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DMG finally going down. David Murcia Guzman
DMG financial tremor can't slake thirst for easy money in Colombia
BOGOTA (AFP) ó The hard hit taken by a controversial financial scheme that has had Colombians jostling to get a cut of fast cash has the company DMG up against a wall amid suspicions it launders money.
It has been five years since the company DMG has offered eager investors a chance to earn 150 percent or more of their cash input in six months.
DMG has lined up and cashed in itself from an estimated 300,000-500,000 clients since it was founded in the southern department of Putumayo, which in the 1990s was roiled by civil strife and held about half the country's coca crop. Coca is the raw material from which cocaine can be processed.
"It is not a pyramid scheme!" shouted a man outside the company's headquarters north of Bogota. So what on Earth is it?
Authorities suspect DMG -- with 52 branches -- is a massive machine to launder profits from drug trafficking. But in three years of investigating, they have not been able to prove it.
DMG claims it is a special marketing company in which clients are given a card marked with the amount they have invested. They can use the prepaid card to buy goods and services from a catalogue -- everything from cars to clothes and appliances.
In a few months they start getting partial or full returns of their original investment -- earning the company the nickmane "Dios Mio, Gracias!" (My God, thanks!).
But the funds are supposed to be commissions for their agreeing to be marketing promoters -- a key reason it has not been possible to show the system is on the wrong side of the law.
Last week what appeared to be a collapse of pyramids at about 50 of the group's outlets triggered rioting and some street-fighting; nervous investors then descended on a DMG event in Bogota demanding to know the status of their funds.
Friday, DMG said in a statement it would honor its obligations and insisting it was not a pyramid scheme -- a fraud in which up to 300 percent earnings are offered in just a few months, using money invested by new clients, until the pyramid caves in.
"Look how many people there are. They are frightened," commented one watchman at the DMG event who spoke privately. He said he invested 435 dollars himself, and was handed back three times as much not long after.
But some of the investors snapped up appliances as a way to try to make sure their assets would not be entirely lost.
In a country in which access to credit is tough for many wage earners and where demand runs high, Colombian authorities estimate that as much as 870 million dollars are being handled by non-regulated financial entities.
David, a 40-year-old carpenter and DMG client at the Bogota marketing event said on condition that his full name not be used: "I am not nervous at all," noting that the company helped him get a motor bike, sound system and TV. He is expecting to double an 8,700 dollar investment in six months.
"Some of the people here are panicking but I am calm; you have to be on your toes though," said another client, accountant Marta, 39.
"This is for the people," she insisted, noting she more than doubled her 3,500 dollar investment.
DMG says it is being persecuted by authorities bent on protecting banks. It claims banks won't allow it to open accounts and so it has no choice but to work only in cash, according to one of its attorneys Abelardo de la Espriella.
De la Espriella claims that among DMG clients are "people in government."
He said the company's founder Panama-based David Murcia Guzman, has set his sights on expanding DMG to other Latin American markets.
Re: DMG finally going down. David Murcia Guzman
Colombia orders money scam arrests
David Murcia has denied involvement in
a pyramid scheme [EPA]
Colombia has ordered the arrest of seven people accused of running a money laundering and pyramid scheme that was linked to riots and threatened to damage the economy by causing millions of dollars in lost investments.
Officials in Bogota said on Wednesday that they had asked Panama to arrest one of the alleged leaders of the scheme there.
Mario Iguaran, the Colombian attorney general, said evidence against the DMG company and its main shareholder, David Murcia Guzman, would show that it was a front for money-laundering.
Alvaro Uribe, the Colombian president, has cited evidence that drug traffickers used the company to give their profits the appearance of legality.
DMG denied the allegations and said its "business model is not consistent with a pyramid scheme."
"David Murcia and DMG have always been characterised by their respect for the law," it said in a statement published in the La Estrella Panamanian newspaper.
Eduardo Lin Yuen, a Panamanian national police spokesman, told the Associated Press that he had received Colombia's request to detain Murcia, and that authorities were seeking him.
The government seized control of DMG and another company allegedly involved in pyramid schemes, Proyecciones DRFE, whose collapse led to looting, rioting and two deaths in disturbances last week.
Police said $270 million was believed to have been lost in a scheme run by the DRFE, or "Easy Money, Fast Cash," agency across its 240 offices.
Pyramid schemes can offer dramatically high returns by using later investors' money to pay off those who invest first.
But they collapse when the flow of incoming money is not enough to pay the growing pool of investors.
The scheme collapsed amid rumours that its owner, Carlos Alfredo Suarez, who local residents said had, until recently, sold snacks on the streets and looked after parked cars, had fled the country.