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The Brothers
CTV.ca News Staff
www.ctv.ca
Jeff McLeod thought he had found the answer to escaping his cold, lonely life as
a trucker in British Columbia. In 1999, at the age of 52, McLeod decided to take
early retirement, pack up and move to Costa Rica – where the weather was warm
and the living was easy.
A friend who had already made the move told McLeod about a money exchange and
investment company that gave astronomical returns, and after several extended
visits to Costa Rica, he was confident he could make a comfortable life for
himself there.
“I sold my house, I sold a hobby car, I sold a pickup truck and I sold a Harley
Davidson motorcycle,” he says. “Took my money and went there.”
Along with thousands of others chasing the same dream, McLeod poured all of his
money into an investment business run by two Costa Ricans – Enrique and Osvaldo
Villalobos – where, for a minimum $10,000 cash investment, investors could sit
back and watch their assets grow by three to four per cent interest a month. For
McLeod -- who initially invested $50,000 U.S., let the interest accumulate, and
then reinvested $70,000 -- the return worked out to $2,100 a month.
Canadian investors are probably used to a more formal system – where everything
is documented and payouts come in cheque form – but the Villalobos brothers’
company operated far more casually. To collect their earnings, investors had to
show up at the brothers’ office at San Pedro Mall in San Jose, where they
received an envelope full of cash.
“I thought it was a bit strange, but it seemed to be the way he did business.
And there were so many people doing it, so many investors,” says McLeod.
With the interest rolling in, McLeod, like most investors, took a laissez faire
attitude, lulled into a false sense of security by the warm temperatures and
easygoing outlook of the locals.
But besides the cash payouts, there were other signs that all was not as it
seemed with the Villalobos brothers’ business. Michael Nash, a Hamilton, Ontario
lawyer whose father invested $180,000 U.S. with the brothers, says he was
suspicious the first time he set foot in the brothers’ office.
“There was no permanent furniture,” he says. “It just had the kind of plastic
stacking chairs that you’re used to seeing in church basements or auditoriums.
The whole impression was that if we needed to be out of here in five seconds, we
could be. There was no identification, absolutely none, to tell you what kind of
an office you were in. There was nothing indicating this is an investment
operation, this is a financial institution of any kind.”
Even more suspicious was the fact that the walls were covered in religious
Christian posters. “The take I had on it was that since we have nothing else to
offer you in terms of security or assurance, we’ll at least give you the
impression that since we’re all Christians here, you can trust us,” says Nash.
The tactic worked, Nash says. “Some people that I knew, that I spoke to down
there, even said though they themselves were not religious people, they were
influenced by the fact that he was religious and so many others who were
religious had their faith in him.”
Still, it all went without a hitch, until 2001, when the RCMP turned up a link
to a Canadian drug ring. With the help of an informant, The RCMP uncovered a
plot by a group of Hells Angels to import a massive shipment of Colombian
cocaine into Canada, via Trinidad and Costa Rica. The ring-leader was a Canadian
drug trafficker, named Bertrand St. Onge, who spent his winters in Costa Rica,
and – like so many others there – invested with the Villalobos.
According to RCMP documents, the Hells Angels members had confided in the
informant that the Villalobos brothers had used the money handed over by
legitimate investors to fund “illicit operations,” and paid out huge interest to
keep investors quiet.
On July 4, 2002, the RCMP arrested the Canadian traffickers and seized a
600-kilogram shipment of cocaine with a street value of $140 million – one of
the biggest drug busts in Canadian history. On the same day, Costan Rican police
raided the home of Enrique Villalobos as well as his office in San Pedro mall.
“It wasn’t until the moment of the raid that we found out and verified that the
Villalobos brothers didn’t have the currency exchange as their only business,”
says Guillermo Hernandez, the senior prosecutor in Costa Rica who assisted the
RCMP with their investigation. “It was a façade to be able to recruit foreign
investors in their investment business.”
Police seized a list of clients – more than 6,000 names, including about 1,000
Canadians – who had invested $600 million with the Villalobos brothers over the
years. All of the brothers’ assets, including 50 offshore bank accounts, were
frozen while police launched a criminal investigation.
Three months later, Osvaldo was arrested and Enrique fled the country. But
before he left, he released a statement to his investors, saying: “We ask
respectfully of all creditors to maintain their understanding, their discretion
and their confidence in the sense that we will do anything necessary to finally
finish this situation so we can normalize the payment of all their debts.”
Investors like McLeod have rallied around the brothers, calling them “honest”
and “honourable” and saying they were unfairly targeted because they cut into
the business of local banks. And they are convinced their investments could
still be recovered.
“The money is should still be invested and earning interest,” says McLeod, “and
if that’s the case, if (the brothers are) allowed to continue (their) business,
then (they) should have the capital to pay everybody.”
In Montreal, a group of investors who say they had to return to Canada because
they are broke, are considering a class action lawsuit to force the Costa Rican
government into international arbitration. They say Costa Rica was asked by
Canada to investigate a particular sum that was linked to drug traffickers – and
not to seize clean money belonging to thousands of innocent investors.
But at this point, the Costa Rican government has only been able to recover $7
million of the hundreds of millions invested, and the whereabouts of hundreds of
millions of dollars – and of Enrique Villalobos – remain a mystery.
Jeff McLeod had to return to a life hauling produce across B.C. after he lost
his money. “It’s just pretty much everything I owned,” he says.
Now, all he’s left with is regret for buying into a fool’s paradise.
“In retrospect, I can say I didn’t look into it well enough, but at the same
time, I was dealing with a man with a 20-plus year reputation for making his
payments to investors,” he says. “I would certainly be smarter to spread my
investments around a little bit.”
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