Big Promises, Big Dreams and Investor Ruins : Investments: A Santa Ana promoter offered 22% returns and a middle-class life, but authorities say his was the largest fraud ever against Southland Latinos.

For thousands of low-income Latinos, Jose Manuel de la Jara burst onto the scene as a modern-day Messiah promising to transport his own kind into middle-class comfort and a life free of financial concerns.

On Spanish-speaking television and radio, de la Jara repeatedly broadcast his message of hope--he knew a way to earn a 22% annual rate of return.

Guaranteed.

De la Jara’s Santa Ana-based American Finance and Investment Group ( Inversiones Y Finanzas Americanas ) claimed it was buying real estate around Southern California and was looking for partners.

The company’s salespeople said de la Jara knew what he was doing. He was, they said, a rich businessman from Peru. He had a couple of Mercedes and a big house in Costa Mesa. And he wanted to spread the wealth.

“He was a Latino and he was getting ahead, so I figured I could, too,” Los Angeles investor Jose Espinosa De Los Monteros said through an interpreter.

Federal and state authorities now say IFA was nothing more than a well-contrived fraud, the largest ever perpetrated on the Latino community in Southern California. De la Jara, they say, operated a Ponzi scheme through IFA in order to enrich himself from March, 1988, through September, 1989.

So far, a state-appointed receiver--who is selling off de la Jara’s estate--has identified 700 investors who have lost more than $8.2 million. Most of the money has vanished.

The victims are nearly all working-class people, scattered around Southern California. Very few speak English.

“People are in financial ruins,” said Carlos Negrete, a San Juan Capistrano attorney representing several victims. “I don’t know of one family that wasn’t literally devastated by it.”

De la Jara is now under investigation by a federal grand jury in Los Angeles on bank and mail fraud charges.

Investigators say he wasn’t the godsend he seemed.

For starters, de la Jara is wanted by Interpol--the international police agency--for misappropriation and swindling in his native Peru. Police there say he carried out a scheme similar to IFA, bilking Peruvian investors out of $7 million in the mid-1980s.

Federal authorities allege that, besides being a con artist, de la Jara laundered money for associates of the Medellin drug cartel.

Two weeks ago, he was convicted in U.S. District Court in Los Angeles on money-laundering charges. The prosecution introduced into evidence scores of documents seized from de la Jara’s home and business, including a notebook full of names and telephone numbers of known narcotics traffickers.

De la Jara, 44, is being held at Metropolitan Detention Center in Los Angeles. He refused to be interviewed for this story but in the past has denied the charges against him. He has said he is an honest businessman, forced out of Peru because of threats against his life.

Five years ago, de la Jara and his son were kidnapped in Lima by the feared Los Retacos gang of brothers--Peru’s version of Jesse and Frank James--who strapped dynamite to de la Jara’s chest and threatened to blow him up unless his well-to-do family paid them $1 million.

The family handed over the ransom and then de la Jara fled to the United States, where he eventually started IFA. De la Jara has used as many as 10 aliases in the past three years, something he says was necessary to stay one step ahead of his kidnappers.

“This entire case is very ‘Alice in Wonderland,’ ” concluded state Department of Corporations attorney Dorene B. Wolf.

Trusting Investors

Catalina Torres came to this country from Mexico in 1977. Even though she earns about $200 a week sewing garments 10 hours a day, Torres and her husband had managed to put away $40,000 in savings.

In late 1988, the south central Los Angeles couple were notified that the building they live in was going to be demolished at the end of 1990. Torres decided it was time they bought a house, but she figured they needed more money first.

While watching Spanish-language Channel 34 (KMEX-TV), Torres saw an ad for IFA. The company was guaranteeing a 22% interest rate.

She paid a visit to the company’s East Los Angeles office and met with a salesman.

“I went there and I spoke to him before I gave him the money and he told me they were a company that had been in business 25 years,” Torres said through an interpreter. “He said the money was going to be safe.”

She invested $40,000 in January of 1989 and apparently has lost it all. Now the Torreses aren’t sure where they and their two children are going to live after their apartment building is destroyed. “You can’t imagine how I feel,” she said.

Federal and state investigators say her experience is typical of those who passed through IFA.

The company told investors they would earn very high interest on money loaned to IFA, which would be secured by trust deeds on one of 16 different properties the company had acquired around Southern California.

People loaned IFA anywhere from $1,000 to $300,000--the average loan was about $40,000. The company had promised to give trust deeds on the properties to anybody loaning IFA more than $20,000.

The state Department of Corporations says that IFA sought loans on the same properties over and over again and then issued numerous trust deeds on the same houses. On de la Jara’s Costa Mesa home, for instance, county records show that there are eight people holding trust deeds. They had loaned nearly $280,000 collectively.

Some trust deeds were actually recorded with county officials and a few deeds were allegedly issued on property that IFA didn’t own, state investigators say.

“By having a trust deed, investors thought ‘I have a secured interest in a property,’ not realizing that if it’s not recorded, it’s not worthless but close to it,” said Assistant U.S. Atty. Carolyn Kubota.

For a while, early investors in IFA didn’t suspect anything was wrong because monthly interest was paid on time. But state officials say that was because de la Jara was running a Ponzi scheme--paying older investors with the money provided by new investors.

The state’s auditors say they know IFA took in at least $14.7 million, but only about $500,000 in cash and $2.6 million in real estate was remaining last September when law enforcement officials raided the company.

“The defendant had cleaned out the bank accounts pretty well before we got there,” said Wolf.

Just where all of the money has gone is something of a mystery, particularly because IFA failed to keep its books up to date. The raid on de la Jara’s home and IFA headquarters produced documents showing that he had opened several offshore bank accounts.

He paid the government of Montserrat $29,500 to allow him to operate a bank, the International Hispanic Bank of North America in the British West Indies. And he had an account with St. Gallische Kantonal Bank in Switzerland. Both institutions refuse to provide any information to U.S. authorities.

Peruvian Cases

Jorge Palomino said he was so upset about losing his money that he hired a private detective to track down de la Jara. He wasn’t any happier when he discovered that de la Jara was in a U.S. jail.

Palomino is one of hundreds of investors in Peru who claim that de la Jara fled to the United States with funds they had invested in his first investment company, International Money Market of Lima.

The Florida Department of Banking and Finance says it has received about a dozen complaints from Peruvians saying de la Jara had millions of dollars in investments transferred to Miami.

“They had purchased what they believed were certificates of deposit in Peru,” said Florida banking investigator Morgan Cronin. “Mr. de la Jara had a lot of those funds transferred into Florida banks.”

Cronin said his department is investigating de la Jara with the U.S. Attorney’s Office in Los Angeles.

Palomino, a rare-book dealer, says he lost $50,000 to de la Jara.

“He has an ambition to get money,” Palomino said through an interpreter. “He had very nice houses (in Peru) and he always flaunted his money.”

South American Roots

Because de la Jara has used so many aliases and has admitted moving from place to place, his background is a bit blurry.

He was born on Sept. 17, 1945, somewhere in Peru. He became wealthy there at least in part from exchanging inte, the Peruvian currency, for U.S. dollars. He has testified in court in Los Angeles that he ran one of his country’s largest currency exchange businesses, Picaref S.A., which had annual revenues of about $30 million.

The Peruvian government nationalized its banking system in 1987 and Picaref was shut down. De la Jara moved to Miami the same year that Picaref closed and opened an International Money Market branch there.

Federal prosecutors allege that de la Jara was already laundering drug money at this point, out of Miami and Los Angeles.

The Internal Revenue Service first noticed in the summer of 1987 that de la Jara--using the name Jose O. Fernandez--was depositing hundreds of thousands of dollars in Southern California banks, but in increments of less than $10,000. Federal law requires cash transactions of $10,000 or more to be reported to the U.S. Treasury Department.

During de la Jara’s money-laundering trial, a former associate testified that he and de la Jara drove around Southern California in August, 1987, with a paper bag in the trunk containing $126,000. They made deposits at 16 different branches of Bank of America.

De la Jara’s attorney, public defender Lupe Martinez, told jurors that his client didn’t want the money to be detected for fear that it would be seized by Peruvian authorities.

But Assistant U.S. Atty. Karin Immergut said de la Jara was laundering drug money and showed jurors a notebook in his handwriting that contained detailed information about narcotics traffickers.

Among the entries was one about two traffickers: “They have contact with fishermen who transport the drug from the islands that are close to Miami in the Bahamas zone. They work for one of Pablo Escobar’s trusted men in Miami. He goes by the name of Jerry. . . . This guy, Jerry, is a very dangerous man.” Escobar has been identified by U.S. officials as chief of the Medellin drug cartel.

De la Jara said he had contacted the narcotics traffickers because he thought that they could help him catch his kidnappers.

“He was looking for these people to help him look for those individuals who had kidnapped him and were hiding out in Colombia,” said IRS special agent Ray Rivera, who has interviewed de la Jara. “His rationale for that was that the only ones with power in Colombia are the drug traffickers.”

To make a case against de la Jara, the Internal Revenue Service conducted a sting operation against him last year. Federal agents wanted to get him on tape agreeing to launder supposed drug money.

IRS undercover agent Oscar Garcia approached de la Jara about laundering some money, supposedly from drugs.

“De la Jara answered that that was not a problem. He said that in today’s world there are few businesses that are not involved in something illegal,” according to an IRS affidavit. De la Jara was convicted on April 24 of three of the four money-laundering charges stemming from that undercover operation.

Hundreds of Victims

Exactly one week before Christmas last year, state-appointed receivers Gilbert Vasquez and Oscar Gamez met with some 600 families in the auditorium at East Los Angeles College. One by one, victims approached the microphone and began pleading to get their money back. One man said if he was only going to get one penny on the dollar he wanted to get that one penny now.

State officials say they don’t know how much--if anything--can be returned to investors. For many, the damage is already done.

Alfonso Garcia, 44, owned two small houses in Orange County and took out mortgages on both, thinking that he could increase his income. The mortgages were at 10% or 11%, and IFA was supposedly paying 22%.

The Santa Ana resident lost $120,000 and is now having trouble keeping up with his mortgage payments, even though he and his wife now work an extra eight hours a day.

But he says the worst thing of all was deciding that he had no choice but to sell his childhood home in Mexico.

“My father bought that house when he was very young, even before he got married,” Garcia said through an interpreter. “In my life and in all of my family’s life, this is a big disaster.”