Past Money Scams?

What was one of the best ways to make money in Costa Rica?
As the old saying goes, “If it sounds too good to be true, it usually is.” Until
2003, a large number of North Americans living in Costa Rica earned “high
returns” on their money by investing in private finance companies. In general,
these returns in dollars ranged between 13 to 42 percent, depending on the
duration and amount of the investment.

Those who got in at the beginning made out like bandits. While those
who let their money ride or got in at the end usually lost everything. The
author personally knows some people who did very well in these investments
and others who lost their shirts.

The most famous of these companies was the Villalobos Brothers or
“the brothers” as almost everyone called them. They ran what turned out
to be a Ponzi-like scheme for about twenty years.. They paid faithfully for
years. Unfortunately, most people chose to let their money compound so
that they would eventually become millionaires. Compound interest grows
very quickly.

The way the Villalobos brothers could get away with this scam for so
many years was the ingenious method of loaning money to “friends.” They
claimed that their investors were their friends who gave them personal loans.
In return investors received a check with the amount of the investment.
However, it could not be cashed unless they informed the Brothers first
who then covered it. Really, all people were getting was a worthless piece of
paper. Over the years people did ask for their investment back, sometimes
with interest, and were returned all of their money.

Originally only a few expats invested but as word spread of the incredible
returns more and more people jumped on the bandwagon and the list of
investors swelled to nearly 6,000 people.

According to estimates the “Brothers,” took in almost $800 million
dollars over the years.

In July 2002 everything went to hell. The government froze the Brother’s
bank accounts while they were investigated for money laundering.
Enrique Villalobos fled and his younger Brother Osvaldo was left holding
the bag. Osvaldo was eventually convicted and “sent up the river.”
There were many theories about what the Brothers did with their investor’s
money. Some say that they were a clandestine bank to fund CIA operations.
Others say Enrique was a genius and was involved in selling arms to foreign
countries. One theory had him working in the one-time highly-profitable
business of exchanging Colombian pesos. Whatever they did to pay the high
interest we may never know. During Osvaldo’s trial the defense could not
demonstrate how the brothers made money. This led most people to believe
that the money came in the front door and went out the back door which
is how a typical Ponzi scheme operates. Since most people let their money
ride and didn’t withdraw their monthly interest, this business could have
theoretically gone on forever as long as new money kept coming in.

It must be pointed out that the Villalobos Brothers have their supporters
who to this day believe blindly in their innocence and think they will recover
their investment. Many believe that the Brothers were shut down because
they had a corner on the investment market and bankers conspired with
the government to put them out of business. Other think that if 9/11 had
never occurred the government would have continued to turn a blind eye
to the Brother’s operation. In case you don’t remember the U.S. pressured
foreign countries into stricter banking policies to supposedly stop terrorists
from moving funds. The draconian Patriot Act was the result of this.

A few years prior to the brother’s demise a couple of similar copycat
operations were born. What they did was prey on people’s gullibility and the
brother’s reputation to attract investors. Many expats and others said, “If
the Brothers can do it, Why can’t these guys?” Savings Unlimted (aka “the
Cubans”)
and “the Vault were other companies that offered high returns.
Savings Unlimted was called the Cubans because the owner was a
portly Cuban by the name of Luis Milanes. To attract investors, he started
out offering a higher monthly rate of interest than the Villalobos Brothers.
Investors could earn a whopping four percent per month. Furthermore, if
you got other people to invest you could make five percent monthly. The
Cubans claimed they generated income from the chain of casinos they
operated in Costa Rica. To make a long story short, they skipped town with
approximately a quarter of a billion dollars on the books a few months after
the Brothers were raided. The fugitive owner was arrested about five years
later in El Salvador and still hasn’t gone to trial to face criminal charges. He
is out on bail and roams freely around San José with his body guards. None
of his assets like the casinos have been seized.

The Vault was a small-time Villalobos-like business that operated from
a storefront on Avenida Central. Soon after the Brothers went down the
owner, Roy Taylor, committed suicide under strange circumstances.

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