Monthly archive: December, 2008

I read about Bernie Madoff and his ponzi scheme the other day, all the people he took down while raking in the millions… no, make that billions of dollars. They say it will go down as the biggest fraud case in history. But Bernie has nothing on us here in Costa Rica, or maybe this is where he learned his trade… or where he’ll end up. This is, and has always been, the place to accomplish this kind of investment formula.

I suppose it all started with Robert Vesco, back in the 1970s, or that’s as far as my collective knowledge goes. He bilked U.S. investors out of millions of dollars, putting it into dummy corporations all over the globe. After an investigation by the Security and Exchange Commission (SEC) and it became clear that charges against him were imminent, Vesco took the corporate jet and fled to Costa Rica— along with about $200 million.

He spent the next fifteen years fighting extradition. Even got a law named after him: The Vesco Law. He donated $2.1 million to Sociedad Agricola Industrial San Cristobal, S.A., a company founded by then President José Figueres. Figueres then passed a law to guarantee that Vesco would not be extradited to the U.S.. Eventually his luck ran out, though; Costa Rica repealed the law and signed a treaty with the United States.

He managed to dodge the bullet, flying to Havana where he lived out his life. Cuba is a tough place to end up and I have read that he was eventually sentenced to 13 years in prison for “fraud and illicit economic activity” and “acts prejudicial to the economic plans and contracts of the state.” I believe he died a couple of years ago. Some say in jail, others say he never served a day.

I gather that Bernie Madoff is out on a $10 million bond and can’t travel outside of New York City area, but Vesco managed to escape the long arm of the U.S. Law. Kenny Lay died––died, or committed suicide––before he ever served any time for the whole Enron debacle that left thousands penniless. Then there are The Brothers.

These guys are my favorites. The Villalobos Brothers, our Costa Rican brand of swindler. I was once courted by one of their “investors” when I first arrived here, wet behind the ears, back in the early 1990s. Their scheme had operated for over 20 years. It was safe, they promised me.

“You and Alan should really think about investing with them,” said Joe, an aging Canadian fireplug who liked to pass himself off as a judge, even though he was really just a bailiff in a small municipal court in Ontario. “All you have to invest is $10,000.00, and you get three percent interest every month, more if you reinvest the interest. I can introduce you to the president of the company. He’s a really nice guy, owns a helicopter business.”

“Yeah, well thirty-six percent interest a year sounds dirty to me,” I told my husband later that night. “And you know what they say when it sounds too good to be true?” We never did invest in the “fund” but many, many others we know did.

It was run by Enrique Luis Villalobos and his brother, Osvaldo, out of a small office in San Pedro, a suburb of the capital, San José. There was religion involved apparently. Enrique claimed to be a minister and had a church he was “supporting.” He was charming and there are still investors today who claim he was framed by the government; Costa Rica is to blame for the loss of their money. Enrique Villalobos is now an International fugitive with millions of other people’s money.

In true Ponzi fashion The Brother’s Fund fed off newcomers, paying off previous investors until Canada finally blew their cover in an investigation over drugs and money laundering in 2001. In May of that year the Canadian Mounted Police busted six people in Canada and confiscated 1200 pounds of cocaine. At the same time the Costa Rican police raided The Brother’s offices in San Pedro. Computers and files were seized. The Villalobos? One of them went to jail, but Enrique—the brain— is on the loose somewhere.

Alan and I talked about it and agree it would be the perfect set up for money laundering. Think about it. If you had, say, $500,000.00 of dirty money and couldn’t use it for legal purposes, what better way than to put it in an investment fund that paid out at thirty-six percent a year. It would only take three years to get your $500,000.00 back as “legal” interest. You wouldn’t be able to use the dirty money, so you just leave it there and move on with the clean interest, knowing there are more drug sales to be made and more principle to be invested. The other investors— the chumps full of larceny, as my dad likes to call them— got stuck holding the bag.

There were many people who had their entire retirement invested in that fund. I imagine there are people in that same situation right now with the Bernie Madoff mess. Granted Madoff was only offering eleven percent interest, but that still seems high for normal mutual fund growth. He found a lot of investors, though.

Here’s the rub: greed outweighs caution ninety-nine percent of the time, or, as PT Barnum is supposed to have put it: there’s a sucker born every minute.

We’ve known this in Latin America for years, but America is catching up fast in the corruption business. Me? I’m not investing a dime in anything until there are regulations in place that make investing an option again.