Thousands of investors with hundreds of millions of dollars on hold in a high-yield investment group known as “The Brothers” await next week’s verdict in the trial of financier Osvaldo Villalobos.
Villalobos is accused of fraud, money laundering and financial intermediation in what prosecutors say was an investment scam along with his fugitive brother, Luis Enrique Villalobos.
Whereabouts of Luis Enrique, listed on international police agency Interpol’s Web site as wanted for charges of fraud and money laundering, are unknown. Prosecutors in the five-year case have suggested he could be in Nicaragua, while Osvaldo has remained tight-lipped about his brother’s location and the family business.
A group of Villalobos investors has published letters in The Tico Times, allegedly from Luis Enrique, saying investors haven’t been paid back because the money laundering charges have crippled The Brothers’ ability to deposit or withdraw investor funds (TT, Jan. 19).
Chief Prosecutor Walter Espinoza alleges that Luis Enrique and Osvaldo were using their money-exchange business, Ofinter, with offices in Mall San Pedro, east of San José, as a front for a scam to convince unsuspecting foreigners unfamiliar with Costa Rica’s financial system that their scheme to hide drug money was a legitimate investment group. Osvaldo faces up to 36 years in prison if convicted of all charges.
For up to 20 years, The Brothers paid monthly interest payments of 2.8-3% of investments, which in the later years were accepted only in sums of $10,000 or more.
Though the total figure invested with the business is unknown, attorneys close to the case have estimated it could be more than $800 million (TT, Feb. 1, 2003). The Brothers shut down in late 2002 when Costa Rican authorities froze as much as $12 million in accounts after Canadian authorities arrested four alleged Villalobos investors on drug trafficking charges. Luis Enrique disappeared soon after.
The defense is requesting that evidence from a raid on the Ofinter office be declared inadmissible due to an alleged lack of a proper warrant and because authorities allegedly reviewed evidence without proper permission.
During closing arguments, defense attorney Alexander Ruiz pointed to holes in the Chief Prosecutor’s Office investigation, which he said failed to prove that The Brothers don’t have the money to pay back investors.
Calling the prosecution’s investigation “partial,” he pointed to tens of millions of dollars the Brothers had in U.S. banks that the prosecution allegedly didn’t investigate.
He also mentioned that the Villalobos group has assets in the form of real estate that amount to at least 7,500 square kilometers.
“For 20 years people were satisfied with their services” until the state froze accounts, Ruiz said.
The defense also asked why, if Ofinter was doing anything suspicious, did the Superintendence of Financial Entities (SUGEF) review the company in 2002 and take no actions.
“If (SUGEF) detected any accounting irregularities, it could have administered sanctions … but it didn’t,” Ruiz said. The Chief Prosecutor’s Office alleges that a business next door to Ofinter in Mall San Pedro was the unregulated operation that was receiving investor funds. Prosecutors have estimated that some 6,300 clients invested money in the operation.
Nearly 200 witnesses have appeared in the trial, which began in February (TT, Feb. 9). The fate of 178 private cases that investors requested be attached to the public case (known as querellas) also rides on next week’s verdict, which is scheduled to be announced in Sala III of the Tribunales de Justicia building in downtown San José at 3 p.m.Wednesday,May 16.
