San José, Costa Rica, since 1956

Villalobos Case Languishing in C.R. Court

Authorities remain mum on the resolution of the infamous and now six-year-old Villalobos case.

The Villalobos brothers – Luis Enrique and Osvaldo – have been investigated and prosecuted by Costa Rican authorities since 2002 for drug trafficking, money laundering and fraud.

The investigations started after roughly 6,300 investors said they lost millions of dollars in 2002 when the brothers shut down their currency exchange business Ofinter in San Pedro mall east of San José (TT, Sept. 24, 2004).

At the time, Luis Enrique fled the country, allegedly along with as much $1 billion in investors’ money. He is still at large.

According to the Judicial Investigation Police, the brothers moved investors’ and lenders’ money through various companies and banks here and in the United States.

Osvaldo, allegedly the lesser of the two perpetrators, was convicted in May 2007 of fraud and illegal financial intermediation and received an 18-year prison sentence. But his attorneys immediately appealed the verdict.

The appeal has yet to be resolved by the criminal court, even though Chief Justice José Manuel Arroyo originally said it would be resolved by March of this year.

The charges of drug trafficking and money laundering against Osvaldo were dropped for lack of evidence, Costa Rican Drug Institute Director Mauricio Boraschi said. And Luis Enrique was not prosecuted because the country’s laws don’t allow trials in absentia, because of a long-standing tradition of belief that such trials violate a defendant’s right to due process.

U.S. citizens and investors John Bisceglio and Avery Patterson, who support the Villalobos brothers and believe they are innocent, said it’s been a tortuous process.

“We’ve been waiting six years,” said Bisceglio, who believes if Osvaldo’s conviction is overturned and the charges against Luis Enrique are dropped, the brothers will return his money. “I’m pretty angry and a lot of us are very depressed.”

Patterson, who said he and his son invested $1.2 million they’ve been unable to recuperate, said the court has repeatedly postponed resolution of the case.

“First, it was March, then April, then May, then June and now they’re saying August,” Patterson said. “I spoke with the (court clerk) and she said the Criminal Court has 1,200 cases. At this rate, they’re going to have 2,400 cases soon.”

Patterson said he was present during a Dec. 17 appeal hearing, the last he heard of the judges officially meeting about the case.

“(The judges) had nothing to say, and they didn’t even ask any questions,” he said.

“They’re the most inept I’ve ever seen in my life and the least caring for citizens of any country.”

Court spokeswoman Andrea Marín said there is no deadline for the court’s decision. She also said the Criminal Court’s five judges do not share their agenda even with employees of the court. She said Chief Justice Arroyo declined to comment.

Patterson said he heard Luis Enrique is holed up in Canada.

While the Villalobos case languishes under appeal, a case before the World Bank against Costa Rica is moving forward –although this too could take years to resolve.

The World Bank case – in arbitration by the InternationalCenter for Settlement of Investment Disputes – was brought by 137 Canadians who invested with the Villalobos brothers. They are asking for undetermined monetary damages from the Costa Rican government because of its failure to protect investors and effectively regulate financial entities.

The center has awarded a number of corporations, including CMS Energy and former Enron Corp. subsidiary Azurix, numerous damages based on breach-of-contract charges, especially from the government of Argentina. Azurix won $165 million and CMS $133 million from Argentina in 2006 and 2005, respectively.

The case – Alasdair Ross Anderson v. Costa Rica – was filed in 2003 and accepted by the international dispute center in 2007 (TT, April 13, 2007).

A Colombian judge – Sandra Morelli – and two arbitrators, one from the U.S. and one Argentinean, have been selected to handle the case, according to the center’s Web site.

Center Secretary Natalie Sequeira said a preliminary hearing is scheduled for July 1. The hearing will establish the terms of the arbitration and the amount of the monetary damages sought.

As of press time, the attorneys representing both sides could not be reached for comment.


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