Faith Turns to Anger for Latino Victims

Jovita Marquez and Virginia Villa were among the thousands of Southern California Latinos drawn to La Luz de Oro Corp., whose name means “The Light of Gold.”

At the company’s festive sales rallies--marathon sessions mixing evangelism with secular promises of money, cars and homes--the two women were told they could realize their financial dreams if they invested in the telecommunications company, followed its rules and held on to their faith.

But faith has given way to anger. Marquez and Villa, two friends from the Inland Empire, recently drove a borrowed Honda Civic to the company’s Panorama City offices to find out what happened to the thousands of dollars they invested. La Luz de Oro’s doors were locked.

“We thought we were going to get some help,” said Marquez, 42, an unemployed single mother. “But they robbed us.”

La Luz de Oro leaders say they run a legitimate business, selling cellular phones and long-distance service. Members, who pay $75 to join, are required to attend meetings and purchase phone cards. They are told they can share in the profits of the phone services and qualify for free cars and homes if they persuade others to join.

In full-page ads in Spanish-language newspapers, the company said it has given away 22 houses and many new cars.

But investigators in the Los Angeles Police Department’s financial crimes division say those claims are false.

La Luz de Oro, according to police and an indictment by a Los Angeles County grand jury, is a pyramid scheme that has defrauded its mostly Spanish-speaking members of their meager savings and ruined their credit. The company, according to authorities, spread the financial ruin through members who signed up friends and family to meet quotas and qualify for prizes.

Company President Mercedes Navarrete and eight others--including her husband, Felix Navarrete, 70, and a daughter, Joan Frederick--pleaded not guilty Friday to 28 counts in a grand jury indictment. The charges include conspiracy, forgery, securities and tax fraud, and running “an endless chain scheme.”

Also charged were Pedro Miramontes, 51; Rolando Soza, 46; Joe Garcia, 44; and Alejandra Nunez, 39.

The Navarretes remain in County Jail in lieu of $1-million bail. Four of the other seven defendants have been released. A trial date is set for March 5.

Mercedes Navarrete’s attorney, Jeffrey Sklan, said his client is innocent. Any dispute with disgruntled members, he said, should be decided in civil court.

Investigators in April seized $1.9 million, the bulk of the company’s assets. Navarrete’s son, Carlos Frederick, said the prosecution is the reason the company can’t make good on its promises.

“How can a company operate when all the money’s frozen?” he said.

Luz de Oro members have filed more than 700 complaints with police and new complaints from the company’s 6,000 members arrive daily, according to court records.

Prosecutors allege that Luz is a typical pyramid scheme, where members profit from the payments of others who join later. The scheme requires a never-ending supply of new members--an impossibility--and most participants end up losers.

Police said the losses are small compared with some scams, but it is one of the worst to target Latinos in Southern California.

“This is a big deal, because the victims are all working-class,” said LAPD Det. John Rodriguez, the lead investigator. “And what really seems wrong is that they believed in the organization so much that they invested not only for themselves. They also got their families involved.”

Even with its leadership facing trial, a recent Luz de Oro meeting at a Montebello seafood restaurant drew nearly 100 members. Each paid a mandatory $5 cover charge to hear the company’s Spanish-language pitch, punctuated by sing-alongs with Ricky Martin tunes and the company’s own perky anthem.

“Latinos are workers,” motivational speaker Sandra Garcia told the crowd, pacing in front of young parents, retirees and men in cowboy hats. “And that’s why we’ll maintain our organization! Our organization is strong!”

Margarita Turner, 70 and a widow, was among the believers. Turner has given the company hundreds of dollars. She said she wasn’t worried that she has not seen any proceeds from the company’s profit-sharing plan.

“They haven’t helped me yet, but they’ve helped a lot of people,” Turner said. “I know they are innocent.”

Det. Rodriguez said the company’s remaining followers have been warned of the charges through coverage in the Spanish-language media. “If they haven’t gotten the picture by now,” he said, “they deserve to be taken.”

For nearly two years, the company’s message was delivered persuasively by its president, 54-year-old Mercedes Navarrete, an attractive, charismatic woman. She described how members could earn riches for themselves and their friends and family if they persisted in finding new people to join.

Potent Mix of Motivations

The Luz de Oro pitch, investigators said, was expertly concocted by Navarrete to play on the aspirations of her target audience, some of whom continue to find it irresistible.

It was a message combining racial pride, self-sufficiency, family values, Christian piety and the American Dream.

“She’d always talk about how concerned she was about families,” said Delia Putzeys, 42, a former Luz de Oro member. “She talked about education, family ties, retirement plans, health plans--everything a human being was interested in. She had a program for each.”

Navarrete was born in Mexico and has lived most of her life in California, according to family members. Neighbors said security guards have been posted at her modest stucco cottage in Arleta for months.

In the last few years, authorities said, they have been unable to prosecute Navarrete because her alleged victims were reluctant to file formal complaints.

“All these people seemed more concerned that if the police got involved, they were all going to lose their money,” said Los Angeles County Sheriff’s Det. Gene Burns, who opened a file on Navarrete in 1999. “It was virtually impossible to convince them they were going to lose their money anyway.”

The state Department of Insurance learned of Navarrete in the late 1990s, when she and two partners operated a Downey-based company called La Luz Del Mundo. The department issued a cease-and-desist order against that company in 1999 for selling fraudulent auto liability insurance.

The “insurer” turned out to be a mail drop in Las Vegas, according to Insurance Department investigators.

One of Navarrete’s partners, Alejandro Corral, was found guilty of theft and acting as an unauthorized insurer in March 2000. Investigators said Navarrete did not act as an agent, so she was not charged.

In the summer of 1999, Navarrete was caught in a videotaped sting selling pyramid scheme memberships to Michigan state police investigators. She spent 145 days in jail, pleading no contest to a misdemeanor larceny charge.

Navarrete was back in California in 2000, police said, recruiting people to La Luz de Oro.

Members were told they would receive $250,000 toward a new home from La Luz de Oro if they gave the company at least $2,400 and signed up at least seven new members, according to investigators and company literature.

LAPD Det. Rodriguez said that only one house was ever given away, and that was to Nunez--one of the company leaders charged.

The “dream car” program required a smaller investment and took in more than 300 members.

Potential members were told that the company would make the payments on new vehicles if they paid at least $2,000 to La Luz de Oro and signed up seven new members at $75 each, police said.

Members bought the cars--usually new Mitsubishi Monteros--on credit for no money down, police said. The income and employment history of many of the applicants were exaggerated to help secure the loans, police said.

When finance companies sent the first payment notices, police said, few members could afford them. So far, 150 cars have been repossessed, LAPD Det. Gene Arreola said.

2 Car Salesmen Among Those Indicted

Two salesmen at the dealerships selling the most cars--Carlos Vargas of Miller Mitsubishi in Van Nuys and Juan Alvarado of Assael Mitsubishi in Duarte--are among the eight people facing charges in the grand jury indictment, Arreola said.

Managers at the two dealerships had no comment or did not return phone calls.

The ripple effects of the car program are illustrated by Putzeys, who for months has been making $900 payments on the Montero she keeps parked in the back of her small paralegal service. Putzeys, who was told about La Luz de Oro by her hairdresser, persuaded 14 friends and business associates to join so she could become eligible for a car.

Like many participants, she needed a co-signer on her car loan. Now she is struggling to keep up the payments so she can preserve the credit of her friend and loan co-signer, Paul Sussman, an elderly Van Nuys bookkeeper.

Putzeys said she is ashamed of having led others to the company. One of them was Dolores Vasquez, 75, of Reseda, who is raising three grandchildren on her Social Security check.

Vasquez said she lost $1,500 to La Luz de Oro and persuaded about 30 East L.A. family members to join.

“I feel worse for them than I do for myself,” Vasquez said.