Villalobos Asset Freeze Extended
Investors to File Suits; Prosecutors Request Arrest Warrant for Luis Enrique Villalobos
By David Boddiger
Tico Times Staff
dboddiger@ticotimes.net
In a move legal analysts say may pressure naturalized Costa Rican businessman Luis Enrique de Jesús Villalobos to come out of hiding, his brother and former owner of the Ofinter, S.A. money exchange business, Osvaldo Villalobos, was detained Wednesday morning by judicial authorities.
A judge ordered a six-month preventive prison term for Osvaldo Villalobos, after he was arrested and charged with money laundering, fraud and illegal financial intermediation, according to judicial spokeswoman Sandra Castro.
Meanwhile, another high-interest investment operation, Savings Unlimited, unexpectedly closed last weekend and its high-profile Cuban owner, Luis Milanes, has reportedly fled the country, according to authorities (see story, below). The two businesses appear to have many similarities, including a high number of now-frantic investors with money in both operations.
On Tuesday, Special Prosecutor Luis Bonilla summoned both Osvaldo and Luis Enrique Villalobos for the next day at 8 a.m. Osvaldo was detained shortly after he presented himself on Wednesday. Luis Enrique Villalobos failed to appear at the prosecutor's office.
Bonilla is handling the Villalobos investigation while lead Prosecutor Walter Espinoza is attending a Federal Bureau of Investigation training seminar in the U.S.
According to Castro, Osvaldo is being charged with violating the Central Bank's Organic Law. A judge ordered Osvaldo to six months preventive prison Thursday afternoon.
Castro said prosecutors also have requested an arrest warrant for Luis Enrique, but it has not yet been approved by the judge.
Osvaldo Villalobos' attorney, Edgardo García, told the local daily Al Día: "(Osvaldo) has always been cooperative (with authorities), such as when he helped prosecutors log on to computers and review various archives, because they didn't know how to do it," Al Día reported.
"(Osvaldo) is certain he is innocent and sooner or later, will be released," García added.
The detention is the latest in a series of steps judicial authorities took this week that indicates they are stepping up their investigation into the Villalobos brothers' business dealings.
Under "The Brothers" arrangement, new investors - who had to be recommended by existing investors - received 2.8-3% monthly interest on minimum loans of $10,000. Many investors reportedly invested much more, and allowed their interest to compound.
Until abruptly closing Oct. 14, Villalobos had never missed an interest payment, and his clients - many of whom lived off their interest payments - have been fiercely loyal to him.
Prompted by a request from Canadian authorities investigating alleged laundering of drug-trafficking funds by six Canadian citizens through Ofinter, Costa Rican authorities issued a July 4 search warrant on Villalobos' business offices and residences.
Costa Rican investigators have been conducting a parallel investigation into illegal financial intermediation, fraud and money laundering ever since (TT, July 12, 19, 26, Aug. 2, 16, Oct. 18, 25, Nov. 1, 15, 22).
On Tuesday, San José Penal Judge Francisco Sánchez extended for six months a freeze on the Villalobos' business accounts, despite a peaceful protest outside his office by 100 mostly-foreign investors calling for authorities to "release the stranglehold" on their investments.
"Basta with this judicial terrorism," said Michel Messier, a protest-attendee who said he has $500,000 invested in the Villalobos operation, known as "The Brothers," and with Savings Unlimited.
At one point, protestors attempted to enter the court complex that houses Espinoza's office, but were turned away.
"We don't feel like hearing rumors and speculation," protest organizer Michael Nystrom-Schut - member of the United Concerned Citizens, Residents and Friends of Costa Rica (UCCRFCR) - yelled through a megaphone. "We want answers."
But Nystrom's appeals - in English - for Espinoza to "come down and talk to us" went unanswered.
The mixed foreign and Tico crowd of mostly older retirees began gathering around 9 a.m. and dispersed around lunchtime. In place of signs and banners normally present at protests, the investors carried personal stories of frustration, lack of hope, anger and bewilderment.
"Maritza," a Costa Rican woman who said she attended the protest on behalf of her mother, said the potential loss of $40,000 in family money her mother invested with The Brothers would have "unspeakable consequences."
"Our situation is very bad, although we would like not to have to say so," she said. "We depend almost entirely (on interest payments), but when we went to get our monthly payments, (Villalobos') offices were closed. I hope this situation is fixed soon."
"With the freeze extension, authorities are obviously showing they're not about to bow to pressure," one legal analyst - who spoke on condition of anonymity - told The Tico Times.
Unlike Maritza's appeal, many of the protestors' chants prompted snickers from the mainly non-English-speaking judicial employees milling around the building.
One investor called on the owners of downtown San José's Hotel Del Rey - popular with sportfishing buffs, gamblers and lonely male travelers - to come and support their cause, claiming that if investors fail to recover their money, "There'll be a lot less business at the Del Rey."
But many investors - especially those who did not fear reprisal from home-country tax officials for having their photos taken by most of the local media - believe everything the prosecutor's office has done up to this point shows it has a weak case against the Villalobos brothers.
The still-faithful were reassured by a message supposedly from the leader himself, Luis Enrique Villalobos, stating, "Everything will be all right." Nystrom said he is positive the encrypted e-mail message came from Villalobos, but to protect communication channels in the future, would not reveal how the message was sent. He did say, however, that it was obtained through a "long-time close friend of Luis Enrique."
The message was short and asked investors to "have a little patience."
But the freeze extension, detention of Osvaldo and closing of Savings Unlimited have taken a toll on many investors, who are now hiring lawyers to help them stake judicial claim to any money that is eventually recovered from The Brothers.
Authorities say only $6-7 million are in the frozen accounts. If all investors follow guidelines established by the Judicial Investigative Police's Victims' Assistance Office to recover their funds, less than $1,000 would be available to each.
Attorney Gregory Kearney - who attended Tuesday's protest - told The Tico Times he is currently representing 30 investors in a civil class-action suit against Villalobos. He said his clients - 60% North Americans and 40% Ticos - each has an average of $150,000 invested with the Villalobos.
Other local attorneys are representing an increasing number of Villalobos investors as well.
Some members of the UCCRFCR say they have hired ex-Justice Minister and high-powered attorney Monica Nagel as a legal consultant. Another recent ex-Justice Minister, José Miguel Villalobos - given a red card last October by President Abel Pacheco for being "pugnacious" - has thrown his hat into the ring by taking on Villalobos clients (see separate story).
Most of his clients, he said, are long-time foreign residents living in the central Pacific beach town Manuel Antonio. The former minister - agreeing with investors - called on the government to make an official statement regarding the case.
"The government should say something. Twenty years ago, there was a similar case of illegal intermediation, but it affected mainly Costa Ricans," he said. The government immediately issued a statement.
"Six months is plenty of time to issue a statement," he added.
The former Justice Minister called the entire case "curious," raising more questions than answers. One such question, he said, is why Costa Rican authorities permitted the operation to continue for so long - some estimate as long as 23 years.
"We're not talking about 3 colones," he said. "How is it possible that neither SUGEF nor SUGEVAL has done nothing?"
Kearney thinks the lack of previous government action may have something to do with Villalobos investors who have political connections.
Businessman Charles Zeller told The Tico Times he had obtained a copy of what appears to be an internal master list of investors kept by Villalobos and obtained by authorities during a July 4 raid on Villalobos offices and residences. The Tico Times obtained access to the copy.
The 129-page list of names - indicating Brothers investors through May 31 of this year - would explain the source of the prosecutor's office's official number of 6,289 investors.
Each name is preceded by a code beginning with the first letter of each last name, followed by a number that appears to be related to either the order in which the investment was made or interest was paid.
While the list does not contain the amount of investment made, each investor's code was most likely cross-referenced with investment information contained in a computer database. Along with numerous documents seized in the July 4 police raid, Villalobos business computers were also confiscated.
According to the unofficial list, approximately 80% of investors are foreigners with non-Latino names and 20% are Costa Ricans or others with Latino last names. Of the Latinos (the majority are common Costa Rican names), most are women.
The list alone does not provide any evidence of wrongdoing on behalf of Villalobos. But it does - if it is in fact is legitimate - confirm suspicions that it could be potentially harmful to investors who failed to report interest earnings to home-country tax authorities.
The names of at least two family members of a powerful former Costa Rican politician appear, as do the names of a high-profile former U.S. political figure currently facing racketeering charges in the U.S., and a fugitive from international justice.
José Miguel Villalobos also said it was strange that the U.S. Embassy, usually adamant about protecting U.S. investments abroad, has refused to intervene in the Brothers drama, even though most investors are U.S. citizens. Embassy officials maintain that the investigation is strictly a Costa Rican affair and denies any involvement in the investigation (TT, Nov. 15).
Meanwhile, some foreign residents are packing up and heading home. One Tico Times classified ad reads, "Villalobos and Cubans have busted me. Must sell all."
Asked if the Villalobos case had forced her out, another classified ad client said only, "No comment."
(Staff writer Tim Rogers contributed to this report.)
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Investors to File Suits; Prosecutors Request Arrest Warrant for Luis Enrique Villalobos
By David Boddiger
Tico Times Staff
dboddiger@ticotimes.net
In a move legal analysts say may pressure naturalized Costa Rican businessman Luis Enrique de Jesús Villalobos to come out of hiding, his brother and former owner of the Ofinter, S.A. money exchange business, Osvaldo Villalobos, was detained Wednesday morning by judicial authorities.
A judge ordered a six-month preventive prison term for Osvaldo Villalobos, after he was arrested and charged with money laundering, fraud and illegal financial intermediation, according to judicial spokeswoman Sandra Castro.
Meanwhile, another high-interest investment operation, Savings Unlimited, unexpectedly closed last weekend and its high-profile Cuban owner, Luis Milanes, has reportedly fled the country, according to authorities (see story, below). The two businesses appear to have many similarities, including a high number of now-frantic investors with money in both operations.
On Tuesday, Special Prosecutor Luis Bonilla summoned both Osvaldo and Luis Enrique Villalobos for the next day at 8 a.m. Osvaldo was detained shortly after he presented himself on Wednesday. Luis Enrique Villalobos failed to appear at the prosecutor's office.
Bonilla is handling the Villalobos investigation while lead Prosecutor Walter Espinoza is attending a Federal Bureau of Investigation training seminar in the U.S.
According to Castro, Osvaldo is being charged with violating the Central Bank's Organic Law. A judge ordered Osvaldo to six months preventive prison Thursday afternoon.
Castro said prosecutors also have requested an arrest warrant for Luis Enrique, but it has not yet been approved by the judge.
Osvaldo Villalobos' attorney, Edgardo García, told the local daily Al Día: "(Osvaldo) has always been cooperative (with authorities), such as when he helped prosecutors log on to computers and review various archives, because they didn't know how to do it," Al Día reported.
"(Osvaldo) is certain he is innocent and sooner or later, will be released," García added.
The detention is the latest in a series of steps judicial authorities took this week that indicates they are stepping up their investigation into the Villalobos brothers' business dealings.
Under "The Brothers" arrangement, new investors - who had to be recommended by existing investors - received 2.8-3% monthly interest on minimum loans of $10,000. Many investors reportedly invested much more, and allowed their interest to compound.
Until abruptly closing Oct. 14, Villalobos had never missed an interest payment, and his clients - many of whom lived off their interest payments - have been fiercely loyal to him.
Prompted by a request from Canadian authorities investigating alleged laundering of drug-trafficking funds by six Canadian citizens through Ofinter, Costa Rican authorities issued a July 4 search warrant on Villalobos' business offices and residences.
Costa Rican investigators have been conducting a parallel investigation into illegal financial intermediation, fraud and money laundering ever since (TT, July 12, 19, 26, Aug. 2, 16, Oct. 18, 25, Nov. 1, 15, 22).
On Tuesday, San José Penal Judge Francisco Sánchez extended for six months a freeze on the Villalobos' business accounts, despite a peaceful protest outside his office by 100 mostly-foreign investors calling for authorities to "release the stranglehold" on their investments.
"Basta with this judicial terrorism," said Michel Messier, a protest-attendee who said he has $500,000 invested in the Villalobos operation, known as "The Brothers," and with Savings Unlimited.
At one point, protestors attempted to enter the court complex that houses Espinoza's office, but were turned away.
"We don't feel like hearing rumors and speculation," protest organizer Michael Nystrom-Schut - member of the United Concerned Citizens, Residents and Friends of Costa Rica (UCCRFCR) - yelled through a megaphone. "We want answers."
But Nystrom's appeals - in English - for Espinoza to "come down and talk to us" went unanswered.
The mixed foreign and Tico crowd of mostly older retirees began gathering around 9 a.m. and dispersed around lunchtime. In place of signs and banners normally present at protests, the investors carried personal stories of frustration, lack of hope, anger and bewilderment.
"Maritza," a Costa Rican woman who said she attended the protest on behalf of her mother, said the potential loss of $40,000 in family money her mother invested with The Brothers would have "unspeakable consequences."
"Our situation is very bad, although we would like not to have to say so," she said. "We depend almost entirely (on interest payments), but when we went to get our monthly payments, (Villalobos') offices were closed. I hope this situation is fixed soon."
"With the freeze extension, authorities are obviously showing they're not about to bow to pressure," one legal analyst - who spoke on condition of anonymity - told The Tico Times.
Unlike Maritza's appeal, many of the protestors' chants prompted snickers from the mainly non-English-speaking judicial employees milling around the building.
One investor called on the owners of downtown San José's Hotel Del Rey - popular with sportfishing buffs, gamblers and lonely male travelers - to come and support their cause, claiming that if investors fail to recover their money, "There'll be a lot less business at the Del Rey."
But many investors - especially those who did not fear reprisal from home-country tax officials for having their photos taken by most of the local media - believe everything the prosecutor's office has done up to this point shows it has a weak case against the Villalobos brothers.
The still-faithful were reassured by a message supposedly from the leader himself, Luis Enrique Villalobos, stating, "Everything will be all right." Nystrom said he is positive the encrypted e-mail message came from Villalobos, but to protect communication channels in the future, would not reveal how the message was sent. He did say, however, that it was obtained through a "long-time close friend of Luis Enrique."
The message was short and asked investors to "have a little patience."
But the freeze extension, detention of Osvaldo and closing of Savings Unlimited have taken a toll on many investors, who are now hiring lawyers to help them stake judicial claim to any money that is eventually recovered from The Brothers.
Authorities say only $6-7 million are in the frozen accounts. If all investors follow guidelines established by the Judicial Investigative Police's Victims' Assistance Office to recover their funds, less than $1,000 would be available to each.
Attorney Gregory Kearney - who attended Tuesday's protest - told The Tico Times he is currently representing 30 investors in a civil class-action suit against Villalobos. He said his clients - 60% North Americans and 40% Ticos - each has an average of $150,000 invested with the Villalobos.
Other local attorneys are representing an increasing number of Villalobos investors as well.
Some members of the UCCRFCR say they have hired ex-Justice Minister and high-powered attorney Monica Nagel as a legal consultant. Another recent ex-Justice Minister, José Miguel Villalobos - given a red card last October by President Abel Pacheco for being "pugnacious" - has thrown his hat into the ring by taking on Villalobos clients (see separate story).
Most of his clients, he said, are long-time foreign residents living in the central Pacific beach town Manuel Antonio. The former minister - agreeing with investors - called on the government to make an official statement regarding the case.
"The government should say something. Twenty years ago, there was a similar case of illegal intermediation, but it affected mainly Costa Ricans," he said. The government immediately issued a statement.
"Six months is plenty of time to issue a statement," he added.
The former Justice Minister called the entire case "curious," raising more questions than answers. One such question, he said, is why Costa Rican authorities permitted the operation to continue for so long - some estimate as long as 23 years.
"We're not talking about 3 colones," he said. "How is it possible that neither SUGEF nor SUGEVAL has done nothing?"
Kearney thinks the lack of previous government action may have something to do with Villalobos investors who have political connections.
Businessman Charles Zeller told The Tico Times he had obtained a copy of what appears to be an internal master list of investors kept by Villalobos and obtained by authorities during a July 4 raid on Villalobos offices and residences. The Tico Times obtained access to the copy.
The 129-page list of names - indicating Brothers investors through May 31 of this year - would explain the source of the prosecutor's office's official number of 6,289 investors.
Each name is preceded by a code beginning with the first letter of each last name, followed by a number that appears to be related to either the order in which the investment was made or interest was paid.
While the list does not contain the amount of investment made, each investor's code was most likely cross-referenced with investment information contained in a computer database. Along with numerous documents seized in the July 4 police raid, Villalobos business computers were also confiscated.
According to the unofficial list, approximately 80% of investors are foreigners with non-Latino names and 20% are Costa Ricans or others with Latino last names. Of the Latinos (the majority are common Costa Rican names), most are women.
The list alone does not provide any evidence of wrongdoing on behalf of Villalobos. But it does - if it is in fact is legitimate - confirm suspicions that it could be potentially harmful to investors who failed to report interest earnings to home-country tax authorities.
The names of at least two family members of a powerful former Costa Rican politician appear, as do the names of a high-profile former U.S. political figure currently facing racketeering charges in the U.S., and a fugitive from international justice.
José Miguel Villalobos also said it was strange that the U.S. Embassy, usually adamant about protecting U.S. investments abroad, has refused to intervene in the Brothers drama, even though most investors are U.S. citizens. Embassy officials maintain that the investigation is strictly a Costa Rican affair and denies any involvement in the investigation (TT, Nov. 15).
Meanwhile, some foreign residents are packing up and heading home. One Tico Times classified ad reads, "Villalobos and Cubans have busted me. Must sell all."
Asked if the Villalobos case had forced her out, another classified ad client said only, "No comment."
(Staff writer Tim Rogers contributed to this report.)
--------------------------------------------------------------------------------
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