As of April 12, 21 nations had signed the Organisation of American States' (OAS) first regional convention to fight bribery and corruption. An editorial in the Washington Post praised the treaty, which the US and Canada had still not signed: "... For a long time the United States has exhorted the Latins to cut out the corrupt practices — even as some Americans took part in them, sometimes explaining that bribery was part of the Latin 'culture.'"
US corporations have in fact been named in several high-profile Latin American corruption scandals. Four Archer Daniels Midland (ADM) executives in Mexico were dismissed in September and October 1995 over the alleged embezzlement of US$9 million. A US grand jury is currently investigating the possible role of the New York-based Citibank in transferring at least $80 million to secret Swiss bank accounts for Raul Salinas de Gortari, the brother of former Mexican president Carlos Salinas.
The governments of Venezuela, Brazil, Argentina, Chile and Mexico have spent more than $50 billion in the past 14 years to "rescue" debt-ridden banks and make up for financial losses from fraud committed by executives.
Brazil has spent the most: nearly $25 billion since 1982; Chile and Mexico follow with $10 billion each. Venezuela spent $3.4 billion and Argentina $2.5 billion. These figures come from media reports on only the largest of the scandals.
Bankers arrested
Manhattan District Attorney Robert Morgenthau announced on April 4 that a grand jury had indicted Orlando Castro Llanes, a well-known Cuban-born Venezuelan financier; his son, Orlando Castro Castro; and his grandson, Jorge Castro Barredo. The three, who all live in Miami, were arrested there on April 3.
The Castros are charged with a scheme to defraud depositors of more than $55 million at Banco Progreso Internacional de Puerto Rico, which they controlled. The Castros are also charged with stealing deposits from the same bank. The DA's office is also investigating Banco Progreso's accounts for suspected money laundering, said Morgenthau.
The DA's office said that the Castros used the money they appropriated to support other financial institutions they controlled in Latin America and to finance their lavish lifestyle.
Castro Llanes was charged in Venezuela in October with financial crimes including bank fraud and embezzlement; Venezuela's general prosecutor Jesus Petit da Costa said his government holds Castro Llanes responsible for $1 billion of Venezuela's $7 billion in bank losses.
IBM bribe scandal
A number of former top executives of IBM's Argentine subsidiary, along with the entire board of directors of Banco Nación, a major state-owned commercial bank, were charged in Buenos Aires on April 2 with defrauding the state.
In two separate probes, the US attorney for the Southern District of New York and the Securities and Exchange Commission are also investigating whether IBM Argentina's parent company violated the federal Foreign Corrupt Practices Act, which bars US corporations from paying bribes abroad.
IBM Argentina is accused of having paid bribes to win a $249 million contract for a computer modernisation plan for Banco Nación. Most of the $21 million IBM paid to the subcontractor company CCR to provide a backup computer system for the modernisation plan — not part of the original contract — has not been accounted for, and Argentine investigators believe that CCR may have been used as a conduit for pay-offs.
Among the 30 people listed in the indictment are former IBM Argentina president Ricardo Martorana, who resigned in September after the fraud allegations surfaced; Gustavo Soriani, IBM Argentina's chief of operations, who was fired; former Banco Nación president Aldo Dadone, who also resigned in September; and former deputy presidency secretary Juan Carlos Cattaneo, who was forced to resign when the allegations first surfaced.
In early February, the US Justice Department opened its own inquiry into the case, asking Argentina's Justice Ministry to provide documents and gather testimony from 12 people. One of the 12 is President Carlos Menem's chief of staff, Alberto Kohan, Cattaneo's boss.
Another is Senator Jose Octavio Bordon, governor of Mendoza province from 1987 to 1991 and a presidential candidate in 1995 for the centre-left coalition FREPASO. Last October, Deputy Gustavo Gutierrez of the opposition Democratic Party in Mendoza province accused Bordon of "irregularities" in contracts the province made with IBM during his administration. In April, a Mendoza judge charged Bordon and four officials from his administration in connection with these irregularities.
Some analysts suggest that the media coverage given to the IBM pay-off scandal in Argentina is an attempt to discredit economy minister Domingo Cavallo, who has close ties to several top government and bank officials implicated in the affair.
The force behind Argentina's neo-liberal economic plan and the leader of the government's fight against tax evasion, Cavallo is himself under fire for tax evasion and possible illicit enrichment. On February 18, the Sunday television news program Dia D broadcast details of Cavallo's declaration of personal assets before the General Tax Department.
The declaration showed that Cavallo receives US$8500 a month from reserve funds, more than he receives in salary. These funds are exempt from income taxes. The documents also showed that Cavallo's assets in public holdings grew from $2000 to $300,000 between 1992 and 1994. Critics say Cavallo, as economy minister, has access to information not available to other investors, and therefore should abstain from making investments in public holdings.
Copper company sues
Chile's state copper company Codelco filed a lawsuit on April 15 in the London High Court of Justice against the German metals broker firm Metallgesellschaft (MG) and the broker Wolfgang Becker. MG was found by Codelco to have deposited $1.5 million in the Cayman Islands bank account of Codelco trader Juan Pablo Davila, allegedly as part of an international scheme to reward him for favouring certain brokers.
MG denies the charges, and says that the money was a legitimate transaction with Codelco, and was not paid into Davila's private account. Becker, a trader at MG in 1990, is reported to have later moved on to Merrill Lynch, the New York stockbrokers, his work tenure coinciding with yet more questionable futures dealing by Davila with Merrill Lynch.
So far Davila remains the only individual in Chile facing charges in connection with a futures trading scam that resulted in $175 million in losses for Codelco in late 1993.
The new lawsuit follows an earlier suit by Codelco against Sogemin Metals, whose representatives allegedly devised an illegal kickback scheme with Davila.
Codelco executives announced on April 15 that they had suspended trade relations with four or five metals broker firms because of known or suspected involvement in the scheme.
Legislators from Chile's ruling Concertación coalition have suggested that Davila's 1990 kickbacks may have ultimately gone to a political slush fund operated by far right-wing political forces linked to former dictator (and current army chief) General Augusto Pinochet. At the time of MG's $1.5 million transfer to Davila, Codelco was run by Pinochet appointee Patricio Contesse.
[From Weekly News Update on the Americas, 339 Lafayette St., New York, NY, 10012, USA; email nicanet@blythe.org.]