As foreign investors in the failed financial cooperative Coopera maneuver to protect their interests, some Ecuadorian investors say they want to make sure that the foreigners, mostly from the U.S. and Canada, do not receive special treatment.
Coopera, or Cooperativa de Ahorro y Crédito Coopera Ltda., was closed by the federal authorities June 12, when three members of top management were arrested and charged with money laundering.
Javier Moroso, an attorney for several local investors, met Wednesday and Thursday with federal and local officials involved in the liquidation of Coopera, to assure his clients that all investors with deposits of more than $10,000 will be treated equally.
Moroso said that some of his clients were concerned that special arrangements were being made for foreign investors.
“I was told by SEPS (the federal office of Economía Popular y Solidaria) that no group will be at the head of the line and we have no indication that the actions of the foreigners will harm the rights of Ecuadorian investors. On the other hand, we want to be part of the discussion to protect our interests,” Moroso said. “We are all in this together and should be seeking a remedy together. If decisions are made affecting the liquidation process or disbursement of funds, these must be acceptable to all parties.”
Meanwhile, the attorney for foreign inestors with deposits of more than $10,000 in Coopera, said he is moving forward with legal action against a number of Coopera officials. The provincial court has appointed a prosecutor, Trotsky Serrano, to review the case to determine culpability.
Gustavo Quito, attorney for the investors group, said that a crime has been committed and the offenders should be punished. “A trust was violated in this case and all the evidence points to embezzlement.”
Quito’s group has approached SEPS and local officials with a proposal to halt Coopera liquidation and reactivate the cooperative’s operations. “We feel that this gives us a better chance to get our money back even it take more time,” said one expat member of the group who asked not to be identifed.
Moroso said his investors may be open to such a move. “Honestly, however, the chances of this being accepted are minimal.”
According to SEPS, there are 1,661 Coopera members with deposits of more than $10,000, with an estimated 300 being foreigners. The 1,661 accounts are believed to represent more than $30 million in deposits.
Charles Edmonds, a former U.S. banker who oversaw a number of bank liquidations in his 30-year career, said that larger Coopera investors should not expect to see their money any time soon. Although he is not a Coopera investor, Edmonds has attended a number of meetings on behalf of friends who are investors.
“From this point, things will move slowly,” he said. “There are a lot of moving parts to a bank failure that most depositors are unaware of.”
One of those parts, says Edmonds, is that fact that most of Coopera’s money is out on loan. “In a failure of a financial institution, it is a tedious process to determine which loans are still good. Many borrowers will stop making payments and these accounts will have to be written off. Obviously, this comes off the bottom line.”
In Coopera’s case, he said, the fact that borrowers were paying high rates of interest could mean more write-offs than usual. “Many borrowers were paying rates close to 20%, in the high teens. This is why desposit holders were receiving double-digit returns. It could be months before the investigators know the full status of the loan portfolio.”
Photo caption: Account holders gather outside a Coopera office in June, when the financial cooperative was closed.