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Woman Banking On $46 Billion--if Courts Give the OK

Mexico: Dispute involves 82-year-old who says her 1988 $24,000 deposit has grown due to sky-high interest rates.


MEXICO CITY — If she keeps winning court decisions against a Mexican bank, 82-year-old widow Celia Reyes could end up rubbing shoulders with Bill Gates. By her lawyer's count, her original $24,000 deposit in 1988 is now worth more than $46 billion.

Lawyers for Banco del Atlantico scoff at such calculations, putting Reyes' maximum claim at something like $150,000. And they're fighting her all the way.

Still, the case has fascinated Mexicans, who have more often been on the losing end of bank disputes. Decades of economic crises, sudden bursts of inflation and devaluations of the peso regularly sent Mexican interest rates through the roof. That made loans unpayable and forced tens of thousands of people to forfeit houses and other assets.

This time, the sky-high interest rates of years past could work in a consumer's favor. Reyes made her deposit in February 1988, when the annual interest rate peaked at 149.35%. Her claim is that she never withdrew the money or changed the terms of her investment. So her original deposit, plus monthly compound interest, her lawyer asserts, kept growing astronomically, to a sum that would be greater than Mexico's entire foreign currency reserves.

The $46-billion calculation was made by a court-appointed accountant in mid-1999. Using his methodology, the amount now would be about $2.3 trillion.

"The nominal figure may be unreal, but the obligation to pay is absolutely real, just as in the 300,000 cases where banks have won judgments condemning debtors to pay far more than the total of their assets," said Reyes' lawyer, Mario Alberto Canales. "Those judgments are carried out until they take all the assets the debtor owns."

Reyes has already won a Mexico City court case and an appeal by the bank, the result of which is that she is owed the principal plus interest--although the legal battle over how to calculate that interest remains to be fought. A final appeal before the Supreme Court remains, in which the bank is challenging the constitutionality of the earlier rulings.

In fact, Reyes doesn't want to be paid out such a sum. Her lawyer suggests that they'll negotiate a realistic settlement--and that most of the payout wouldn't go to Reyes.

Victor Blake Gomez, head of a debtors action group, said he agreed in 1999 to take on the Reyes case only if she agreed that any windfall would be used to create an education trust fund. Reyes and her heirs--she had 19 children, 15 of whom are still living--would receive a portion of the interest from the trust fund.

The bank, which was devastated by Mexico's 1994-95 peso crisis, didn't appear to take the case seriously at first, much to its later regret. It lost the original case when it couldn't produce receipts or other documentation that could have proved that Reyes' contract called for floating interest rates to apply to such investments.

The bank later found documents it claims proved that one of Reyes' sons actually withdrew the deposit about three months after it was made. But that claim couldn't be used as evidence because it wasn't introduced in the first trial.

Blake says that allegation is untrue, as well as inadmissible, designed to distract attention from the basic question of justice at stake.

Reyes told a television interviewer recently: "If you can't have confidence in depositing your savings in a bank and in the justice system that should defend us, then what can you trust?"

Even if Reyes wins the final appeal, a separate, lengthy procedure would have to follow to determine the current value of the claim. The bank would then press its argument that the floating interest rate applies, which would drastically reduce any payout.

Bank lawyer Javier Sainz said: "There's no point in speaking about figures that don't appear anywhere, that only exist in someone's head. In all transactions in Mexico, the interest rate floats. Any adult knows that investments were of this nature."

Reyes' husband, Walfre Nieto Reyes, started out as a metalworker in the state of Michoacan. He later set up a small foundry that was successful enough to generate profits, allowing the couple to make the 1988 deposit, in both their names.

She has the original deposit receipt, which Blake argues is like a check: She would have had to turn it over to the bank if the money had been withdrawn. Blake also says the terms on the receipt could not be modified without agreement between the bank and the depositor, so the original interest rate prevails for the duration of the certificate of deposit.

The bank later found additional receipts reflecting lower interest rates: Just one month after the original deposit, the rate plummeted to 86% in March and 60% in April 1988. Typical interest rates now for such certificates of deposit are about 5% to 6%.

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