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

For thousands of low-income Latinos, Jose Manuel de la Jara burst on to 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 it 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 Mercedeses 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 scam, 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.

Besides being an alleged con artist, federal authorities claim de la Jara launders money for associates of Colombia’s 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 currently 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 kidnaped 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 fled to the United States, where de la Jara eventually started IFA. He has used as many as 10 aliases in the last three years, something he says was necessary to stay one step ahead of his kidnapers.

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

Catalina Torres came to this country from Mexico in 1977. Even though she earns only 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 is going to be demolished at the end of this year. Torres decided it was time they bought a house, but she figured they needed more money first.

While watching Spanish-language KMEX Channel 34, Torres saw an ad for IFA. The company was guaranteeing a 22% interest rate--not as much as the 40% you can earn in inflation-plagued Mexico, but pretty good nonetheless.

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 has apparently 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 invested 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 claims IFA sought loans on the same properties over and over again and then issued numerous trust deeds on the same house. On de la Jara’s Costa Mesa home, for instance, county records show there are eight people holding trust deeds. They had invested close to $280,000 collectively.

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

“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 earlier investors with the money provided by new investors.

Mission Viejo National Bank claims in a lawsuit against de la Jara that he duped it into loaning him around $1 million by using 11 of the 16 properties as collateral.

The tiny institution said title searches showed numerous owners of each property but that de la Jara provided them with full reconveyances--which state officials now say were forged--showing IFA owned the property outright.

State examiners now say De la Jara needed those loans from Mission Viejo to keep IFA afloat.

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 did produce documents showing he had opened several offshore bank accounts.

He paid $29,500 to the government of Montserrat to operate 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.

State 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 were remaining last September when law enforcement officials raided the company.

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

IFA allegedly commingled investor funds, which were used to pay some of de la Jara’s personal expenses, according to the state audits.

“He misappropriated investor funds for personal use, ran no legitimate income-producing enterprise and utilized funds of later investors to pay off the earlier investors,” said state appointed receiver Gilbert Vasquez.

Jorge Palomino said he was so upset about losing his money he hired a private detective to track down de la Jara.

He wasn’t any happier when he discovered de la Jara was in a U.S. jail.

Palomino is one of hundreds of investors in Peru who claim 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.”

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. ($30-million annual revenue, U.S. dollars).

The Peruvian government nationalized its banking system in 1987 and Picaref was shut down.

De la Jara has said Interpol’s issuance of an arrest warrant against him is wholly politically motivated.

“The Peruvian government instigated a series of administrative and judicial proceedings to discredit Mr. de la Jara and his business affairs in Peru,” his wife, Maria Ledesma, said in a court filing.

De la Jara moved to Miami the same year Picaref closed and opened an International Money Market branch there.

Federal prosecutors claim 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 in increments of less than $10,000. Federal law requires cash transactions of more than $10,000 to be reported to the U.S. Treasury Department.

During de la Jara’s money-laundering trial, a former associate testified the two men 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 his client didn’t want the money to be detected for fear 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 which contained detailed information about narcotics traffickers.

Among the entries was this 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.

Some of the descriptions were so detailed they included information such as what kind of car a particular trafficker was driving.

“Luis drives a Chevette, light blue with dark blue doors. . . . He supplies weapons to the Colombian guerrillas in exchange for drugs,” the entry read.

Immergut then showed jurors what she said were payoff ledgers, which contain the names of many of the same traffickers.

“There were references to kilograms and amounts that appeared to correspond to kilogram prices of cocaine,” Immergut said. “He said they were currency exchange rates.”

De la Jara said he had gotten in contact with the narcotics traffickers because he thought they could help him catch his kidnapers.

“He was looking for these people to help him look for those individuals who had kidnaped 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 cement 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.

Wells Fargo in Glendora agreed to employ an undercover IRS agent as a personal banker and within six months he had befriended de la Jara. Agent Oscar Garcia soon 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 discussed de la Jara’s ability to get money into various South and Central American countries. De la Jara indicated that Colombia was a problem; Venezuela was fine but Costa Rica was better.”

De la Jara was convicted April 24 on three of the four money-laundering charges stemming from that undercover operation.

The IRS agent brought in an undercover investigator from the Drug Enforcement Administration, who told de la Jara he was a narcotics trafficker whose main business was selling chemicals used to make cocaine.

“On Aug. 8, 1989, de la Jara stated that he was interested in obtaining ether” used in processing of cocaine paste, the affidavit claims. And later--according to the affidavit--de la Jara “suggested that maybe he could help with the selling of the cocaine.”

But later “de la Jara informed the undercover agent that he currently did not have a customer for the cocaine and suggested that the cocaine deal be put on the back burner for now. De la Jara told the undercover agent that the people he spoke with were distrustful of people they did not know.”

Exactly one week before Christmas last year, state-appointed receivers Gilbert Vasquez and Oscar Gamez met with about 600 families in the auditorium at East Los Angeles College. One by one, victims approached the microphone and pleaded 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 at all--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 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 are working an extra eight hours a day.

But he says the worst thing of all was deciding 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.”

INVESTIGATION INTO AMERICAN INVESTMENTS (IFA)

The company’s records included a listing of the 16 properties used as collateral for trust deeds issued to investors. In most cases, the amount owed to investors exceeds the cost of the property. Although trust deeds totaling $3.6 million were issued, state appointed receiver said other records indicate that the total “invested” was closer to $8.2 million. Homes Owned by American Investments (per city)

Address Estimated Encumbrances Cost (Trust Deeds) LONG BEACH 23 68th St. $136,408 $160,000 COSTA MESA 1085 Tulare Dr. 290,000 260,000 SANTA ANA 111 N. Main St. 437,500 141,000 CHINO HILLS 2534 Cottonwood Tr. 164,500 218,500 2612 Cottonwood Tr. 160,000 194,500 2759 Fairlane Pl. 160,000 315,057 13487 Treasure Wy. 159,500 308,500 ONTARIO 1247 W. Monticello St. 133,000 322,000 3255 Antler Rd. 116,000 239,300 FONTANA 16130 Elaine Dr. 98,000 104,400 RIALTO 2404 Teakwood Ave. 116,000 140,000 2287 N. Sycamore Ave. 132,000 339,250 5674 Sycamore Ave. 153,000 160,000 MORENO VALLEY 23280 Dewdrop Cir. 124,000 186,400 25620 El Greco Dr. 135,000 366,002 13140 Mohican Dr. 120,000 147,975 Total 2,634,908 3,602,884