Today marks the 10th anniversary of the law enforcement raid that radically changed the lives of expats in Costa Rica.
As U.S. citizens were enjoying their July 4 picnic at the Cervercería Costa Rica picnic grounds in 2002 Costa Rican investigators and prosecutors used a relationship with a Canadian drug case as an excuse to search offices of Ofinter S.A. and the Villalobos high interest borrowing operation downtown and in Mall San Pedro.
A.M. Costa Rica carried a brief, three-paragraph report the next day, Friday, under the headline “Money exchanges raided.” Not until the following Monday did the full scope of the investigation become known. Eventually the raids would cause Luis Enrique Villalobos and brother Oswaldo to close down the businesses. Even today only a handful of creditors have received a percentage of their investment.
Dreams shattered, marriages broke up and lives ended in despair or suicide. Such is the legacy of that July day.
Even today no one really knows how Luis Enrique Villalobos managed to pay investors interests of up to 42 percent a year. Brother Oswaldo tried to distance his money exchange business from his brother’s activities. But in a subsequent trial that led to his conviction for aggravated fraud and illegal banking his intimate role was disclosed.
Prosecutors convinced judges that the Villalobos borrowing operation was a ponzi scheme in which early investors are paid form the funds deposited by latecomers. Proof of that was minimal, and a better explanation is that the brothers were engaged in exchanging dollars for Colombian pesos.
Today’s anniversary is significant because there still are investors who believe firmly that Luis Enrique, a fugitive for 10 years, will return by the end of the year to distribute the money he has been safeguarding for loyal investors.
The statute of limitations might take hold by then.
Oswaldo has been housed in a prison for the elderly and can leave the grounds to live at home weekends.
Investors who pressed a claim against him finally received
about 38 percent of money awarded them by the trial court. Many more investors believed Villalobos supporters who urged them not to file a claim.
The Villalobos case generated hundreds of news stories, but none truly reflects the human tragedies and the despair the collapse of the businesses caused.
Some of the investors, mostly U.S. and Canadian citizens moved to Costa Rica to be near their money. A few U.S. stockbrokers touted the investment under the table to clients. Some Costa Rican communities pooled their money to invest with Luis Enrique. Many members of Escazu’s International Baptist Church did likewise because Luis Enrique was a popular member of the congregation.
Ofinter reopened a few days after the raid, and Luis Enrique made moves to modernize his business. He asked the faithful to invest more money. Many did. Luis Enrique said he would make bank deposits instead of stuffing the monthly interest in envelops. Investors rushed to open accounts.
They were not pleased when Ofinter and Villalobos suspended operations Oct. 14. Some investors organized and hired a lawyer to bring pressure on the Costa Rican government. Others predicted the collapse of the Costa Rican economy because the monthly flow of money from Luis Enrique Villalobos has stopped. Some firms that did business with expats suffered, but a poll showed that most Costa Ricans did not know of the case.
Other firms were marginally profitable and were being subsidized by the Villalobos money paid to their operators. They eventually failed, too.
Some investors were enraged when A.M. Costa Rica offered a reward for Luis Enrique and Luis Milanes, the head of a similar firm who also fled. Telephone calls threatened death or advertising boycotts. Only a few individuals offered to fatten the reward.
One investor ended his life by plunging from the third level of Mall San Pedro. A man near Lake Arenal was reported to have shot himself. In neither case was there clear evidence of a cause.
Even today, 10 years later, there has been no closure. Luis Enrique still is a fugitive. Many questions remain unanswered. No one knows where the estimated $1 billion went or if it ever was anything more than a bookkeeping entry.