REPORT AND RECOMMENDATION TO UCCR

1. The set of events unleashing the complex judicial case relating to the Villalobos Brothers started with the letter of request sent by the Canadian government asking for help from Costa Rican judicial authorities.
2. The letter arrived in the Foreign Affairs Bureau on June 25, 2002.
3. On July 3, 2002 that letter was received by the Attorney General of Costa Rica, Lic. Carlos Arias,
4. On July 3, 2002, the Criminal Court of the First Judicial District of San José issued a warrant to raid and search premises together with seizure and others ( “others” meaning freezing of accounts.)
5. On July 4, 2002 the raid and seizure were conducted.
6. The following places were raided :
   • Casa Ofinter San José S.A.
   • Sucursal Casa Ofinter S.A. Mall San Pedro.
   • Residence of Edison Galeano Arias
   • Condominio Mar y Arena.
   • Residence of Osvaldo Villalobos Camacho in San Jerónimo de Moravia.

7. All bank accounts were frozen or immobilized.
8. The Government of Canada requested the raid of a condominium in Jacó de Garabito, home of some Canadian citizens, to seize documents found there. They were looking for information related to the bank accounts of those people in Costa Rica.
9.  The government of Canada did not ask to raid the offices of Ofinter or Luis Enrique Villalobos. That was done as a result of local interests promoting this type of action against the Villalobos brothers.
10. A number of irregular actions took place in the initial procedures, raids, and others, debated in the process against Osvaldo Villalobos  (File 02-008579-0042-PE.) However, the trial court discarded all of them and the Appelate Court confirmed them.
11. On May 16, 2007 Osvaldo Villalobos was sentenced to an 18-year jail term for aggravated fraud and illegal financial intermediation.
12.  By order of the Trial Court of the First Judicial District of San José, Sentence 435-07 at fifteen hours of May 16, 2007, the injunction relief must remain in full force for the frozen and seized money as a result of this process, which will be at the disposal of COMPETENT authorities to eventually carry out this sentence. Thus, all civil claims stated to the benefit of civil plaintiffs will remain under guardianship. The Property Registry is ordered to issue the appropriate notices to write notes for this process at the margin of movable property or real estate property recorded under the name of the defendant declared as civil responsible individuals.

ANALYSIS OF THE SITUATION FROM THE STANDPOINT OF THE CASE IN THE CRIMINAL COURT

                  I.    Firm judgment exists against Osvaldo Villalobos Camacho with all stages closed.

                II.    There is no chance for Osvaldo’s situation to change one way or the other.

               III.    Any change that might take place is in relation to complying with the judgment, e.g., benefits in the jail system, reducing the time to be served, and so on.

              IV.    Enrique Villalobos Camacho, on the other hand, has been declared “Absent” and has been ordered to appear in court (through national police and INTERPOL.)

               V.    Therefore, Enrique Villalobos Camacho is an accused with a declaration of absence.

              VI.    Contempt of court and absence differ as follows: In the first case, the accused has appeared in the process and then has left. In the second, the defendant has never appeared in court. A statement of absence does not imply that the investigation will be suspended. On the contrary, the Prosecutor is committed to preserving proof that might be lost if the court waits for the defendant to appear. In these cases, the Prosecutor’s Office keeps a monthly record to keep orders of seizure and appearance active.

             VII.    I repeat that ENRIQUE VILLALOBOS CAMACHO IS AN ABSENT accused.

           VIII.    The above implies that the count to apply the statute of limitations operates on a ten-year basis, starting on Julio 4, 2002, in the case of Enrique Villalobos Camacho, until July 4,  2012.

              IX.    From that date on exoneration of criminal action can be requested in line with article 30, subsection e) of Costa Rica’s Criminal Code that reads as follows:

·         Article 30. - Causes for exoneration of criminal action. Criminal action will expire: “… e) at the end of the expiration term.

X.- Other alternatives can be considered in the Villalobos case, for example:

a)   Negotiating with the Prosecutor’s Office

b)  Political Negotiation

a) Under option a) negotiating with the Prosecutor’s Office would involve Enrique Villalobos showing up for the legal process, going to jail, and starting the process under the conditions agreed upon with the Prosecutor’s Office. It is obvious that, cognizant of Enrique Villalobos’ opinion about the Costa Rican judiciary system, he will refuse to take this option.

b) Option b) is not feasible at this time. We are about to choose a new president and Legislative Assembly and no political player will be willing to negotiate anything related to this case, for fear of impacting the election process. In the current political environment of Costa Rica, this option is not viable.

Thus, waiting for the completion of the expiration term, i.e., July 2012, seems to be the most logical option for Mr. Villalobos.

LAWSUIT AGAINST THE GOVERNMENT BY UCCR MEMBERS

Upon analyzing all documents, I have concluded that a lawsuit against the Costa Rican government is possible and that it has a high likelihood of success. The reason for this is that documents available lead one to believe that the government took action in an irresponsible fashion, against a large number of legal rules and standards, chiefly the legality principle that must rule all government action. The action taken and the way the events leading to shutting the Villalobos Brothers operation, with the consequences of said actions, ruined thousands of local and foreign citizens.

Hundreds, maybe even thousands of investors were waiting for the return on their investments. However, Enrique Villalobos said he could not continue operating as the government of Costa Rica as well as those from other countries had frozen his bank accounts.

The action of Costa Rican authorities, through a series of deeds completely corrupt and invalid, damaged all of these people who believed in good faith that Costa Rica had a rule of law protecting them.

What took place, however, has its root in interests other than legal. As a result of action taken, one of the worst financial disasters in Costa Rican history occurred, seriously hurting hundreds of local and foreign citizens.

There is a clear juridical base for a damage lawsuit to hold those responsible accountable.

It must be clearly stated that this lawsuit would in no way hinder the potential recovery of investments from Enrique Villalobos, should this be made possible in the future by a change in the conditions for
Mr. Villalobos.

It is also important to clarify that the lawsuit would in no manner result in persecution or any other consequences for participants. Lawsuits against the Costa Rican government are a widely known juridical tool

 and a fact of daily reality in Costa Rica, being a state of law.

On the other hand, filing a lawsuit could eventually facilitate a political negotiation with the new government, as it may have an interest in negotiation to prevent a potential sentence against the state.