American Sits Almost a Year With No Charges in Isolated Bolivian Prison

Santa Cruz, BOLIVIA
May 11, 2012— -- In a grim Bolivian prison, a lone American man has languished for nearly a year, uncharged by authorities who have accused him of money laundering, but he says he is innocent of any wrongdoing and refuses to give in.

"It's an absolute nightmare," Jacob Ostreicher said. "I feel all alone most of the time. I'm begging the American people to try to help me."

"Nightline" traveled to Bolivia to hear Ostreicher's story firsthand. What we found was a man trapped in the web of a truly Kafkaesque prosecution, held inside of a prison like any in the world, where inmates roam free.

"Are you innocent?" I asked him.

"Absolutely 100 percent innocent," Ostreicher shot back. "And the prosecutors know I am 100 percent innocent."

Jacob Ostreicher is a 53-year-old flooring contractor from Brooklyn. It's a family business, selling and installing flooring mostly for commercial clients in the New York City area. In 2008, as the construction industry collapsed in the U.S., Jacob said he heard from a family friend -- a prominent lawyer in Switzerland -- about a promising investment opportunity: growing rice in Bolivia.

Ostreicher said he put $200,000 -- his life savings -- into the venture and became a very junior partner in a $25 million project.

He said things went well for a year or so. The first harvest yielded nearly 40 million pounds of rice. More than 200 Bolivian workers were employed in the business. Ostreicher helped manage it, traveling frequently to Bolivia.

Then in 2011, Bolivian police arrested one of Ostreicher's former employees and accused him of being involved with drug criminals. Ostreicher said he cooperated fully with police -- and then was arrested himself.

Prosecutors claimed they were investigating whether the $25 million that started the rice business came from drug money.

"So we spent close to $20,000 to get together 1,300 documents to show them the origin of the money," Ostreicher said. "We provided that to the judge. And the judge gave me my freedom."

But six days later, in an extraordinary move, the judge reversed his decision and Ostreicher was sent back to prison. The judge was later promoted to the appellate court, further delaying proceedings.

Former FBI agent Steve Moore, who helped clear Amanda Knox of murder charges in Italy, has investigated Ostreicher's case. He is brutally frank in his conclusions.

"The whole system is corrupt," Moore said.

What's happening here, according to Moore and other sources on Ostreicher 's defense team, is an old-fashioned shakedown: Bolivian officials are demanding money.

"There's no evidence to convict him of anything," Moore says. "But here's a guy they see coming in from New York, who's got probably a lot of liquid cash or represents a lot of liquid cash, and they saw an opportunity."

Jacob Ostreicher Case: Videos and Documents

According to Transparency International, a non-profit group that tracks corruption, Bolivia ranks as one of the most corrupt nations in the Western Hemisphere, and in a 2010 poll, Bolivians themselves rated the judiciary as the most corrupt institution in their country.

Today, Jacob Ostreicher remains in prison, no charges and no evidence brought against him. Bolivian authorities informed us that Bolivian law allows for the incarceration of people without charge for up to 18 months. Ostreicher has been in prison for 344 days -- over 11 months.

And what a prison.

Palmasola, it's called. It adds a "Lord-of-the-Flies" quality to Ostreicher's nightmare.

Because in Palmasola, there are no guards inside the walls. Prisoners govern themselves. They walk around the streets and alleys between the pavilions of cells. Some bring their wives and children to live with them.

But murders are common. So are drugs. So is prostitution.

American Waits in Bolivian Prison; No Charges Filed

When "Nightline" visited, it was a surreal scene, like a small Bolivian village, with shops and even restaurants, and an unmistakable air of menace and fear lurking just beneath the surface.

"I never, never go out at night," Ostreicher said. "It is absolutely frightening, walking around, like what you -- wherever you walked today, at night, it's very scary."

Jacob's wife, Miriam Ungar, comes to visit him frequently in this wild and strange prison. Leaving him to return home is "torture," she said.

"I feel like I'm abandoning him," she said. "The pain of watching him watch me leave, he stands behind the gate, and I just stare at him and I walk backwards, because I don't want him to see my back when I walk out the door, and he sees my anguish, and he runs in to make it easier for me to leave."

The Ostreichers have five children and 11 grandchildren. The little ones don't understand what's happening. Jacob Ostreicher showed us a letter from his granddaughter, in which she wrote, "We keep asking grandma and mommy when you will come home. And they told me they don't know when. Grandpa, who knows the answer? I want you to come home today."

"My family keeps me going, because there's nothing else here," he said. "I'm the only American between 3,500 prisoners."

On the wall in the dining area near his cell, Ostreicher's fellow prisoners painted an American flag for him. It is an emotional talisman for him -- a slender, essential lifeline home.

"It means everything to me," he said. "This is what I got, is my flag. I will never look at the American flag the same way again... basically I'm hoping, one day, I will see this flag in my country."

That day is nowhere in sight.

For more information about Jacob Ostreicher's case, visit his website HERE