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Casa
Canada is not involved in the administration of
stocks, bonds, or other securities in any way,
however it is the advice of Casa Canada Group that
investors be extremely diligent should they wish
to invest in Costa Rica.
The legal system is dysfunctional, a civil
case can take up to ten years to resolve, the
financial regulatory authorities do not protect
investors and are ruthless in shutting down banks
or other financial institutions seem not to meet
their guidelines, trapping investor or depositor
funds in interminable legalities.
Real
estate investments must be closely watched - we
have a case where we went to sell a property only
to find a $150,000 mortgage on it.
A swindler registered a forged document
against it. The
investigation by the prosecutor’s office began
almost two years ago, but the lien is still
against the property, the person defrauded has
received nothing and charges still have not been
laid. In
this way, the Costa Rican legal system helps
thieves and swindlers avoid justice.
Costa
Rica has little in the way of stock offerings. The
stock market trades mostly in debt such as bonds,
and the majority of that is from the government.
Stockbrokers, stock markets and anything to
do with stocks and bonds are supervised by SUGEVAL,
who along with SUGEF, the supervisors of banks and
financial entities, control the financial sector
of Costa Rica under CONASSIF - the Consejo
Nacional de Supervisión de Sistema Financiero, an
agency of the Central Bank of Costa Rica.
These organizations are noted for arrogant,
heavy-handed behaviour, and for the heartless way
they deal with investors and depositors.
Should anyone believe that the financial
supervisory agencies in Costa Rica are there to
protect investors, as they are in many countries,
it is necessary to think again.
It would be closer to the truth if we were
to say these agencies protect investors from their
investments!
Here
are examples of these entities in action, where
Casa Canada was involved and has first hand
experience.
SUGEF
- Superintendencia General de Entidades
Financieras
(Supervises
banks and financial institutions)
In
early 2004 Banco ELCA, with whom we dealt, was
investigated by SUGEF.
Following the investigation it was alleged
that Carlos Alvarado, the President and owner of
the bank was engaged in illegal activities.
On Tuesday, June 29, 2004 Banco ELCA was
intervened and closed down by SUGEF, in spite of
the fact that it had more than enough assets to
cover all deposits and investment certificates.
Depositors, investors in certificates of
deposit and small businessmen had no access to
their funds.
Carlos Alvarado was arrested and held in
what is called “preventive detention”.
This is where the government of Costa Rica
can hold someone suspected of a crime in prison
for an indefinite period without charges being
laid.
The
intervention caused chaos among depositors.
Small businessmen could not meet their
payroll; pay their bills, rents or other
obligations as their funds were beyond reach in
the bank. Many
personal depositors could not meet their
obligations - rent, mortgages or other month end
payments. Causing
this type of grief is not a cause for concern with
the financial supervisors - no doubt these
ruthless individuals selected the date of the
intervention to be when deposits would be highest
as clients prepared to write month end cheques.
Branches
were closed, employees fired and the finances of
the bank investigated in detail.
The interventors spent enormous amounts of
money during this period.
While you may guess that this was
government tax dollars, you would be wrong - this
money came from depositors of the bank.
Eventually personal deposits up to $10,000
were paid from cash on hand, but nothing was paid
to the small businesspeople that struggled along
without access to their bank accounts.
On
April 21, 2005 there was a meeting held to elect a
representative of the depositors on the
liquidation committee for the bankruptcy of Banco
ELCA. This
committee was comprised of a representative of the
owner, an appointee of SUGEF and a representative
of the depositors.
Once this committee took over and SUGEF
could be outvoted the massive losses stopped,
gradually turning into a profit as the bank’s
assets were better managed.
Subsequently the majority of deposit money
was distributed to depositors.
At the date of writing some 20% remains to
be distributed, and the liquidators feel that
most, if not all, money will eventually be
returned, but not before incredible hardship had
been caused to depositors and employees by this
unnecessary intervention.
SUGEVAL - Superintendencia
General de Valores (Supervises
stock markets and brokers)
On
August 5, 2004 SUGEVAL intervened Financorp, a
security brokerage company with whom we were
dealing. We
knew the company was in trouble well before the
intervention due to owners borrowing against
client bonds, and had come to an arrangement with
investors representing the majority of the funds
in administration and with the owners, to place
the company into voluntary receivership, with the
just retired president of the Costa Rica stock
exchange in charge.
We hired auditors, to work with the
official auditors of Financorp, to do an audit of
the company.
Most information was available in three
days. Our
intention was to continue to operate the company
and gradually return investor funds from profits.
The bond market was at a panic selling low,
so even a recovery of the market, which happened,
would save everyone’s investment.
In
the meantime, SUGEVAL were notified of the
situation, and of the fact that we would be
operating a receivership.
This did not suit them, so a couple of days
later they intervened, kicked out our auditors and
closed the company.
The employees were fired, and bonds given
to those who had loans against them, in spite of
written instructions to SUGEF to not sell Casa
Canada owned bonds.
Our assets were dumped into a common pool
with other investors; in spite of the fact that we
had written proof that our bonds belonged to us
from the government registrar.
Once again, the expenses of the
intervention including staff were paid from the
investor’s funds.
On
December 15, 2004 at an investor’s meeting the
interventor in charge of Financorp offered a deal
- if we would get a quitclaim signed by all
investors agreeing not to take legal action
against SUGEVAL, they would pay the amount of our
investment that remained.
At this time the figures indicated that
this would be about 45-50% of our investment.
In
spite of the disruption of the Christmas holidays,
by January 10, 2005 all investors had signed
quitclaims. Naturally, investors had to pay all costs.
On January 17 we were informed that SUGEVAL
had changed its mind - they wanted to do a formal
liquidation through Costa Rica’s hopeless
courts. A
meeting of investors was held, and all signed a
request to CONASSIF to distribute funds as SUGEVAL
had promised, but to no avail.
Some investors were desperate to get some
of their money by this point, so a letter was send
to the public defender requesting help.
Proposals were requested from top lawyers
to take criminal action against SUGEVAL, but as
the prices were in the $330,000 range it was
beyond the ability of the investors to pay.
This whole fiasco involved only about 20
investors and the regulators disregarded their
unanimous wishes!
In
spite of investors doing everything in their power
to prevent a long, costly liquidation, it went to
court. A letter for the public defender informed stated that
CONISSIF had made the final decision against
distributing funds to the people who owned them.
As
seems standard procedure, neither the court nor
the appointed liquidator did much of anything.
Unlike banks, only a single court appointed
liquidator is involved for securities dealer
bankruptcies.
The judge refused to hear from investors,
the liquidator did not communicate or even bother
to pick up cheques for over $220,000 as part of
the Banco ELCA distribution to Financorp - a
letter from Casa Canada brought that to her
attention. In
addition Casa Canada launched various
constitutional court actions to try to get
information.
Of course, these people all received fees
and costs from the investor’s funds.
On
January 15, 2009 Casa Canada representatives
finally met with the liquidator.
She had received a permanent position on
the Election Tribunal and wanted to terminate her
liquidator position as soon as possible.
In February investors received their first
funds, 21% of investment, 4 ½ years after the
totally unnecessary SUGEVAL intervention. Now there is a new liquidator who after over 3 months has not
received information, the computer with data, and
the former liquidators does not return his phone
calls. The
process goes on, large amounts of money appear to
be missing from the new balances given and the
investors remain helpless.
Investment
in Costa Rica should be approached with extreme
caution - these are only a few examples of many
that we have had the misfortune to experience.
IF
YOU PLAN TO INVEST IN COSTA RICA, CONTACT CASA
CANADA. WE
OFFER FREE HELP AND COUNSELLING TO HELP PEOPLE
AVOID PITFALLS, OF WHICH THERE ARE MANY.
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