by Rod Hughes
Take care where you invest your money, even if interest yields seem too good to be true.
They probably are.
On the heels of the arrest of Italian millionaire Matteo Quintavalle, the daily paper La Nación issued this warning today in an article about illegal financial operations in Costa Rica. The advice is hardly new and applies to any country, but the newspaper added that some 13 investment firms have been identified as operating here without registration with the proper regulatory agencies. This is equal to offering stock in the United States without registering with the Securities Exchange Commission (SEC).
Costa Rica also has its equivalent, Sugeval (for the Spanish Superintendencia General de Valores.) This agency has less policing power than the SEC and does not file criminal charges for unregistered companies dealing in stocks or other financial services. Nor does the offering of “financial advice” figure into existing law, even though that “advice” might steer the client into dubious investments. But the Sugeval list of authorized companies does offer a clear benchmark to identify legitimate companies.
The illegal firms solicit investors through the Internet, by telephone marketing and personal contact such as the venerable ploy of the business lunch. But, unless an investor files a criminal complaint, these firms operate without interference. By the time a complaint is filed, usually the damage has been done, not only to the plaintiff but to hundreds of other victims. Nor are all the victims innocent—many times, offshore investments are sought to hide taxable income or laundered funds. But legitimate offshore investments do exist and offer sometimes more stable and lucrative returns than, say, the U.S. stock exchange.
This situation has existed since the offshore Swiss Bancorp scandal of the 1970s. In the 1980s, Costa Rica experienced its own savings and loan meltdown, with its race for local investors prompting newspaper ads offering interest of up to 48%. One investment firm president, evidently overcome by belated conscience, committed suicide after his firm went under. The number of convictions continues, including one in which a con artist skipped the country during his sentencing hearing, after having sued the English-language weekly The Tico Times for libel, a favorite tactic to silence a probing newspaper. (That paper refuses financial advertising if the company offers stock but is registered neither with the SEC or Sugef, a sister agency of Sugeval.)
The most recent high-profile conviction involved the Villalobos Brothers, naturalized Costa Rican citizens who ran a high-yield investment operation guaranteeing 10% intereest monthly on investments of $10,000 or more. (See article 1138 in our search engine)
Nor are foreigners the only targets. The savings and loan scams netted mainly local investors and some affluent Costa Ricans lost thousands when the Villalobos brothers were closed and refused to pay back the principal they had invested. (Although Osvaldo Villobos was convicted of all charges except money laundering, Luis Ernesto, his brother, remains at large with an international arrest warrant on his head.