economy

The DMG affair is turning out to be much more of a crime story than it originally seemed.

In Colombia, the news first broke as a financial scandal, a matter of this extravagant long-haired 27-year-old named David Murcia Guzmán running a company bearing his initials, an apparent classic Ponzi scheme wherein early investors were paid fabulous returns with the money put in by later investors. It turned out that he was living the high life here in Panama, and running the same DMG operation that Colombian authorities broke up not only in this country, but also in Ecuador, Peru, Venezuela, Brazil, Mexico and Belize.

Panama's Banking Superintendent, Ministry of Commerce and Industry and National Securities Commission issued warnings that investors should be wary, but said that they have no power to deal with Ponzi schemes that take depositors' money and promise high returns. Attorney General Ana Matilde Gómez pleaded that she couldn't act unless one of the previous two institutions forwarded her a complaint or an international warrant came out of the Colombian investigation. One of the problems with legal action here was that not a single customer of Murcia Guzmán's DMG scheme --- of which there were some 20,000 in Panama, doing business at branches in Panama City, David, Chitre and Colon --- had filed a complaint alleging that she or he was cheated.

The INTERPOL warrant from Colombia was forthcoming in a few days, and at 10:10 p.m. on November 19 he was arrested by Panamanian National Police in Chame and at 1:15 the following morning handed over to Colombian National Police chief Oscar Naranjo, who was standing by with one of his force's airplanes in Tocumen. There were no extradition procedures for Murcia Guzmán, who was expelled as an undesirable element under Panama's new immigration law.

There ensued a Panamanian law enforcement mop-up, with the closure of DMG offices and seizure of their contents, raids on luxury hotel suites, a house and two condos owned or rented by Murcia Guzmán, the impoundment of a yacht at an Amador marina, the confiscation of three Lamborghinis, two Maserattis, a Ferarri and other vehicles and the search for bank accounts and several other suspects listed on the INTERPOL warrant, including the main suspect's wife (Joanne Ivette León Bermúdez), mother (María Amparo Guzmán),  and two  brothers-in-law (William Suárez and Marco Bastidas).

Meanwhile back in Colombia, prosecutors were making allegations and reporters were connecting dots, and it was adding up to another spectacular chapter in the ongoing reality telenovela about ties between the government and drug-dealing paramilitary death squads.

It seems that detectives were on the DMG trail for about a year and a half, and that they had tapped the phones of one of the brothers-in-law, William Suárez. Colombian authorities believe that William Suárez, who a decade ago was making his living driving a taxi, was the person actually running the DMG empire.

And how did a cabbie rise to such heights? Colombian prosecutors say that wiretaps and other evidence indicate that he was the person laundering the ill-gotten gains of the right-wing AUC paramilitary death squads and its allies in the Valle del Norte drug cartel in the absence of AUC leader Carlos Mario "Macoco" Jiménez Naranjo and Valle del Norte kingpin Juan Carlos "Chupeta" Ramírez Abadía. Both of these men have been extradited to the United States to face drug trafficking charges.

The AUC (United Colombian Self-Defense) and its predecessors Los PEPEs (People Persecuted by Pablo Escobar) and the ACCU (Farmers Self-Defense of Cordoba and Uraba) were throughout most of their existence allied with and supported by the governments of the United States and Colombia. In the George H. W. Bush administration the PEPEs worked closely with the US Embassy in Bogota to track down and kill Pablo Escobar and dismantle his Medellin Cartel. The death squad movement prospered and grew from the assets that it grabbed from Escobar's gang in those times. During the Clinton administration the ACCU and later the AUC played key roles in the offensive against the drug and kidnapping financed FARC guerrillas. That offensive, which involved a series of massacres wherein government forces surrounded areas and the AUC went into them and committed notorious massacres, later became formalized as the US-financed "Plan Colombia." Plan Colombia's proponent, Colombian President Álvaro Uribe, has himself been implicated by at least one witness and several bits of circumstantial evidence in the October 1997 massacre of at least 15 farmers at El Aro when he was governor of Antioquia province.

As the FARC was driven back from rural areas that it had controlled, the power to tax drug growing, processing and trafficking in those areas passed from the leftist rebels to the right wing paramilitaries. AUC leaders made televised boasts about their movement's vast drug income. The scandals about that and the massacres became sufficiently odious that in 2001 the George W. Bush administration added the AUC to its list of terrorist organizations and overt cooperation with the United States was reduced. There followed a "peace process" between Colombia's Uribe administration and the AUC, which by 2006 had formally demobilized the paramilitary force and granted a partial amnesty that allowed the group's members to keep the rural lands that they had seized and the fortunes they had amassed. In many cases the demobiliation was only pro forma, and the AUC for the most part continued with its drug running activities. Under US pressure --- both from the Bush administration and a Democratic-controlled Congress that wanted to see some substantial reforms before it would consider a US-Colombia free trade agreement --- a number of AUC leaders were extradited to the United States in 2007 and 2008.

However, the multi-billion-dollar fortunes acquired by the AUC leaders were by and large unaccounted for. It is now alleged by Colombian prosecutors and media that the DMG empire was a vehicle for the laundering of part of this fortune.

As such, the DMG affair is another episode in the far-reaching scandal that has seen 50 members of Uribe's faction in the Colombian Congress charged with various crimes arising from their AUC ties.

Based on police wiretaps, prosecutors allege that David Murcia Guzmán and William Suárez conducted a $330,000 lobbying campaign to get Colombia's Congress to pass an amendment to a financial regulation law that allowed DMG to get into the debit card business. Named by police and prosecutors for their alleged ties with DMG --- although these claims are denied, explained or minimized by those identified --- are General Miguel Maza, the former head of Colombia's police intelligence apparatus; former Colombian tax and customs chief Guillermo Fino; Governors Ómar Díazgranados Velásquez and Joaco Berrío of Magdalena and Bolivar departments respectively; Santa Marta Mayor Juan Pablo Díaz Granado Pinedo; and Superior Judicial Council Magistrate Pedro Alonso Sanabria (said to have been financed by DMG in an unsuccessful gubernatorial campaign, before President Uribe appointed him to the bench).

It is also reported by several Colombian news media that the DMG organization maintained a $6 million fund especially to bribe journalists in six countries, including Panama. The usual method of operation seems to have been to pay off corrupt members of news organizations to kill unfavorable reporting rather than the more common practice of businesses planting favorable stories about themselves.

Given Panama's history of occasionally invoking its financial fraud laws, the National Securities Commission's 1999-2000 shutdown of Marc M. Harris's financial empire for being unregistered and statutes that unambiguously give the Banking Superintendent the power to regulate any business that takes deposits of customers' money; and given the public corruption aspect of the DMG scandal in Colombia, there is at least the suspicion raised that the pleas of top government officials here that nothing could be done about DMG given the state of Panamanian law may have been something other than honest professional opinions.

One aspect of our legal and regulatory system, however, clearly didn't fit the DMG situation and is likely to prove nightmarish for the thousands who invested their money in David Murcia Guzmán's scheme. What's going to be done with the money that Panamanian authorities seized from DMG? The bank intervention rules clearly don't apply. Is there any existing form of accounting to separate the alleged AUC and Valle del Norte Cartel funds from depositors' money? Will anybody who put money into DMG ever see any of it again? It would seem that there will be years of litigation before there would be any possibility of that.