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When a Ponzi scheme becomes a movement
By Simon Romero Published: January 31, 2009
BOGOTA: Among the elite here, David Murcia Guzman is often disparaged as the "Madoff of Colombia," after Bernard Madoff, the New York financier accused of creating a $50 billion investment scheme. But to the lower classes in one of Latin America's most stratified of countries, he is a folk hero, and his government-shaking arrest recently was just another example of the extent to which the rich will go to keep the poor in their place.
In some ways, the rise and fall of Murcia, a child of Bogotá's slums who clawed his way into Colombia's elite, may be even more exceptional than Madoff's. Nowadays, Murcia ponders the events that delivered him to a cell at La Picota, a prison located amid the shantytowns of this city's southern fringe.
Just 28 years old, Murcia has been charged with creating a hydra-headed enterprise based in Panama that laundered money and enticed thousands of Colombians into a pyramid scheme emblazoned with his initials: DMG.
The accusations are common enough in these times of bewildering international financial ruses.
But only in Colombia, perhaps, with its history of charismatic outlaws who chafe at the conservative status quo, could Murcia emerge not as a Madoff-like villain but a folk hero with a legion of followers from coca-growing regions.
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Murcia revels in this transformation into an anti-establishment idol. "My only flaw was that I dared to dream," he said in a meandering interview at La Picota under the gaze of three guards armed with machine guns. "What is criminal about dreaming?"
Just a couple of months ago, Murcia was wining and dining provincial governors. He flew to different cities aboard a private jet. Visitors to his home in Panama marveled at his fleet of exotic cars, including a Ferrari, a Maserati and a Lamborghini.
Then it all collapsed, as the global financial and economic crisis pinched the markets, bringing down several pyramid schemes here in November, including Murcia's. The authorities shut down DMG while the Panamanian police rounded him up. He was quickly extradited to Colombia, where a prison barber awaited Murcia at La Picota to cut off his trademark ponytail.
But there was a twist to this latter-day tale of Icarus: Many of the small investors in DMG saw Murcia not as a swindler but as their savior, protesting his capture in almost a dozen cities. A hunger strike by his most diehard supporters, who want his release and the reopening of DMG, persisted well into January in the colonial heart of Bogotá.
"David Murcia was only trying to redistribute the wealth a little in Colombia," said Norberto Escobar, 47, an impoverished DMG investor from Putumayo, the southern coca-growing department, or province, where Murcia's investment schemes first gathered speed about four years ago.
"He was simply too much of a threat to the system," said Escobar, interviewed recently alongside others at a hunger strike here clamoring for Murcia's release. For a visitor, they broke into a chant: "Crea en Dios y en David Murcia" ("Believe in God and David Murcia").
The mixture of popular outrage and scandal that followed Murcia's capture has shaken Colombia. Claims surfaced that DMG tried to curry favor with President Álvaro Uribe's allies in Congress; others said officials moved against Murcia because his power was coming to rival that of Colombia's established banking families.
All this led to a rare moment of dissent in a war-weary society against a president whose success against leftist rebels had shielded him from earlier scandals. A plan by Uribe's supporters to change the constitution so he could run for another term unraveled, as the collapse of DMG did what no other crisis had done before: make Uribe, Colombia's most powerful president in recent memory, tremble.
In the interview, Murcia described a childhood marked by grinding poverty and the early death of his father, a grounds-keeper for rich families.
By the time he dropped out of high school, he aspired to attain fame as an actor. He never did, but his capacity to entrance people would come in handy later on.
When he and his wife separated several years ago, he said he contemplated suicide as he stood at the top of a waterfall in Tolima in central Colombia. But as he closed his eyes and asked God for forgiveness, he said, "I began to appreciate, more than money, more than companies, my life."
At least that is how Murcia explains it. After his epiphany, he wandered around a Colombia at war, ending up in a flophouse in the coca-growing south. While there, he devoured the biographies of Donald Trump and Warren Buffett, and learned the story of a billionaire Arizonan named Rex Maughan.
Maughan founded Forever Living Products, a marketing company that features a line of health and beauty aids.
Soon, Murcia said he was going door-to-door in small towns peddling items made by Maughan's company. Murcia said he grew fascinated by Maughan's ability to piece together a brand covering a wide range of products, and to convince an army of independent contractors that they could grow rich selling them.
"I soon realized that I wanted my own brand," said Murcia, "and that this brand could be based on myself."
With DMG, he devised a business model of selling prepaid debit cards to customers who were also its salespeople. They could use the cards to buy items like electronics, or they could redeem points on different cards for cash in a few months time - provided they signed up new salespeople who would also buy the cards.
That was the catch, prosecutors say. A sales network becomes a pyramid, or Ponzi scheme, if it relies solely on attracting new victims, whose investment is used to pay off earlier investors.
Investigators here say the venture also benefited from a vast underground economy of cocaine-trafficking, creating a new way to launder profits through DMG and the dozens of related companies created by Murcia and Panama-based business associates from Belarus and Brazil.
Prosecutors see in Murcia a manifestation of the lawlessness that was allowed to fester in areas of Colombia where private armies wield far more power than bureaucrats from Bogotá. But the theories about what made his venture possible miss something key in Murcia's mercurial story: the force of his personality.
Even now, as he settles into a new identity as an imprisoned, populist idol, he adamantly claims innocence of any wrongdoing, insisting he was simply building a brand - around himself, of course. "What keeps me active and full of energy," he said as the guards ended the interview, "are the people who want my freedom."
Jenny Carolina González contributed reporting from Bogata
http://www.iht.com/articles/2009/01/30/america/profile.4-419713.php?page=2
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