Phantom cows and missing millions spark financial scandal in Uruguay

Sandra Palleiro is on the hunt for her lost cows. The 60-year-old accountant is standing in a muddy field at the end of a farm track in Uruguay's remote border region with Brazil.

She has travelled 600 kilometres (370 miles) from the capital, Montevideo, to find 61 cattle she owns, at least on paper. The missing bovines were part of a "cow bond" scheme that has collapsed, causing one of Uruguay's biggest ever financial scandals.

The co-owner of one Uruguayan firm that took money from savers to invest in cows has died by suicide. Three companies have gone bust and are under investigation for fraud.

"Hello moo-moo! Could one of you be mine?" Palleiro called out hopefully into a paddock in the border region of Artigas, her jeans caked in mud as she approached a wire fence to get a closer look at the cows.

Palleiro - like hundreds of other investors - is unable to find the animals she owns or prove they even exist, making them part of a herd of "phantom cows" that could number over 700,000 head of cattle.

So far, the losses have mounted to some $350 million, roiling the stable farming nation, home to just 3.4 million people, but 12 million cows. It has also sent shockwaves through bigger ranching neighbours Argentina and Brazil, which looked to Uruguay's cattle-tracking system as a model and where similar livestock investment schemes operate.

In March 2024, Palleiro put her life savings of over $50,000 into the livestock investment scheme offered by a local firm named Conexión Ganadera, lured by promises of fixed 7-10% dollar returns and investment materials with bucolic pictures of brown-and-white Hereford cattle.

Savers could own cows directly that would be reared and sold for profit by livestock firms, or take an investment stake in the overall scheme. Palleiro, an urban professional, liked the idea of owning a tangible asset. It seemed a safe bet.

She could track the cows via a state-backed online portal - for years an example globally for cattle tracking - which set out breed, age and location. Each cow was supposed to be branded with a symbol assigned by the government and documents listing her assets carried the crest of the agriculture ministry, which oversees the cattle registry.

Uruguay's national cattle registry declined to comment on the cases.

When she went in search of her cows, Palleiro carried print copies from the cattle registry to see if she could match the 53 tracking numbers linked to this ranch with the tags of the cows staring at her on the opposite side of the fence.

Using her smartphone camera, she zoomed in on the tracking numbers pinned to their ears. It soon became clear that few of the numbers matched. Then the cows started backing away. She couldn't get close enough. The exercise felt hopeless.

"It feels like falling into a nightmare," said Palleiro.

TESLA CRASH

Three of the biggest firms under investigation for fraud are Conexión Ganadera, República Ganadera and Grupo Larrarte, which between them persuaded nearly 6,000 people or investor pools to buy into the program, investing millions of dollars.

Similar investment schemes exist throughout South America, in Argentina, Brazil and Colombia. Many are legitimate.

Martín Fablet, a local radio presenter in Montevideo, said he invested several times in Conexión Ganadera and other livestock schemes in Uruguay over the past 12 years: "This system of receiving fixed dollar returns worked fantastically well for at least 11 years. They paid me on time."

The first hint of the scandal at Conexión Ganadera came on November 28 last year, when a Tesla Model 3 car crashed at 211 kilometers per hour in the small central Uruguayan city of Florida. Behind the wheel was Gustavo Basso, one of the co-owners of Conexión Ganadera, which had boomed since opening in 1999.

Weeks after he drove his car into a parked construction vehicle, investors started reporting their payments from the cattle scheme were late, and by January the company confirmed it was short of nearly $250 million. A coroner concluded in April that Basso had died by suicide.

Conexión Ganadera was one of the three funds that started to warn late last year that they wereunable to fulfill obligations to investors. They were short of cash, which they blamed on adverse weather (there had been a drought in 2022-23) and tough market conditions.

By late January, investors were scrambling to withdraw savings amid reports of fraud. Some filed suits for fraud, leading to bankruptcy proceedings and an official investigation by Uruguay's Prosecutor's Office for Money Laundering Crimes, which remains ongoing. The prosecutor declined to comment to Reuters.

Pablo Carrasco of Conexión Ganadera denies fraud allegations. Lawyers representing Conexión Ganadera said they were unable to comment on legal proceedings until testimony was given in court. Grupo Larrarte's lawyer said the firm was fully cooperating with the authorities. República Ganadera did not respond to a Reuters request for comment.

'MAYBE THE COWS WERE FAKES'

Politicians, radio hosts, pensioners and even priests are among the thousands now attempting to recover their savings - and their missing 'phantom' cattle, the number of which is proving hard to pin down.

An inventory of the biggest firm, Conexión Ganadera, carried out by a bankruptcy trustee estimated that as few as 70,000-80,000 of the 804,604 cattle the company claimed to manage actually existed.

In another court case into fraud allegations, Uruguay's Ministry of Agriculture and Livestock (MGAP) said in March that one of Conexión Ganadera's main cattle holding firms, Pasfer, had only 49 of the 3,740 cows that it put up as collateral to secure a loan.

"We don't know if the cows were ever bought, whether they're alive or dead," Palleiro said during a drive along country lanes to the Artigas ranch. "Maybe the cows were fakes, or sold, moved somewhere or their tags were changed."

Victims want to know how authorities failed to spot the problems despite the cattle registry.

Three lawyers for victims said it was possible that the government-issued tags were never attached to the animals because the animals were never purchased, and the investments were used for other purposes. Two other lawyers representing investors in bankruptcy and fraud cases alleged that cows owned by investors were sold off illegally, without their consent.

Each company was responsible for applying the tags and in-putting data to the national registry. "The registry reflects what the company provided. The problem is that there was no control over what the company provided," said one of the lawyers, Nicolás Hornes, who represents 98 victims.

Hornes said he went to several farms and found that the number of cattle did not match the registry. Two other investors Reuters spoke to told similar stories of trying to find their cows.

Uruguay's livestock ministry did not respond to Reuters questions about whether the registry system failed.

COMPANIES UNDER INVESTIGATION

An executive from Grupo Larrarte, the first firm to receive formal complaints from investors, is already in prison as part of an ongoing criminal investigation, which is separate from bankruptcy proceedings. Jairo Larrarte was placed in preventive detention by a judge in April for alleged crimes of misappropriation, fraud and issuing bad checks.

In a response to Reuters, his lawyer Enrique Möller said that his client had fully cooperated with the authorities and that cattle had already been returned to some investors.

República Ganadera filed for voluntary bankruptcy in November, which the courts rejected in March because authorities opened an investigation into the company's accounts. Negotiations with creditors continue and the firm said in a March 25 statement that it was "prioritising the best possible solution" for those affected. The company did not respond to Reuters' requests for comment.

There are several open investigations into Conexión Ganadera, the biggest of the three. The company's co-owner, Pablo Carrasco, his wife Ana Iewdiukow and Basso's widow, Daniela Cabral, are being investigated for fraud and embezzlement. In February, all three were temporarily barred from leaving Uruguay without court authorisation and their passports confiscated. Carrasco's lawyer Jorge Barrera said there would be no comment to the media.

SNAKE CHARMER

Basso, whose high-speed crash presaged the company's downfall, lived in grand style in the city of Florida, which has a small-town feel, home to 30,000 people surrounded by farmland.

Fablet, the local radio presenter, said he met Basso some 50 times over the course of a decade, socially and while covering agriculture events for radio.

"(Basso) was a snake charmer," said Fablet, a longtime investor in Conexión Ganadera. "He could never simply lose $250 million... he could've made a loss, but that money must be somewhere."

Back at the Artigas farm, Reuters drone footage showed around 80 animals compared to what should have been several hundred belonging to Palleiro and other investors.

Farmhands at the ranch explained that more animals were out in other fields. Several mentioned delays to salary payments since the scandal broke and they said there was no easy way of checking which, if any, belonged to Palleiro.

Palleiro herself was angered at the way the case was hurting so many hard-working Uruguayans. She had at times taken on three jobs to put together a nest egg for her retirement.

"We put in all our savings that cost us a lot of effort," she said with emotion. "Now we want justice."