who assisted us in understanding the situation."

Vilenchik said he filed a complaint about the matter with the U.S. Embassy in Kenya, and has since written to the White House and several Minnesota representatives and senators.

Their response? "It is unfortunate that this happened," said Vilenchik.

He doesn't seem too confident that he'll fare much better in court.

"I like to believe in justice, but the courts are unpredictable," Vilenchik said.

Dan Browning • 612-673-4493