A Few Benefited; Most Lost Everything Naive Albanians Pay Bitter Price After Get-Rich-Quick Schemes Fail

On a $500 investment, Beniamin and Servete Lohja remodeled their apartment, swapping Stalinist functionality for Western comforts, and traveled abroad for the first time.

“It was like a fortune game,” said Servete Lohja, 51, laughing at her good luck as she sipped thick coffee and her husband served chocolate and fruit. “I didn’t care how this fortune game was organized. … There was a mania to get rich.”

The Lohjas were among the lucky ones. For most, that mania ended in disaster.

As Albania emerged from medieval poverty in 1991-92, risky investment businesses promised impossibly high returns of up to 100 percent a month, offering Europe’s poorest citizens comforts unknown during five decades of harsh Communist isolation.

Few resisted the consumer dream. Up to 1 million of Albania’s 3.2 million people poured between $1 billion and $2 billion into the pyramid schemes, which have now failed or will soon.

The collapses, which robbed thousands of people of their life savings, have fed a month of unrest against the government, which is blamed for not warning ignorant Albanians away from the temptations of the first capitalism they ever knew.

Pyramid schemes have flourished briefly all over post-communist Europe, paying off early investors with the savings of latecomers before all go belly up. But nowhere did they have such a universal grip as in impoverished Albania.

The first investors received huge returns. Most redeposited the interest each month, and lost everything they had. A very few, like the Lohjas, came out ahead.

The biggest profits went to the managers of the phony investment schemes and their friends. They showed off their wealth and launched publicity drives to attract more investors.

In one example, the owner of the Xhaferri fund made a $350,000 contract with Argentine soccer coach Mario Kempes in hopes of lifting his hometown squad, Lushnja, to the Albanian championship. Before Kempes could coach a game, Xhaferri had collapsed, its funds were seized by the government and owner Rrapush Xhaferri was in jail facing up to 20 years under a new law banning pyramid schemes. Kempes went home.

Another scheme, Gjallica, laid out $1.2 million for the Miss Europe pageant in September, the first such international gala ever held in Albania. President Sali Berisha attended. It was televised throughout Europe.

But while the managers profited, most investors lost everything. The Lohjas were among the few to make a profit. They invested $500 in 1994 and used the returns to spruce up their home.

With the first payment of $940, they tore out rotting wooden window frames and installed metal replacements. With the second they pulled up dull black and brown flooring and laid shiny cream-colored ceramic tiles.

They remodeled the bathroom, removing the standard Turkish toilet - basically a hole in the floor - put up shades, expanded the balcony, installed new dry wall, bought new furniture.

And they traveled to Germany to visit their sons and first grandchild, a luxury unimagined on Beniamin’s $40 monthly pension and Servete’s $100 state salary as a doctor.

Servete Lohja was drawn into the fund by a patient, Sudja Kademi, the first person arrested as the schemes began collapsing.

Servete doubted Kademi’s business savvy, and assumed some illicit activity. But she never seriously questioned the source of her new wealth.

Beniamin, 60, had no idea how pyramid schemes worked, but felt some discomfort.

“Workers here were being paid $10 a day,” Beniamin said. “I felt like I was giving them a piece of paper, not money, because it was not earned through work.”

Asked what he could do for the thousands who lost their investments, he gave a wry laugh.

“Those who invested at the end can come take our toilet and windows,” he said.