Fast-Profit Deal Turns Into Loss for Investors

Catalina Torres and her husband were told in late 1988 they had two years to find somewhere else to live.

The apartment building the South-Central Los Angeles couple calls home is scheduled to be demolished by the end of this year.

Torres decided it was time they bought a house, but she figured they needed more than the $40,000 they had saved. While watching Spanish-language television, Torres saw an ad for Santa Ana-based American Finance and Investment Group (Inversiones y Finanzas America), which was guaranteeing a hefty 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. “He said the money was going to be safe.”

She invested $40,000 in January, 1989, but instead of earning interest on the amount, she apparently has lost it all. Now the Torres couple is not sure where they and their two children are going to live when their apartment building is destroyed.

Federal and state authorities say American Finance was nothing more than a well-contrived scam, the largest ever perpetrated on the Latino community in Southern California. The company’s owner--Jose Manuel de la Jara--operated a Ponzi scheme through the company in order to enrich himself from March, 1988, through September, 1989, investigators claim.

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, 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 under investigation for possible bank and mail fraud violations by a federal grand jury in Los Angeles.

Investigators say he was not 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 American Finance, bilking Peruvian investors out of $7 million in the mid-1980s.

Besides being an alleged con artist, federal authorities said De la Jara launders money for associates of the Medellin drug cartel.

He was convicted in April on money-laundering charges in U.S. District Court in Los Angeles. 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 narcotics traffickers.

De la Jara, 44, has been 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.

They handed over the ransom and then fled to the United States, where he eventually started American Finance. De la Jara’s salespeople touted him as a rich businessman from Peru.

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

The company told investors they would earn very high interest on money lent to American Finance, 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 lending American Finance more than $20,000.

The state Department of Corporations claims American Finance sought loans on the same properties over and over again and then issued numerous trust deeds on the same house.

For a while, early investors in American Finance 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.

State officials say they don’t know how much money--if anything at all--can be returned to investors.

CONSUMER ALERT

Officials advise consumers to be careful if an investment promises an interest return that is far above what banks or savings and loan offices may offer. Consumers may call the following numbers for information and assistance:

Los Angeles County Consumer Affairs Department: (213) 974-1452 or 260-2893

State of California Consumer Affairs Department (service in English only): (800) 344-9940

State of California Department of Corporations: (213) 736-2520