Accusations that Uruguayan livestock investment companies defrauded people out of hundreds of millions of dollars highlight how white-collar criminal organizations can cause widespread financial devastation without resorting to violence.
Uruguayan prosecutors are investigating at least three firms over claims they misled investors. Conexión Ganadera, República Ganadera, and Grupo Larrarte allegedly offered investors the chance to buy cattle that would be sold upon growing to their full size, providing those who invested with fixed annual returns of around 7-11%.
However, prosecutors say the firms were in fact paying their investors with the income gained from other investors. In some cases, the cows people thought they were buying never actually existed, with fictional cows registered in Uruguay’s national cattle registry.
The largest of the firms involved, Conexión Ganadera, which had been operating since 1999, is accused of owing money to around 4,000 investors and was found to have a financial shortfall of roughly $250 million. An accountant hired by Conexión Ganadera to give an independent assessment of its finances following the suicide of one of its co-founders told investors during a videoconference that although the company had at one time been operating as advertised, it had at some point devolved into a fraudulent enterprise.
“There was a serious problem with records within the company,” he said. “A lack of balance sheets, a lack of audits.”
Although it is still unclear how much money is owed to investors, Carlos Esponda, director of law firm Dotta & Esponda, told InSight Crime that his 423 investors are owed around $47 million, an average of more than $110,000 per person.
In June, livestock investors in Portfolio Capital also denounced the company for allegedly defrauding them out of around $20 million.
None of those connected with the companies under investigation have been found guilty. But Grupo Larrarte’s head, Jairo Larrarte, received a 120-day pretrial detention order in April, and a prosecutor is due to present charges against three of Conexión Ganadera’s higher-ups on July 17.
Uruguay has tightened its financial regulations in recent years, introducing measures such as having its central bank oversee crypto assets with the intention of protecting investors from being misled. But the firms involved reportedly took advantage of regulatory gaps, such as being able to avoid central bank scrutiny thanks to being classified as agro-business companies. Uruguay’s cattle registry reportedly also trusted data provided by firms rather than independently verifying it.
Livestock investment firms allegedly defrauding their clients is not unique to Uruguay, with similar cases occurring elsewhere in South America, including in Colombia and Paraguay.
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While organized crime is often associated with violent criminal groups, the non-violent nature of white collar offenses means they can go on for years at a large scale, inflicting serious financial damage while remaining under the radar of the authorities and the media.
Investors have reported losing their entire, or a significant chunk of their, life savings to the alleged cattle scams.
“For the vast majority, these weren’t merely speculative investments, but rather their savings. They relied on that money to support their retirement,” Esponda told InSight Crime.
“The vast majority of them have no way or means of generating that amount of money again because they are retirees. The situation is truly very, very distressing for many of them.”
Returning this money can sometimes take many years, if it ever happens at all. Thousands of people who invested in real estate in Mexico through the companies Sitma and Invergroup are still seeking restitution 15 years after having been defrauded.
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The cattle industry has started to see negative impacts already. One meatpacking plant cut its workforce from 400 to 80 after cattle producers stopped sending cattle there when they lost trust in the plant following reporting it had a $25 million debt with Conexión Ganadera in February.
The fallout could have wider economic ramifications for Uruguay. Agriculture and Fishing Minister Alfredo Fratti and Montevideo Stock Exchange President Ángel Urraburu both made comments to the press on the impact the latest alleged cow fraud case could have on investors’ trust in Uruguayan companies.
“I think it will take a long time for Uruguayan investors to invest money in Uruguay again due to a lack of confidence,” said Esponda.