We posted back in Aug, 2009 (Government Get Sued) and Dec, 2009 (Investors Suing Costa Rica Government) thats when the Canadian investors formed a group to sue the government of Costa Rica in an attempted to recoup money lost in the Villalobos Ponzi scheme they would probably lose … they did in arbitration this past week.
About 200 creditors had organized (out of the 6000 who had invested) and sought $200 million dollars in damages from Costa Rica’s government, claiming they did not exercise sufficient oversight to prevent Luis Enrique and Oswaldo Villalobos from taking over $1 billion in a 20 plus year unregulated load scheme. The scheme also involved drugs in Jaco and a business center in San Pedro. The IRS also got involved investigating Americans who had invested.
The Villalobos investment scam paid up to 3.5 percent a month on deposits of $10,000 or more that started in the late 1980s; some put in millions. After a landslide of complaints, finally, in late 1990s the judicial department started to investigate which lead to the conviction and sentencing of one of the brothers, Oswaldo who got 18 years. The other, Luis Enrique Villalobos Camacho, fled the country and still is a fugitive, convicted of fraud and illegal banking. His whereabouts is unknown.
The arbitration was before a three-member panel at the International Centre for Settlement of Investment Disputes in Washington, a World Bank agency. The case was almost immediately rejected on jurisdictional grounds and the panel never heard the main arguments that creditors wanted. So they have been crying foul all week.
The plaintiffs argued, and blame Costa Rica for overacting and conducting a police raid and freezing bank accounts, that drove the brothers out of business; which in our opinion was grabbing at straws, since the government had been under presser from investors for years. If anything they [government] acted way too late.
The main jurisdictional defense was, the Villalobos investment business was not licensed by the government but it was only a personal interest where transactions and/or investment deals were among friends, so it did not follow under Costa Rica Security and Exchange laws, which have numerous flaws. In other words, “Buyer Beware.”
The legal team for the creditors was the Canadian firm of Cain Lamarre Casgrain Wells and would have received a percentage of any settlement, that could have amounted to millions of dollars.
However … I would not feel to sorry, the law firm did not get burned as 99% of the investors did. They still walked away with over $500,000 that was raised by investors as retainer money to start the lawsuit eight months ago.
Not a bad “win” for any law firm whose lawsuit was bound to fail from day one.