ADMINISTRATIVE LAWSUIT

NEW CASE

PLAINTIFFS: JOHN MANNERS, FREDERICK ROBERT PITTS, SOLVEIG MARIE HALLSTROM, KATY FRANCE TENZA, RONALD TUCKER, ET AL.

VERSUS: THE COSTA RICAN GOVERNMENT, represented by the Executive Branch, SUGEVAL, and the Judiciary

Honorable Judges of the Administrative Court:

I.          ACCOUNT OF EVENTS

1.    Mr. Enrique Villalobos Camacho and his various companies operated lawfully in Costa Rica with the full knowledge of the country’s authorities, including all three branches of government, and under the vigilant oversight of regulatory agencies, among them the SUGEV. We reiterate that Mr. Villalobos, openly and in plain sight of all the authorities of the Costa Rican State, developed and operated an enterprise devoted to securing investment capital, according to a special arrangement, i.e., we investors established a financial relationship, investing various sums of money (usually in US dollars), which he would back with collateral in the form of checks made out to the investors, bills of exchange or other payment mechanisms. In most cases, an agreement was made for a monthly yield of three percent (3%) in exchange for this investment.

2.    Payments of the interest rates that we agreed to were honored for a long time. During the years that he operated according to this arrangement and sustained this contractual relationship, Luis Enrique Villalobos Camacho punctually paid us the respective interest. Likewise, he always offered us the option of either reimbursing the principal or continuing to operate according to the established system. WE REITERATE THAT NEVER, AT NO TIME WHATSOEVER, DID WE FEEL THAT OUR INVESTMENTS WERE AT RISK, AND WE ALWAYS OBTAINED THE SAME YIELD AGREED UPON AND NEGOTIATED.

3.    Based on letters rogatory from the Canadian Government, the Costa Rican Government decided to intervene and BRING ABOUT THE CLOSURE OF OPERATIONS, FREEZING OF NATIONAL AND FOREIGN BANK ACCOUNTS, SUSPENSION OF FINANCIAL OPERATIONS, SEIZURE OF CASH AND MISCELLANEOUS SECURITIES, AND PROSECUTION OF LUIS ENRIQUE VILLALOBOS CAMACHO BY THE COSTA RICAN GOVERNMENT; this action took place on 4 July 2002.

4.    Despite the above, Mr. Enrique Villalobos Camacho continued for some months honoring his commitments until persecution by the Costa Rican Government and its actions made it impossible for him to continue to do so. To this day, Mr. Enrique Villalobos Camacho has expressed to us his intentions of paying us and honoring our investments, provided that the Costa Rican Government discontinues its persecution, which prevents him from make good on his offer.

5.    The reason for this is that every month the Costa Rican Government issues enforcement orders against Mr. Enrique Villalobos Camacho through international police agencies, such as Interpol.

6.    Mr. Enrique Villalobos Camacho has been declared “DEFENDANT NOT PRESENT” by the Costa Rican justice system in the proceedings of Lawsuit No. 02-8579-042-PE, by which his brother, Enrique Osvaldo Villalobos Camacho, was convicted because he was never notified of the proceeding suit filed against him by the Costa Rican justice system.

7.    On 15 March 2010, we filed an Appeal for Protection Against Infringement of Constitutional Rights before the Constitutional Chamber of the Costa Rican Supreme Court (Case No. 10-3805), so that a new action on the part of the Costa Rican Government (executed this time by the Judiciary through the “Enforcement of Judgment” mechanism involving the very Case or Criminal Lawsuit against Enrique Villalobos Camacho’s brother, Osvaldo) would resolve and distribute all or a portion of the funds or securities that were seized or impounded from both Enrique Villalobos and his brother Osvaldo and their companies, with no way of determining just how much corresponds or belongs to the businesses owned by Osvaldo and those owned by Enrique. This fact is exceedingly important, since among the funds and securities that the Costa Rican government seized or impounded from Enrique Villalobos Camacho, were our monies, our investments, and an entity of the Costa Rican Government was disposing of them without even allowing us participation or communication (notification), in the exercise of our right and due process, to be able to challenge or submit pleas on the this matter. It is scandalous that our monies are included in this pool of resources that the Costa Rican Government has decided to distribute, since a lawyer, without having invested one cent of these funds, is appropriating about US$ 2,000,000 (two million dollars) (see official letter CCPJ-003-201 dated 6 January 2010).

8.    This action taken by the Costa Rican Government culminates a process nearly eight years long during which we have suffered in misery unable to obtain remedy in the Costa Rican justice system. Our status as foreigners, despite the constitutional protection governed by Article 19, which stipulates that: Foreigners have the same individual and social duties and rights as do Costa Ricans, with the exceptions and limitations set forth in this Constitution and Law…,” it would seem that it has not faithfully achieved its purpose, since, we repeat, the Costa Rican Government through its actions has caused us serious economic harm which, in many cases, has deeply affected our lives, financial interests and the administration has deceitfully neglected our interests.

9.    It is important to point out that the Costa Rican Government and justice system acted under the assumption that it was to charge Enrique Villalobos Camacho and his brother Osvaldo with Money Laundering, the crime of which Osvaldo was acquitted, since the judges assumed it proven that said crime had never been committed. So, what justification was there for the Costa Rican Government’s actions which brought about economic failure for many of us?

10. The actions triggering the Costa Rican Government’s intervention and causing extremely serious harm to thousands of citizens (foreign and Costa Rican nationals) were unjustifiable and reckless.

11. Taking this outline back to the events giving rise to our rationale for this lawsuit, we must point out that at no time did the Canadian Government’s letters rogatory requesting the cooperation of the Costa Rican Government ask it to raid the Villalobos Brothers’ offices. Appearing on pages 18, 19, and 20 of these Letters Rogatory are requests for cooperation, and a raid on these offices was never mentioned. The search warrant was limited to the condominium owned by some Canadian citizens who were in Jacó in the Canton of Garabito, to seize documents there. Implied in and inferred from this request is that the Canadian Government’s interest was to seek information regarding these individuals’ bank accounts in Costa Rica, not only possible deposits made with Villalobos Brothers, but any other type of transaction made in Costa Rica. Raiding the offices of Ofinter or of Luis Enrique Villalobos was not discussed nor was it requested by the Canadian Government; the request involved finding and investigating the Canadians under investigation in Canada and obtaining all types of banking and financial information in Costa Rica, without limiting itself to possible operations with Luis Enrique Villalobos. But no, the Costa Rican Prosecutor’s Office, specifically Prosecutor Espinoza, requested and executed the raid on the offices of the Villalobos Brothers, sequestering and seizing all documents, books, account statements, monies, and other items potentially associated with the alleged investigations.

12. The above mentioned event, already departs from a precluded stage in the Costa Rican criminal justice system, if it reveals a fact that is relevant to this litigious complaint, i.e., the actions taken by the Costa Rican Government do not correspond to, abide by, nor were they based on the Canadian Government’s objective as stated in the respective Letters Rogatory and said Letters Rogatory or legal instrument of international law was only an excuse for the Costa Rican Government to persecute and compel Enrique Villalobos Camacho and his brother to close down their operations in Costa Rica, with the disastrous consequences that involved for thousands of citizens who, as we did, carried on a financial relationship with him that was exceedingly beneficial to both, with complete satisfaction and performance for all parties.

13. It is unquestionably important to the genesis of this matter to also explicitly state that at the time the Acting Legal Director of the Ministry of Foreign Affairs altered the Canadian Government’s note or letters rogatory, unofficially describing it as a request for judicial cooperation and indicating that it had to do with a case against several Canadian citizens, when the note from that country was absolutely clear in stating that it had to do with a simple police investigation, that there was no case at that time, and that charges had not been pressed against these individuals. Even the Supreme Court itself reiterated the error into which it was led by the Ministry of Foreign Affairs.

14. The serious harm that we have suffered over the entire last eight years is now viewed as reaching a climax in the decision handed down by the Costa Rican Courts of freely distributing the monies that were seized or impounded from the Villalobos Camacho Brothers’ businesses, and consequently from Enrique Villalobos Camacho, the businessman with which we established our financial relationship. Going back again into the history and genesis of this matter, the certain fact should be mentioned that the Costa Rican authorities were fully aware of the operations of Enrique Villalobos Camacho in this financial activity, and this is because since 11 May 2000 the Costa Rican Prosecutor’s Office had already received official letter 2310-2000-03 from the SUGEF signed by then Deputy Superintendent General of Financial Entities, Helberth Pineda Solís, whereby he sent a report on the so-called Villalobos Brothers Case and another one on 20 July 2000 (No. 3358-2000-03). The investigation was begun by means of an official letter sent by the Banco Crédito Agrícola de Cartago, informing the Superintendent’s Office of frequent cashing of checks at that bank by Brothers Luis Enrique and Osvaldo Villalobos Camacho. The report mentions possible collecting of cash in dollars at a place of business in San Pedro de Montes de Oca; that is to say, the Costa Rican authorities were fully aware of the Villalobos Brothers’ operations and nevertheless it was not until two years later that they were to audit the businesses and to encourage closure of operations and now eight years later they reinforce this “macabre” operation by distributing the funds that belonged to each and every one of us investors. Just as we did with the Constitutional Court, we want to clearly establish that our financial relationship was with Mr. LUIS ENRIQUE VILLALOBOS CAMACHO, the individual with whom we invested our funds, who has not been sentenced; he cannot even be considered a fugitive from justice, he has been termed “defendant not present,” since he was never notified of having been accused in any lawsuit whatsoever. So, if we invested our funds with him and they were confiscated as part of a generalized pool of monies and other securities due to acts or provisions of the Costa Rican Government, who would be legally authorized to dispose of those funds? The undersigned plaintiffs contend that nobody, no political or judicial authority may do so, or is it the case, then, that we do not live in a country that is truly under the rule of law? We are told that there is an Enforcement of Judgment (Case No. 02-008579-042-PE) process being carried out in the Judicial Branch’s Center for Conciliation, but we are not a party to it and consequently have no access to it; we have no recourse to the judicial decrees handed down there and this is because we were not a party to the main process or a plaintiff or civil plaintiff against Osvaldo Villalobos Camacho, since we have no complaint to lodge against Mr. Osvaldo Villalobos Camacho, because we had no negotiations, contracts or investments with him. We repeat, we invested and negotiated with Mr. Enrique Villalobos Camacho, a person with whom we continue to trust and we understand that any delay in meeting his commitment with us is through no fault of his own, but instead because he has been obliged by absurd, illegal, and unconstitutional circumstances and actions caused and taken in due course by the Costa Rican authorities and that their effects in force to date prevent our business and investment counterparty, Mr. Enrique Villalobos Camacho, from paying what he owes us, as he had always done month to month in a responsible honest fashion.

15. Costa Rican judicial authorities, after acting to the detriment of thousands of investors, taking over the financial operations of Enrique Villalobos Camacho, reach the conclusion, as legal truth, that the operations of Luis Enrique Villalobos did not fit the description of the crime of Money Laundering, so all of that rough judicial and administrative posturing that culminated in shutting down Villalobos Camacho’s operations turns out to have been unwarranted.

16. The Costa Rican Government acted in an irresponsible manner, filing a case against Anonymous for the crime of Drug Dealing. Ultimately, they end up sentencing Enrique’s brother, Osvaldo Villalobos Camacho, for fraud and financial intermediation, without the Costa Rican regulatory agency for the Financial System having established that said crime was even committed.

17. A note is on record dated 1 July 2002, received on that date by the Office of Prosecutor Espinoza, Official Letter UAF-045-02-38-1999, by which the Joint Center for Drug Enforcement Intelligence known as CICAD, sent it the results obtained after updating the information on the Villalobos Brothers to October 2001. Following 34 pages, eight Conclusions were established, with none of them indicating a single consideration dealing with the crime of money laundering. The CICAD limited itself to listing the real estate properties of what it calls the Businesses Associated with the Villalobos Brothers. It states that the Villalobos Brothers are devoted to financial intermediation and describes the interest rate for which funds were captured, without even suggesting any possible illegality. It observes a high circulation of cash, without any lucubration whatsoever regarding causes or explanations. There are no references in that report to any possible illicit activities at all, much less to money laundering, nor did the investigators ask the Public Prosecutor for additional time to finish their assigned task. Hence, at that time there was no evidence or even suspicion of criminal activities, even though the CICAD had been carrying out the respective investigations for a great deal of time beforehand. Actually, SUGEF had established in an extensive case begun in March 2001 that the Villalobos Brothers had not been engaging in financial intermediation activities, as per Official Letter DAJ-074-2002 of SUGEF’s Legal Advisory Office, dated 12 June 2002. That is to say, experts on the matter had already stated that what they were looking at was not a crime of illegal financial intermediation. This was reiterated by the Superintendent of Financial Entities to the Public Prosecutor himself in April 2003.

18. On 4 July 2002 a raid was conducted on the Offices of Ofinter and a large sum of cash was seized and delivered into the hands of the Public Prosecutor's Office. The Judge responsible for the action was Licenciada Cindy Williams, who was accompanied by a good number of Judiciary officers. The Search Warrant was issued at 9:15 p.m. and was 16 pages long. Support documentation was found for all the respective money confiscated, except for the sum of 10,331,000 colons, which neither appears as deposited in the accounts of the Court nor can the Public Prosecutor account for this sum. On page 10 of the Search Warrant it plainly states that a small safe was found with this sum of money in bills, but no one assumes the responsibility of explaining where these monies ended up. This money went missing once the judicial agents arrived on the scene and raided the offices; the record states that it was found in that place but it was not transferred into the Judiciary’s accounts. This is no small sum of money, yet even if it were, the Public Prosecutor and the respective Judge are obliged to explain the final whereabouts of these funds and specify those responsible for their disappearance. On 6 August 2003, Prosecutor Espinoza publicly mentions the formal complaint regarding the alleged disappearance of money during the seizure and vehemently affirms that the sums in their entirety were to be found deposited in the Judiciary’s accounts, displaying the respective deposit slips. Prosecutor Espinoza again speaks untruths since the sum of 10,331,000 colons does not appear deposited in the accounts of this Branch of Government, despite appearing in the search warrants. On 9 June 2003, Prosecutor Espinoza responded to an investor’s request, stating that sum total deposited in accounts of the Instituto Costarricense contra las Drogas (Costa Rican Anti-Drug Institute), known as the ICD, was $204,189 U.S. Nevertheless, by 6 August he already had to acknowledge that there was an additional $56,000, since the amount had not been added up correctly, and that was without the appearance of the aforementioned 10,331,000 colons. It is difficult to have faith in an Office whose calculator malfunctions when handling such high sums of money and which incessantly retracts from the many errors that it makes without explaining why they happen. Even as early as 3 July, Prosecutor Espinoza ordered the freezing of monies from accounts and the freezing and sequestering of monies seized from the offices of the Villalobos Brothers. To do this, he bases his actions on the alleged commission of crimes of money laundering and illegal financial intermediation. Despite his failure to quote a single legal regulation to support this action, the Judge authorizes the seizure of these funds. Thus, just referring to an alleged operation involving Canadian citizens under a police investigation (not a judicial investigation) was sufficient to freeze the sum total of the funds belonging to thousands of investors who had no connection whatsoever with the case. There is no reference whatsoever of knowledge that the Villalobos Brothers might have about the operations of the Canadians, nor was it taken into account that one month before this the very SUGEF had established that the activities engaged in were not classified as illegal financial intermediation; nevertheless, the funds of third parties were frozen simply due to the trumped-up story of the Public Prosecutor. The Public Prosecutor could have requested the information about the Canadians or investigated the final whereabouts of the seized funds, but what he did instead, with the assistance of the Judge (who should have protected constitutional guarantees) was to close down a business that had been operating problem free for over 18 years.

19. The collection of funds from the public by unauthorized entities or persons is not a crime in Costa Rica. This activity is unlawful when these funds are used to make loans or to invest in securities. This is why the SUGEF consistently considered the Villalobos Brothers as not having committed this crime. The Costa Rican authorities acted arbitrarily by raiding their businesses and eventually lodging criminal cases against them and their actions harmed thousands of us foreign nationals, investors who, in good faith and believing in the rule of law reigning in Costa Rica, participated in a lawful business which, we repeat, consistently met its obligations without fail until the Costa Rican Government prevented it from doing so.

20. As for Osvaldo Villalobos Camacho, he is accused of committing the crime of illegal financial intermediation, envisaged in article 157, paragraph a) of the Organic Law of the Costa Rican Central Bank (Banco Central de Costa Rica), relating to the second paragraph of article 116 of the same law. Article 157 referred to above stipulates that, those who “engage in unauthorized financial intermediation” shall be punished with a three to six year jail sentence, being that this regulation is completed in article 116, paragraph two of the same law which defines financial intermediation as the routine collection of financial resources from the public with the purpose of devoting them, at the risk and expense of the intermediary, to any form of credit or investment in securities, independent of the contractual or juridical concept used and of the type of document, electronic record system or other analogous system whereby transactions are formalized.” The penal classification in this case demands that not only financial resources be regularly collected from the public, but that they also are used for a precise, specific purpose, as expressly defined by the lawmaker, and consist of any form of credit or investment in securities. It is not enough for the funds to be collected for investment; the lawmaker stipulates that this investment is made using forms of credit or backed with securities. Any other form of investment made with captured funds does not constitute financial intermediation and therefore, carrying out these activities without legal authorization legal does not constitute a crime and deals with lawful conduct from the standpoint of criminal law. This crime definition for illegal financial intermediation was applied in the case ending in the conviction of Osvaldo Villalobos Camacho, classifying the behavior as exclusively capturing funds and paying out interest, flagrantly ignoring the rest of the crime definition transcribed above, which may be read clearly in article 116 of the Organic Law of the Banco Central. In all cases where the Public Prosecutor’s Office and the Criminal Law Office mentioned the crime of illegal financial intermediation, they omitted the legal purpose of the funds, completely neglecting the requirement of the crime classification and later on justifying the conviction of Mr. Osvaldo Villalobos Camacho and the arrest warrant for Mr. Luis Enrique Villalobos Camacho exclusively by his capturing funds from the public.

21. The Superintendent General of Financial Entities himself, Mr. Bernardo Alfaro, declared as a witness to Prosecutor Espinoza that the activities of Messrs. Villalobos Camacho did not fit the category of a crime involving illegal financial intermediation because the purpose of the funds did not match those contemplated in the articles quoted above. Regarding this matter, it is important to note the manner in which the daily newspaper La Nación reported on it in its 4 December 2002 edition:

Auditing Agency investigated the capture of funds in the millions

SUGEF fails to detect crime at Ofinter

La Nación, 4 December 2002

• It found no signs of illicit intermediation at business

Giannina Segnini
gsegnini@nacion.com
Editor at La Nación

Following a seven month investigation of Ofinter’s operations, the Office of the Superintendent General of Financial Entities (SUGEF) announced this July that there was no evidence of illegal financial intermediation in their operations. According to Superintendent Bernardo Alfaro, the investigation did determine that the brothers Luis Enrique and Osvaldo Villalobos were capturing funds from investors, but “other conditions had to be proven in order to suggest involvement of illegal intermediation,” he explained. One of the conditions required for illegal intermediation to exist is that there must be a public offering, i.e., publicly offered services. According to the superintendent, in the case of the Villalobos brothers it was never proven that they advertised their activities. “In stark contrast, they ran a completely closed operation, which required a referral in order to participate,” he added. The other condition has to do with the purpose of the monies. Alfaro explained that just the capturing of funds alone did not constitute a crime, since there is no legal penalty for it. “It has to be proven that the capture aimed to accomplish a given purpose and that the individual capturing the funds was also assuming the risk,” he said. The Office of the Superintendent found no evidence to suggest that the money captured by the Villalobos brothers was put into loans or invested in some sort of commercial activity. The Villalobos Brothers operated the currency exchange office of Ofinter, S.A. (known as “The Brothers”) where, besides exchanging currency, they captured investments in dollars for which they paid as much as three percent per month. Osvaldo was arrested last week, accused of illegal financial intermediation. Authorities are unaware of the whereabouts of his brother, Luis Enrique.

Sent to SUGEVAL

The superintendent explained that, by the end of 2001, a SUGEF team began investigating the movements of the Villalobos brothers, responding to several reports of suspicious activities sent by financial institutions and a formal complaint lodged by a family member of one of the investors. “The gentleman claimed to be the beneficiary of a sum of money and his lawyer showed up at the SUGEF” to file a complaint about the incident. Alfaro remarked that, in response to suspicions, they took on the task of contacting other investors. “We wanted to know how they were furnishing the funds and what the nature of the procedure was, but everyone refused to give out information and they argued that they had absolute trust in them because they had been investing with them for years,” he recalled. Even though they received a sworn statement from one of the investors, SUGEF officials were convinced that the case was not complete, since they never confirmed what the funds gathered were used for. Therefore, last July superintendent Alfaro decided to send all of the information compiled to the Superintendent General of Securities (SUGEVAL) for him to determine whether it was possible for some anomaly to exist in that operation within his jurisdiction. The Organic Law of the Banco Central authorizes the SUGEF to take over unsupervised entities (as in the case of the Villalobos’ capture of funds), but that in order to do this court authorization is required. Alfaro explained that takeover of Ofinter was not requested because no evidence emerged from the investigation that the crime of illegal financial intermediation was being committed. According to the superintendent, it is necessary to regulate the capture of funds, because although the concept of illegal funds capture does exist, sanctions have not been established against this activity. In defense of his client, Edgardo García, defense counsel to Osvaldo Villalobos, offers a version of events that coincides with the findings of the Superintendent’s Office. “What happened at Ofinter was a possible capture of economic resources whereby Luis Enrique Villalobos Camacho provided a check drawn on his own personal account at Banco Nacional de Costa Rica as collateral.” García argued that since the OIJ accounting report does not establish the purpose assigned by Enrique to the captured funds, he cannot be accused of illegal financial intermediation. He insisted that the capture of funds was conducted by Enrique at his office and not by his client, Osvaldo Villalobos, who, according to the lawyer, was just another employee of the businesses.

22. Altogether with the considerations expressed above, the Costa Rican Government and the Costa Rican State made decisions that as we have indicated, adversely affected several thousands of foreign and Costa Rican investors. But in the interest of this lawsuit, we the undersigned believe that with the distribution of monies of which we are co-owners, since they belonged to the pool of monies and resources that were seized/impounded from the Villalobos Brothers, part of which were resources over which Mr. Enrique Villalobos Camacho wielded power as the individual in whom we placed our trust in the financial operation we had contracted with him to engage in, that the Costa Rican government’s decision to distribute these resources is absolutely illegal and adversely affects our financial interests.

23. Among the serious violations of the principle of legality, as pointed out in the Constitution and the Costa Rican General Law of Public Administration, by persecution of the Villalobos Brothers but specifically involving what adversely affects Enrique Villalobos Camacho, and has a direct connection with this process, for example we could mention the following: A COURT ORDER was never issued to authorize CICAD officials to obtain information protected by Bank Secrecy Law covering Records. In this case, the RECORD that the Costa Rican Power Authority (Instituto Costarricense de Electricidad) keeps on information regarding names of subscribers and their traits, what type of telephone service they have, be they landlines or cellular service, where they are located, etc., all of which is strictly confidential. Failure to comply with procedures for obtaining telephone-related information implies injuring the Rights and Guarantees envisaged in the legal system, because privacy was invaded.

24. The record DOES NOT state what legal procedure was followed to obtain this information; consequently the telephone information presented in the report is illegal, hence the CICAD Report UAF-D45­02l38j999 turns out to be spurious evidence.

25. If the specific actions comprising the acts conducted by the Costa Rican authorities to obtain private information protected under bank secrecy law are carefully analyzed, a series of questions arise: was a request ever made by CICAD or the Public Prosecutor’s Office to the Court for a court order to access the records? What judicial authority authorized release of this information? What jurisdictional office was it requested by and when? Was it the appropriate jurisdictional authority that ordered it? Was the procedure followed legitimate? Was the order officially handed down by a criminal judge? Did CICAD members assume the power to inspect the records without court authorization in order to achieve the objectives laid out in the investigation?

26. The truth is your honors, Administrative Judges, that this COURT ORDER DOES NOT appear in the record. It was not even offered by the Assistant Public Prosecutor Lic. Espinoza when evidence was admitted to uphold the accusation in the Case, nor was it provided as documentary evidence to prove that actions were carried out according to legal procedure. It was not admitted by the Intermediate Criminal Court Judge who announced the trial opening notification and it was not read by the Criminal Trial Court to incorporate it into the debate; and this happened because this court order never existed, and the reason why it does not exist in the record is because it simply does not exist. So, what happened to constitutional principle eleven of legality of equal status in the regulations of the General Law of Public Administration?

LEGAL CONSIDERATIONS

Administrative law allows for State liability for damages against those under its administration caused in the performance of its activities. This liability is understood as a constitutional principle of the rule of law associated with the effectiveness of the necessary submission of Power to the law. This submission primarily includes controlling the legality of the actions of organizations that wield power (prohibiting abuse of authority), and consequently, yet no less importantly, the obligation to compensate for damages caused by illegal activity. As Hariou aptly pointed out, the feeling of the group regarding the Authorities can be summed up in two axioms: "act, but obey the law,” and “act, but pay the damages.” In this sense, the role of liability as a mechanism for controlling the Authorities explains the need for special rules (out of respect for the public interest assumed in the activity) and the need for a uniform order to govern the courts to enforce control of legality as well as compensation for damages incurred. Now, the principle of State material liability involves wielding influence over the Authorities; hence, the organizations responsible for its implementation have abstained from implementing it exhaustively and effectively on many occasions. This, which according to some individuals explains the legal creation of the French Council of State as a mechanism for distancing the Authorities from the rigid principles of private law and creating a financial responsibility of the State sufficient for its own purposes, would have no justification whatsoever nowadays, since modern administrative law envisages principles that nurture an even broader system of liability than the one envisaged in civil law, since it contemplates liability for unlawful administrative activity. The situation proposed is clearly paradoxical, since the failure to enforce the rules of civil law to determine State liability which in the past was justified to create special situations for itself, are justified nowadays to prevent any limitation or reduction of its liability. The advantage of public law having its own liability system can be illustrated in expressions such as those used by the famous expert in administrative law, Juan Carlos Cassagne, when he states that nowadays applying approaches and solutions taken from civil law has exacerbated the difficulties stemming from the liability of the state and its agents. Nevertheless, we must acknowledge that even in systems of administrative law, the absence of legal regulation of State liability tends to make it more flexible, diminish it and create more exceptions. State compensation for damages caused to individuals from its activities will depend on how developed the relationships are that arise between law and power, provided that the former is set up as the main limitation to the exercise of the latter. Actually, the attitude of Power as to the limit implied by imposing liability for exercising it clearly depends on how much or how little the rule of law has been developed. In this sense, the words of Colombian professor Juan Carlos Henao are illustrative. When speaking to this issue, he stated that "Development or underdevelopment of the state and violence or pacifism, when carried out, are two poles inextricably bound to the function that it is called to discharge its responsibility." This professor lays bare the meaning of his words when referring the state of affairs in Colombia he pointed out that "In Colombia the State liability phenomenon is now getting those who manage the government budget worried..." And we can add that often this worry influences the opinions of jurisprudence which, in the absence of legal regulation, it chooses to apply in determining liability and in many cases the judge leans toward private law to enforce it in and in others he/she shuns private law to rule out liability. In this sense, even though administrative liability is traditionally analyzed from the perspective of those under authority as a mechanism for ensuring the wellbeing of their assets, the truth is that this is not its only function.

Administrative liability performs a dual function since, besides setting itself up as a guarantee established on behalf of the individual to achieve compensation for harm caused by the State, it also appears, particularly in the assumptions of liability with offense, as a means to control the Administration itself, (Martín Rebollo) "an instrument to control Power." Thus, liability, in the author’s opinion, plays a formative or “pedagogical” role in the actions of the Administration from the moment that it imposes the guidelines governing its commitment; liability collaborates to make the State run better. In fact, from the moment that the State is obligated to compensate for harm out of its constitutional or legally established liability, it is constrained to endeavor to adapt its actions with the aim of avoiding harm in the future. In this way, liability succeeds in making the administration moderate its actions (and this is its control function) with the aim of avoiding potential censure. Liability can also be (Martín Rebollo) secure with regard to risk caused by unforeseeable situations and may be a price to pay for adopting certain expropriatory or quasi-expropriatory policies.

Therefore the State (in principle) is unquestionably liable for the harm caused to those under its authority, even by its jurisdictional actions, when they cause economic or moral damages, which is why the state must answer for them subsidiarily if they become insolvent.

From what has been shown above it is plain to see that the State’s system of material liability has the following characteristics: 1) It is vague, since it covers all of its entities and the entirety of its activity in the exercise of its public function; 2) It is a direct and objective liability system in which the concept of blame is not determinant; all that is required is for damage to be verified due to lawful or unlawful activity attributable to the Administration the individual’s right to be compensated to arise 3) It is a hybrid system that includes liability for fault or due to abnormal service operation, no fault liability or liability through personal forfeiture. 4) It is a system based on the principle of property rights, according to which the individual has the right not to suffer damages without compensation for them. Regardless of whether the offending party acted lawfully or unlawfully, what really matters is that the victim is not legally obligated to suffer them without compensation. The liability covers any type of assets or rights and the reparable damage or injury may be material (monetarily quantifiable) or moral.

Since the State’s material liability is a direct and objective system whereby fault is inconsequential, its legitimacy requires verification of two elements, namely: 1) Damage attributable to the Administration understood as any decrease in assets suffered by a legal entity due to administrative action; and 2) A causal link associating the damage with the administrative action.

The damage must be certain and effective, i.e., real and current and not potential or forthcoming. It must also be specific or personal, which implies that it be individualized with respect to a person or group of persons, that is to say, that the damage must be singular and not be a common burden that all the individuals must suffer. The damage must also be legally attributable to the normal operation of Public Administration (i.e., lawful activity) or abnormal (i.e., unlawful activity) operation as a result of any material or formal action and must be associated with a legally protected situation, that is, a situation permitted by law. The damage must also be unlawful, that is, it has to do with harm to the plaintiff that he/she is not legally obligated to endure, given that it exceeds the collective burden involved in administrative action affecting the group. This unlawfulness stems from the absence of a regulation in the legal system justifying the burden imposed on the plaintiff which, because it lacks legal foundations, constitutes an unjust injury that must be compensated for.

It is upon this specific case that we, the duly individualized undersigned plaintiffs, lodge a formal complaint for the serious material and moral damage that the Costa Rican government has caused us by its actions.

To date, these actions proceed to our detriment. The Costa Rican Anti-Drug Institute has handed down the order and has proceeded to distribute our resources or at least part of them or the part belonging to those of us among the pool of owners or co-owners of these monies. This action is entirely null, arbitrary, and violates the principle of legality and due process because we had to be notified, warned that these monies were going to be distributed. We wonder how a Judge or any other official can determine what portion or percentage of the resources seized (and now handled as if it were a piñata to be plundered) belonged to individuals joining in on the Public Prosecutor’s case against the Villalobos brothers. We the undersigned parties to this administrative lawsuit are not members of that group because at that time we believed, and continue to do so today, that we could in no way join in any lawsuit against Mr. Osvaldo Villalobos Camacho, an individual against whom we have had no complaint to make because we had not signed any contract with him whatsoever. We reiterate that our relationship has always been with Mr. Enrique Villalobos Camacho, who we continue to expect will meet his commitments to us as he always did as long as he was allowed to work in this country. This is because we are very certain that if Enrique Villalobos Camacho were allowed to enter Costa Rica without being persecuted, he would honor his commitments. We could not expect any other outcome because during all the time (months and years) that we kept up out financial and commercial relationship with him, he always met his commitments month after month. It was not until the operations of Enrique Villalobos were shut down due to the unfortunate intervention of the Costa Rican Government and its authorities that his offices and accounts were taken over and relentless national and international persecution began. Month after month the Costa Rican Government issues international arrest warrants for Enrique Villalobos Camacho through the Interpol, the international banking system has frozen all the accounts of Enrique Villalobos Camacho, and the monies and all other assets of Enrique Villalobos Camacho were seized and impounded, among them our investments, which the Costa Rican Government gleefully decides to distribute without our consent among a few individuals who are investors as we are, but not the owners with absolute control over these resources. (Inserted below is an image of the official letter sent on 06 January 2010 to Mauricio Boraschi Hernández, Director of the Costa Rican Anti-Drug Institute).

CCPJ-003-201, San José 08 January 2010

Lic. Mauricio Boraschi Hernández

Director General, Costa Rican Anti-Drug Institute

Dear Sir,

I hereby state to you that in case No. 02-008578-PE, by which the sentence execution is being processed against OSWALDO VILLALOBOS CAMACHO, and in which EVELYN CARAVACA FARY AND OTHERS appear as plaintiffs, a decision to of XXXXXX has been handed down, by which this official letter was ordered to be sent to you so that the monies credited to this Institute’s care may be deposited into the account No. 158838-5 (a dollar account) of the Banco de Costa Rica and in the name of the Costa Rican Supreme Court, as illustrated in the following table:

Likewise, many of us investors, mostly foreigners as are we, have made monumental efforts with the Costa Rican Government for justice to be done and for it to understand that it was more profitable cost-effective for the Costa Rican Government to allow Enrique Villalobos Camacho to return freely and meet his financial commitments than to continue persecuting him. There are many millions of dollars that this country’s Government will have to own up to as the party liable for this financial catastrophe; several international lawsuits are already cropping up in various countries. We foreign nationals believe that we have been the object of unequal and unjust treatment.

Clearly many actions have been taken, motivated by the desperation of feeling powerless in the face of the power wielded by the Costa Rican government to bankrupt us, because many of us have indeed been left “bankrupt.” Have our funds at the government’s disposal (legitimately, it says), that we saved over the course of many years, the resources that we hoped would become part of the rebirth of our sound financial relationship with Enrique Villalobos upon his return been frozen? We do not know. Lost? We do not know. What we do know is that today the Costa Rican Government, shielded with its power (illegitimately, from our perspective), barged in and forced the shutdown of his operations and obligated him to flee the country, to this very day.

UNEQUAL TREATMENT UNDER THE LAW IN SIMILAR SITUATIONS (ARTICLE 33 OF THE COSTA RICAN POLITICAL CONSTITUTION)

With the permission of the publisher and author, we insert here the following article portraying the inequality that we investors have suffered due to this situation, which has been made publicly known to the entire world regarding the financial intermediation of the Catholic Church, events that are kept hidden and dormant in the Costa Rican courts, waiting for the statute of limitations to run out and the matter to fade into obscurity. Conversely, the government has forced us to lose our savings, persecuting an innocent Costa Rican businessman, an individual who always honored his commitments to us. He has been persecuted within this country and abroad, but such is not the case with the clergy in this country. This undoubtedly violates the principle of equality under the law, protected in Article 33 of the Costa Rican Constitution and depicts Costa Rica as a surreal, Kafkaesque country where law and justice do not exist, at least for over five thousand foreign investors who invested with Luis Enrique Villalobos.

It is important to point out that we belong to a large group of investors of different nationalities, citizens of the United States, Canada, Norway, Germany, Iran, etc. Without exception, all of us have faced the cameras and absolved Luis Enrique Villalobos of any responsibility in this and we have pointed to the Government of the Republic of Costa Rica, and continue to do so, as the sole party responsible for the fraudulent loss of our money. Several of these investors have ended up bankrupt or insolvent. Others have lost their liquidity, sold their homes and belongings to survive and leave this country, dejected.

As borne out by scrutiny and analysis, in light of events, unequal treatment in similar situations has occurred. But of course, in one case the high ranking hierarchy of the Catholic Church intervened, the powerful political arm in this country, and in another we modest foreigners who believed that the rule of law governed this country were far from facing a very different reality.

THE RIGHT WE INVOKE PURSUANT TO COSTA RICAN LAW

Political Constitution: Articles 11, 19, 27, 33, 39, 40, 41 et seq., and related provisions.

General Law of Public Administration: Articles 11, 158, 159, et seq., and related provisions, regarding the nullities of administrative acts – Chapter six, section one, second and third paragraphs. Article 190 of this same body of law et seq., and related provisions.

Administrative Procedural Code: Article 1 et seq., and related provisions. Article 10 – Regarding legitimization: “Article 10: It shall be legitimate for the following to sue: a) Those who invoke affected legitimate interests or fundamental rights.

On this matter, our legitimization is clear, some of us are foreign nationals and some are Costa Rican citizens whose interests and fundamental rights were adversely affected by the unjust, illegal decisions of the Costa Rican Government according to the legal concept and instance indicated above that caused a circumstance of damages and adverse affect on the most serious subjective interests of each one of us.

INTENTS:

Article 42- Administrative Procedural Code: Regarding Intents.

1. For this claim to be admitted
2. For the Costa Rican government to be found guilty and obligated to pay compensation for the damages it caused
3. Given that the estimated damages involved amount to an exorbitant sum in the millions of dollars, as can be gathered from the attached accounting report as evidence and since our intention is not to harm the Costa Rican people, who will eventually end up having to pay these monies, we request and propose that the Costa Rican government pardon Mr. Enrique Villalobos Camacho, allowing him to return to Costa Rica to freely exercise his citizenship, civil and economic rights, so that he can be the one to meet his own financial obligations with each one of us, just as he has offered to do. This decision by the Costa Rican Government would solve a problem created by its irregular actions which violated the tenets of the Costa Rican legal system and it would simultaneously resolve the difficult circumstances that thousands of us foreign citizens and Costa Ricans who were caught unawares by these illegal acts are enduring.
4. In the event that the aforementioned proposal is refused, we request that a legal expert be appointed to determine the sum of the compensation to be paid by the Costa Rican Government based on the certification provided and on the itemized investments as reported by the undersigned plaintiffs and interveners whose personal information has been inserted.

DOCUMENTARY EVIDENCE

• File of Case No. 02-8579-042-PE of the Criminal Court of San José. We ask that this complete file be requested, along with its attachments.
• All of the transcripts of the deliberation of the trial involving the aforementioned case.
• The file of the SUGEF for the case of the Villalobos Camacho Brothers, including the following official letters: 4375-99, 3358-2000, 2310-2000, and all official letters and correspondence dealing with this case in the possession of this institution. We deem it necessary for the respective raids occur or be ordered to secure this evidence and to render our intentions above suspicion.
• We are also processing the information and documents that are in the hands of intervener investors and plaintiffs.
• Certification of Public Accountant Licda. Roxana Monge.
• We request that you receive these documents from us as testimonial witness to those that we ask you to kindly provide.

San José, Costa Rica, 13 August 2010.

WE HERBY SIGN:

_______________________________________________________________

John Manners                       Frederick R. Pitts                       Ronald Tucker

______________________________________________________________

               Solveig Marie Hallstrom                      Katy France Tenza

Saturday, 09. October 2010