For perhaps as many as 20 years, an unknown number of mostly foreign investors here had been living off 3% monthly interest paid quietly, in cash, on their investments, which in later years were accepted only in minimum sums of $10,000.
On March 16, 2001, The Tico Times ran a story about an 88-year-old investor named Keith Nash who was suing Luis Enrique Villalobos. Nash, a Canadian who claimed to have as much as $700,000 invested with the business known as “The Brothers,” filed a case against Luis Enrique for not allowing Nash to withdraw some of his funds.
Luis Enrique’s lawyers said at the time they refused to permit a withdrawal because they wanted a court-appointed psychiatrist to assess Nash’s health to see whether he was mentally fit to authorize fund withdrawals. Nash had suffered the year before from a near-fatal bout with meningitis.
The spat brought what was said to be “the best known investment scheme nobody knows anything about” into the public eye (TT,March 16, 2001).
The Tico Times started receiving a flood of letters from Villalobos investors and others who were angry that the Nash case put The Brothers in the spotlight.
“A lot of people were angry,” said activist Gail Nystrom, who along with Nash’s son helped try to get Nash’s money back.
Nystrom, a U.S. citizen who runs a nonprofit humanitarian foundation in Costa Rica, said she never expected the case of Nash, who is now living in an assisted living home near Toronto, Canada, to bring so much attention to The Brothers.
“But if you’re not doing anything wrong, what are you afraid of?” Nystrom said.
Villalobos, who had denied Tico Times’ previous requests for interviews, sent the newspaper a letter defending his activity as “occasional” personal loans. But officials from the Superintendence of Financial Entities (SUGEF) and the Superintendence of Securities (SUGEVAL) told The Tico Times that large amounts of loans would require the operation be registered with the financial institutions (TT, June 29, 2001). However, a SUGEF official would later deny that raids on The Brothers yielded evidence of illegal activity (TT, Dec. 6, 2002).
The heightened controversy prompted Luis Enrique to file a libel lawsuit against The Tico Times, but the statute of limitations on the case expired after the financier went into hiding.
It was July 4, 2002, when the moneyexchange business Ofinter’s Mall San Pedro officers were raided by authorities along with Osvaldo’s home and a former Ofinter treasurer’s home. The seizures included a dozen boxes of documents and computer archives that ended up being the main source of documented evidence in the trial that ended this week in a guilty verdict (see separate story).
The raid was the result of a Royal Canadian Mounted police investigation in which six Canadians were arrested on drug-trafficking and money-laundering charges. The trafficking ring’s late leader Bertrand Henri St. Onge, allegedly had used drug money to buy condo in the Central Pacific beach town Jacó and invest $300,000 with Ofinter.
After the raid, The Brothers continued to pay out interest for three months until October 2002, when the offices closed. By November, Luis Enrique had disappeared, Osvaldo was in custody, and thousands of distraught investors were trying to put their lives back together. Many had lost everything and returned to their home countries after years of living well in Costa Rica. At least one investor who lost most of his life savings ended up shooting himself in the head (TT, Jan. 17, 2003). More than 100 investors gathered in late 2002 before Special Prosecutor Walter Espinoza’s office demanding that the government lift the freeze on accounts, hoping this would help them get their money back.
In February 2003, former Justice Minister José Miguel Villalobos said investors should sue the Costa Rican government to get their money back (TT, Feb. 1, 2003). That’s when a group of 137 Canadian investors filed a case against the Costa Rican government with the InternationalCenter for Settlement of Investment Disputes (ICSID), a World Bank financed organization that provides facilities for arbitration disputes.
The pending case, which was accepted earlier this year, alleges that the Costa Rican government failed to enforce its own laws and protect investor rights under its 1998 Bilateral Investment Treaty with Canada (TT,April 13).
Like Osvaldo Villalobos’ defense attorneys in his trial, the ICSID case alleges the raids on The Brothers’ offices and the homes were illegal – excused by a trumped-up money-laundering allegation and authorized by a drug crimes prosecutor after multiple fruitless drug-crimes investigations of The Brothers.
The case alleges the government knew about the operation, since Karen Christiana Figueres, sister of ex-President José María Figueres (1994-1998), was an investor during Figueres’ presidency. Another police report alleged that The Brothers made a series of loans totaling $6.6 million to Figueres’ brother, José Martí Figueres, during Figueres’ presidency (TT, Nov. 11, 2005)
Luis Enrique has remained at large for five years and Osvaldo stayed in jail until he got pneumonia, prompting judges to allow him to go home on house arrest (TT, April 1, 2005).
In the months leading up to the trial, a camp of Villalobos supporters launched a campaign to get affected parties to drop their claims of fraud against The Brothers. The United Concerned Citizens and Residents (UCCR), a group of Villalobos supporters, claimed to be in communication with Luis Enrique and published letters allegedly sent by him in which he preaches patience and promises to return with investors’ money if charges against him and his brother were dropped (TT, Jan. 19). An estimated 600 investors had filed individual fraud complaints against the brothers with the Chief Prosecutor’s Office, but many later withdrew them. Once the trial began, only 178 cases remained.
When the anticipated trial opened in early February, only a few investors showed up, prompting judges to move the trial from the large auditorium they expected to be filled by investors to a smaller courtroom. Investors have speculated that the low turnout was because many foreign investors who lost money have since returned home, and others may not be fluent enough to understand the Spanish-language court proceedings (TT, Feb. 9).