Shopper’s club card pumped in drug business

BOGOTA, Colombia

It was just three easy steps to the ultimate shopper’s club reward:

1. Buy a prepaid card.

2. Cash it in for groceries, a flat-screen TV or a even new car.

3. Six months later, get all your cash back.

That fantastic deal enriched legions of working-class Colombians before President Alvaro Uribe shut down DMG Group Holdings S.A. last month, calling it a pyramid scheme that laundered drug money and raked in $435 million this year alone.

Officials say DMG was the largest in a wave of scams that has swept Colombia, where a well-developed smuggling industry has nurtured some of the world’s craftiest swindlers. The collapse of one such scheme last month sparked deadly riots by duped investors in more than a dozen southern Colombian towns.

Those riots triggered Mr. Uribe’s decision to shut down DMG before it could collapse, a move that outraged many of its 200,000 cardholders. They revere the company’s founder, a 28-year-old former baker named David Murcia, for giving them a shot at the good life.

“Where does the money come from? Believe me, I don’t know,” said housewife Lucia Lizca, 38, whose prepaid 5 million pesos ($2,100) DMG card is now worthless. “But look, that cake maker showed himself to be smarter than a president. I don’t know how he cooked it up, but good or bad, he gave a lot of hope to people who have nothing.”

The gangly, ponytailed Mr. Murcia was arrested last month in Panama, where he kept a yacht and a fleet of exotic cars. He and six other DMG officials - including his mother, his wife and his brother-in-law - face charges of money laundering, bribery and other crimes related to their rapidly expanding financial empire.

Mr. Murcia has long denied any wrongdoing, calling his business an “economic revolution” designed to provide opportunity to Colombia’s poor.

“What sin have I committed?” he asked in a message to customers posted on YouTube in June. “Giving people something to eat? Helping people to generate jobs with their additional income? Improving their quality of life?”

At first glance, DMG stores worked much like any other discount shopper’s club. Members would buy a prepaid card for any amount after providing the names and phone numbers of three friends who might want to join.

But along with their blue debit card they received a matching black card, set to be activated in six months. That one held “points” as a reward for spreading the word about DMG.

The value of the points varied from day to day - anywhere from 70 percent to 300 percent of the initial investment. They could be redeemed to purchase goods at DMG stores, or simply be cashed in. Many customers took the money and immediately spent it on a new card.

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