Colombia Reels After Investment Schemes; Scandal Has Riveted Residents, Shaken the Economy, Damaged Uribe's Standing

Colombian police escort David Murcia, owner of the collapsed DMG investment group, in Bogota last month. He and his associates are now in jail.
Colombian police escort David Murcia, owner of the collapsed DMG investment group, in Bogota last month. He and his associates are now in jail. (By William Fernando Martinez -- Associated Press)
By Juan Forero
Washington Post Foreign Service
Friday, December 5, 2008

BOGOTA, Colombia -- The pied piper was a gangly, long-haired entrepreneur whose remarkable success story seemed to augur well for those who invested in his get-rich scheme. David Murcia, 28, had gone from being a traveling salesman making $130 a month to living in a luxury high-rise, driving a Ferrari and forging ties with government officials.

Investigators now say Murcia ran a secretive, hydra-headed enterprise -- part pyramid scheme, part money-laundering business -- that provided investors with returns of up to 300 percent in just a few months. His company, DMG Group Holdings, along with 250 other pyramid schemes nationwide, attracted hundreds of thousands of working-class people starry-eyed with promises of an easy payday.

But DMG and the others -- including the now-infamous DRFE, whose initials stood for "Fast Money, Easy Cash" -- soon collapsed, and Murcia and his associates are in jail. The attorney general's office said that perhaps as many as 4 million people in a country of 44 million lost money, an estimated $1 billion in four hard-hit southern states alone.

The ensuing scandal has riveted this country, shaken the economy and damaged the so-called Teflon president -- Álvaro Uribe -- like nothing before. A weekend poll on Uribe's governance showed that 77 percent of Colombians surveyed in the country's south believe that things are going badly, and support for his reelection bid is wavering.

Indeed, a proposed constitutional change that would permit Uribe to run for a third four-year term could be sunk by the scandal, as two members of Congress have withdrawn their support for it, citing the government's inability to protect poor investors.

And then there was the embarrassing news that the president's two sons -- Tomás and Jerónimo -- were friends with one of Murcia's associates in DMG, Daniel Ángel, though they had not invested in the company. That prompted Uribe to declare at a news conference: "My sons are not corrupt. My sons are not influence peddlers."

After the pyramid schemes collapsed last month, protests erupted across the country and the government responded by declaring a nighttime curfew in 13 cities and sending in riot police. Investigators are now trying to figure out exactly how the moneymaking schemes worked, while government officials consider ways to indemnify those who lost their investments.

Carmen Ochoa, a teacher, saw her life savings vanish.

"Of course, we knew this was a business where you could lose it all, and that is what happened, it collapsed," said Ochoa, who invested $5,500 in DMG.

Those who joined "the DMG family" bought prepaid debit cards for any amount, cashed them in for appliances and recouped their money six months later. For recruiting new members, the investors earned points on a different card. The points could later be redeemed for cash, but many investors simply bought more and more cards, which have since become worthless.

The earnings were nothing short of miraculous for some investors, and the mantra of the company became "Believe in God, and David Murcia."

But investigators say it appears Murcia made money by buying electronic goods in bulk and selling them at high prices and by laundering drug profits. The earnings were impressive -- DMG is estimated to have lured in $435 million in investments this year alone. In barely three years, Murcia built an empire of 60 DMG offices nationwide and dozens of other businesses. DMG's tentacles also reached into Ecuador, Panama and Venezuela.

He was able to stay a step ahead of authorities, according to investigators and government officials, by supporting political campaigns and bribing lawmakers. In one taped telephone conversation in October, Ángel, Murcia's associate, talked of designating $322,000 for members of Congress to approve a law beneficial to DMG.

There had been warnings that the house of cards could collapse -- stories in leading magazines this year and warnings by politicians from regions where pyramid schemes were thriving.

When the schemes did crumble, a government that likes to characterize itself as steady in the face of crisis appeared wholly unprepared. The president admitted as much, saying he was at fault for not having moved fast enough.

As the government began to zero in on DMG, Murcia went on the offensive, saying he had not let his investors down.

Many of those who invested in DMG protested the government's pursuit of Murcia, burning dozens of vehicles and destroying property in the city of Mocoa in the south. Now, many of the same people are lining up outside Bogota's main soccer stadium, filling out forms in the hope of getting some kind of compensation.

The outlook is not rosy: The government says the money will come from the funds seized from DMG, only $5 million, far from enough to cover all the losses.

© 2008 The Washington Post Company