GOC ARRESTS ALLEGED PYRAMID RINGLEADERS AMID

UNCLAS BOGOTA 004201 SENSITIVE SIPDIS TREASURY FOR FINCEN MSWANSON; EEB/ESC/TFS FOR JJALORINA E.O. 12958: N/A TAGS: EFIN ETTC PTER KCRM SNAR PGOV CO SUBJECT: GOC ARRESTS ALLEGED PYRAMID RINGLEADERS AMID PROTEST; BEGINS ASSET RETURN TO VICTIMS REF: BOGOTA 4134 ¶1. (SBU) SUMMARY: Amid collapsing pyramid schemes suspected of defrauding at least 300,000 Colombians (reftel),the GOC seized DMG Holding Group, S.A., the largest suspected scam in the country and arrested its founder and principal directors on charges of money laundering, illicit enrichment, and fraud. The GOC has initiated a plan for victims of DMG to file restitution claims for payment, on a sliding scale, from any recovered assets. Nevertheless, most low income claimants appear to blame the GOC seizure, rather than questionable DMG business practices, for the loss of their savings and several demonstrations against the GOC action continue around the country. In a series of public appearances, President Uribe has defended the closure and arrests for staving off worse losses and shutting down a major money laundering operation for narcotics funds. END SUMMARY. DMG Ringleaders Taken Down -------------- ¶2. (SBU) Following the November 17 closure of all DMG offices in Colombia, and similar closures of the firm's Quito and Caracas branches, Panamanian authorities in coordination with GOC Police arrested DMG founder David Murcia Guzman November 19 and immediately deported him to Colombia. Colombian law enforcement arrested six other senior DMG officials, including Murcia's wife, mother, and brother-in-law who had various DMG assets listed in their names. According to press reports, two of the DMG directors were arrested carrying more than USD 500,000. (NOTE: Embassy Bogota Consular Section has entered lookouts for the announced arrestees and revoked the visas of five of those who had valid visas. END NOTE.) ¶3. (SBU) The National Prosecutor's office based the arrests on evidence derived from more than 2,500 phone intercepts implicating Murcia and the other individuals in fraud, money laundering, and other crimes. The Police also pulled evidence from more than 100 computers seized November 16 from an office that was not listed in DMG public records but, according to GOC officials, appeared to serve as the financial nerve center for the company. Murcia and colleagues are currently incarcerated in separate jails outside of Bogota, awaiting arraignment. Claim Process Launched -------------- ¶4. (U) Meanwhile the GOC has appointed a caretaker for seized DMG assets and launched a process for DMG depositors to file claims to partially recuperate their cash investments from the liquidation of DMG. After receiving a flood of claimants at the Financial Superintendent's office the day after DMG's closure, the GOC decided to move the process to Bogota's El Campin stadium. Under streamlined rules, depositors can present themselves in person with copies of their investment documentation and enroll a claim for restitution from any seized DMG assets. The expedited process is based on President Uribe's November 17 State of Emergency decrees and aims to provide responses to depositors within 20 days. ¶5. (U) Colombian media reported on November 21 that several politicians, including Senator Samuel Arrieta, a member of the Uribe coalition, may have been involved with DMG. The Fiscalia has not commented on the possible political angle, but media is rife with speculation that a number of politicians could be implicated as the para-political scandal continues. Many Victims Blame GOC -------------- ¶6. (SBU) Despite GOC efforts to assist victims, many blame the government for wrecking DMG and costing low-income investors their life savings. Various protests and marches have occurred since the GOC-imposed closure of DMG on November 17, including among victims waiting in line to seek restitution. Police used tear gas to disperse one angry gathering that blocked a main road in Bogota November 20, reportedly instigated by individuals wearing DMG shirts and urging depositors to not participate in the restitution process. ¶7. (SBU) President Uribe and other GOC officials vehemently defend their actions as necessary to prevent further losses among DMG depositors and halt suspected laundering of illicit funds. However, as the majority of DMG investors are low-income Colombians long excluded from the traditional banking sector by high fees and lending rates, the firm's closure has exposed socio-economic rifts and placed the GOC on the defensive with DMG investors while it simultaneously tries to help them recuperate lost funds. Representative Roy Barreras told us the DMG scandal and protests could not have come at a worse time for Uribe, with a too-close-to call vote pending in the Congress over a resolution to change the consistution to allow a possible third term for Uribe and the population spooked over the world financial crisis. BROWNFIELD