Cash scandals hit rich, poor Latin Americans alike

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Cash scandals hit rich, poor Latin Americans alike
Wed Mar 11, 2009 11:21am EDT

Stanford Latam clients don't want names known
11:21am EDTBy Patrick Markey

BOGOTA (Reuters) - Colombian college teacher Mercedes Diaz has little else in common with mattress maker Henry Moreno, but they both know the bitter sting of investment schemes that promise high returns only to collapse in scandal.

Latin America's poor and working class are more often the victims of get-rich-quick scams, but now some of the more well-heeled are feeling similar pain since U.S. bank Stanford crumbled under the weight of massive fraud charges.

The region's professionals and well-off pensioners were among the biggest investors with Stanford owner and billionaire, Allen Stanford, who was hit with accusations he fraudulently sold $8 billion in certificates of deposit from his Antigua operation.

From Mexico City to Quito, retirees sporting designer purses have waited with Blackberry-twiddling bankers to reclaim cash from Stanford, once seen as a guarantee of high returns or a safe haven offshore account in an often unstable region.

"We thought it was something solid, with a lot of years and tradition," Colombian Diaz said recently lining up outside a Bogota university hall with other clients to transfer her cash from a local Stanford brokerage to another fund.

A U.S. lawyer for some Latin American investors says his clients want to keep their names confidential, fearing they could be targeted by criminals if word gets out about their wealth.

Lawyers and investors say wealthy Latin Americans also bet with Bernard Madoff, the Wall Street trader accused of masterminding a $50 billion Ponzi scheme stretching from Florida to Europe. He is expected to plead guilty this week.

Investors are still counting the cost of those schemes, but Latin America has a history of scams targeting the poor.

Hundreds of thousands of Colombians like Henry Moreno got burned last year in schemes with names like "Money, Fast, Easy and in Cash" that sparked riots and worries over the country's already sputtering economy when they imploded.

Moreno, who makes mattresses in a working-class Bogota neighborhood, said he and his brother sold an apartment and took out bank loans to invest in two schemes that later imploded. Now he is waiting to get his money back after the government took over one of the companies and jailed its director on money-laundering charges.

"All that money is lost, they haven't told me anything, nothing has been solved," he said. "It's frustrating to have no money, and to pay back the bank I have to work even harder."

For many Colombians, already feeling the pinch in the global economic slowdown, their local "get-rich-quick" schemes seemed like an alternative to banks, who they say charge too much for holding basic savings accounts.

Colombian authorities say hundreds of thousands of people are trying to reclaim investments in the pyramid schemes that offered returns of up to 150 percent.

In neighboring Ecuador, hundreds of people plundered stores in Machala city in 2005 to demand their money back after a public notary ran a $400 million pyramid-style scam.

The notary died just as frantic investors tried to rescue their funds. An angry mob even dug up his body to make sure he was dead. But most were never able to recover their cash. Continued...