Colombia declares state of emergency over money scams

COLOMBIAN GOVERNMENT officials have declared a state of emergency, boosting their powers of arrest and money seizure to help deal with multimillion-dollar investment scams that have targeted mostly poor investors.

The measure was introduced after panic spread among investors across Colombia last week when one suspect financial agency halted payments. Disturbances broke out in 12 states, police said, and investors stormed offices in the southwestern cites of Pasto and Popayan, threatening to lynch the managers.

Police closed 59 offices of DMG, one of the largest of dozens of several companies under investigation. Orlando Páez Barón, the police director for citizen security, said he had stationed riot police at the offices in advance of seizing records and confiscating the company’s remaining cash.

In the past week, police have arrested 52 employees from several financial agencies on suspicion of fraud, confiscating $30 million that they say will be distributed to investors.

President Álvaro Uribe’s office, in announcing the state of emergency, said the measure was taken because of a “serious deterioration in public order” in connection with “massive illegal collection of public funds”.

Authorities said the schemes fitted the classic definition of pyramid or Ponzi schemes, with promoters promising sky-high profits to attract cash that was then used to pay existing investors and line the pockets of company officials.

One collapsed investment house known by the initials DRFE promised profits of up to 150 per cent a month before its founder, a former parking attendant named Carlos Alfredo Suarez, fled the country last week. Colombian police want him for questioning.

Much of the alleged pyramid investment activity was concentrated in the southwestern state of Narino, where rampant drug trafficking has generated a steady flow of disposable cash.

The government had no estimate of how many investors were at risk, but the number was thought to be in the thousands.

– (LA Times-Washington Post)