What the CICIG papers have revealed

The progress in the investigations conducted by the International Commission against Impunity in Guatemala since the discovery of the “La Línea” corruption scheme reveals that it wasn’t a case of government leaders committing isolated acts of corruption, It was a mafia-like criminal structure headed by President Otto Pérez Molina and his Vice President Roxana Baldetti, who had co-opted the Guatemalan State.

Juan Hernández Pico, SJ

Thanks both to the International Commission against Impunity in Guatemala (CICIG), an agency promoted by the United Nations and the Guatemalan government that has been working in the country since 2007, and to Guatemala’s Public Ministry, a criminal scheme has come to light whose objective was to co-opt the State in favor of the interests of a criminal political group around the Patriot Party (PP).

CICIG Commissioner Iván Velásquez and the Public Ministry’s Attorney General Thelma Aldana have worked hand in hand on this investigation. They have been aided on occasions by the current minister of government, Francisco Rivas, who held several important investigative posts in the Public Ministry starting in 2003 and whose appointment to his current position seems to have been influenced by US Embassy pressure on President Jimmy Morales.

Uncovering “La Línea”
was the first fruit

The first results of CICIG’s investigation were revealed on April 16 last year when it charged the existence of a customs tax-fraud scheme called “La Línea”“(The Line), in which high-ranking authorities and employees of the Superintendence of Tax Administration (SAT) received bribes. In that first moment we learned that 60% of the bribes seemed destined to increase the fortune of Otto Pérez Molina and Roxana Baldetti, at the time President and Vice President of the Republic.

The evidence resulting from further investigation came out in a second declaration by CICIG five days later.

It is helpful to read extensive fragments of the CICIG report itself to adequately gauge what that investigation has revealed. We include the most relevant ones below, with the asterisk in the subtitle representing those textual fragments, although the subtitles themselves are envío’s as is the translation into English.

* ”We didn’t gauge the magnitude”

Phase 1 of the investigation (April 16, 2015). The inquiries are based on investigations conducted between 2012 and 2013, growing out of the suspected existence of a group of importers who

had contact with a network of customs processors to evade paying the real tariffs in the country’s customs offices.

In 2014, a key phone call describing the operating mechanisms of the system they called La línea was intercepted. The conversation was between importer Erick Miao Miao and customs broker Julio César Aldana. At that point first names were consigned and the first modus operandi emerged, including supplying a phone number, the location of those in charge of each customs office, the table of fees and the prices of the bribes to be paid—called “collaboration” (la cola)—to release the merchandise.

Back then, CICIG couldn’t determine the number of people involved in La Línea case or their degree of complexity. As the investigation advanced it was established that part of the structure was made up of individuals who communicated with and gave orders to SAT members...

Wiretapped phone calls, analysis and follow-up showed one structure within the SAT and one structure outside and a crucial operator above both of them to make things work: Juan Carlos Monzón, private secretary of then-Vice-President Roxana Baldetti.

On April 16, 2015, when the Línea case was presented in court, the SAT superintendent at the time, Omar Franco, was captured, as was his predecessor Carlos Muñozm and several members of both the internal and external structures of the criminal network. An international arrest warrant was issued for Juan Carlos Monzón, who was accused of illicit association, passive bribery and a special case of customs fraud. He turned himself in on October 5, 2015.

* Loads of facts and evidence

The investigation continued after a series of searches in which important documentary evidence was seized in several residences and offices of the people detained in April 2015. Among those that stand out are the office of Salvador González and the Emilio Boutique belonging to Línea member Luis Mendizábal, who is still a fugitive.

In this phase, the Public Ministry and CICIG were able to confirm evidence linking other people to leadership positions above the structure, among them Vice President Roxana Baldetti, who stepped down from her position on May 8, 2015, and Otto Pérez Molina, who resigned on September 3, 2015, after Congress stripped him of his immunity. At the time, the investigations also determined the participation of then-Customs Superintendent Claudia Méndez Asencio. All three were accused of illicit association, passive bribery and the special customs fraud case, and now in custody.

This case has identified a structure with leaders at different levels within and outside the State who have been discovered as the investigations move forward.

The Special Anti-Impunity Prosecutor’s Bureau (FECI) has yet to bring any witnesses or effective collaborators before the comptroller court as the accusations against the members of the structure have been based on the analysis of large quantities of data obtained with scientific proof.

This is obtained from a log of the actions within the process that includes an approximation of the following actions in phase 2 of the investigation (August 21, 2015): 88,920 wiretapped conversations sessions; 5,906 emails; 175,000 forensic extractions: 100 documents/reports from institutions; 17 police searches; 650,000 pages of documents found during the searches; 2,814 merchandise declarations; 100 telephone foldouts and phone pages in 32 date books; required financial information for at least 100 people and 22 companies.

Of the warrants issued, 32 were executed and 17 are pending capture.

* 340 importers used
La Línea for fraud

During the time of the investigation, about 1,500 altered Single Administrative Documents have been detected for the purpose of paying less tax.
So far, it has been determined that La Línea was used by at least 340 importers who resorted to this fraud mechanism to bring in merchandise through different customs offices around the country. Investigations also have determined that in some cases the importers created fraudulent companies to carry out these acts of corruption in the customs offices, usurping the names of real companies and individuals to obtain their tax identification number. That means that many of the names that appear in the lists of importers do not necessarily correspond to the real importer.

After a documentary analysis, the FECI requested from the comptroller court judge the arrest of the first nine importers using La Línea out of the estimated 340 importers participating.

Another five cases
investigated by CICIG

The above fragments from the first stage
of the investigation show its seriousness of the investigation as well as the gravity of the facts. It is important to point out that Luis Mendizábal, owner of the Emilio Boutique cited in this CICIG report, is married to a woman whose surnames are Fernández Matis-Regalado. She is from the Salvadoran oligarchy, is currently a fugitive, presumably in El Salvador, given this relationship, and so far is under cover to escape extradition requests.

It should also be stressed that during 2015, CICIG investigated several other cases now awaiting trial. The first one involved fraud committed in the Guatemalan Social Security Institute (IGSS), which had requested the PISA drugstore to supply what was needed for peritoneal dialysis, resulting in 17 deaths. The then-director of the IGSS, retired military officer Juan de Dios Rodríguez, had been Otto Pérez Molina’s private secretary.

Another investigation by CICIG is the case of IGSS-Chiquimula, a scheme in which a company belonging to congressman Baudillo Hichos refurbished the IGSS building in Chiquimula, hiding this transaction through a bid granted to a company acting merely as a front. Given that he was under pre-trial investigations, Hichos couldn’t take the seat in Congress for which he had been elected.

Another investigation has been that of ghost seats in the National Congress involving former Congress president Pedro Muadi, who was also formerly a member of the Coordinating Committee of Agricultural, Commercial, Industrial and Financial Associations (CACIF), an umbrella group of different types of business associations. Muadi turned himself in and was imprisoned.

Yet another investigation is known as “Networks,” a case of extensive influence peddling activities involving public officials, a judge and private citizens, with César Augusto Medina Farfán in the center as the “influence peddling manager.” He processed them through Pérez Molina’s former private secretary and son-in-law Gustavo Martínez, among others. At least two companies benefited from this influence peddling: Zeta Gas Centroamericana and Jaguar Energy, along with the SAT director, who is currently in jail.

The fifth of these investigations has to do with the Port Quetzal Container Terminal (TCQ) in the Guatemalan Pacific. In 2012, the first year of Otto Pérez Molina’s government, the Terminal de Contenedores Barcelona Company negotiated usufruct for 25 years of 384,171 square meters of Quetzal Port for 6.5 million quetzales. The CICIG states in its investigation that the wiretapped conversations of La Línea indicate that an enormous bribe under this negotiation table that also fed the pockets of Pérez Molina and Baldetti.

On June 2, 2016, Diego Alvarez, CICIG’s press chief, issued press release 047 about what they called “The case of co-option of the Guatemalan State.” Below are some textual fragments from this report due to the importance to understand the gravity of what was discovered.

* “it’s a mafia-like
criminal structure”

When the case of La Línea was presented on April 16, 2015, we thought we were facing a structure of corruption that had taken control of Customs to generate economic benefits for itself.

As the judicial procedures advanced—especially the searches and wiretapping—it was detected that it was in reality a criminal organization that went all the way up to the sitting President and Vice President of the country. As the seized physical and digital documents were meticulously put in order, an immense, apparently unrelated, financial scheme was found that included names, companies, checks, goods, financial movements, etc., reporting operations taking place as far back as 2008, four years before the PP came to power.

Some of those names and companies appeared in cases presented by the Public Ministry and CICIG as La Línea, TCQ and the Lake Amatitlán case. There was even evidence of participation in other ongoing investigations.

The work of the financial investigators uncovered a complex scheme that detailed all the machinery for laundering assets, meticulously designed to gather funds during the PP’s 2011 electoral campaign that resulted in Otto Pérez Molina’s election as President of the Republic and Roxana Baldetti Elías as his Vice President.

This activity, typical of illicit political-economic networks, must have been designed during the PP’s campaign, just after it lost the 2007 elections. and continued on through its government (2012-2015).

The conclusion was that it was not a government whose members were committing isolated acts of corruption, but rather was a mafia-like criminal structure that had co-opted power in Guatemala through the ballot and its main leaders were Otto Pérez Molina and Roxana Baldetti.

Several key state institutions were co-opted by this mafia network and used a financial scheme that appeared legal in many cases but whose main goal was the illegal enrichment of the structure’s members, with no concern for the institutions’ financial precariousness.

This mafia structure used the electoral channels democracy offers in Guatemala to obtain power through a political party called the Patriot Party (PP).

* “The objective was to
launder illegal money”

The Investigation:
1. All money seized was subject to a thorough investigation and analysis that included reconstructing the banking activities of each entity, the establishment of commercial activities, the origin and destiny of the money that circulated through the entities as income and expenses and the profile of clients, partners and legal representatives.

2. The above helped establish that Otto Fernando Pérez Molina and Ingrid Roxana Baldetti Elías were the creators and beneficiaries of this entire business conglomerate through front men.

3. Through these companies, they both received all kinds of benefits ranging from the payment of basic services; rentals; credit card expenses for the purchase of travel tickets, clothes, jewelry, supplies, electrical appliances, furniture for offices and residences to the purchase of planes, helicopters, vehicles, boats, motorcycles, land, houses, villas, farms, warehouses and offices, and to cover expenses for their refurbishment, decoration and maintenance.

4. As the investigation advanced, new entities linked to the business network were detected, leading to new searches to document them.

5. Almost 100 ministerial declarations were received from the companies- partners and legal representatives, lawyers, auditors, accountants and service providers. The objective of the financial scheme was to launder money of illicit origins.

The above allowed us to confirm that the detected business network was the vehicle designed to hide the money coming from the commission of different crimes by Otto Pérez Molina and Ingrid Roxana Baldetti, at least from January 2009 to April 2015, with the participation of several operators.

* The case of the TV stations

Modality 1 of illicit electoral financing: The case of the TV stations.
In 2008 Otto Pérez Molina, then general secretary of the PP, was preparing to be his party’s presidential candidate, so getting funds for the electoral campaign was a priority for the structure.

For this they started up an entire structure of companies controlled by Roxana Baldetti to raise funds, among them: Comercial Urma, Publicmer, Publiases and Serpumer. These entities began to receive money from Radiotelevision Guatemala S.A. (Channel 3) and Televisite S.A. (Channel 7). As the campaign progressed, Channel 3 and Channel 7 increased their payments to the four companies...

The television companies that made the payments to Roxana Baldetti’s entities during the campaign (2008-2011) were benefited with contracts worth millions starting at the moment of presidential inauguration (2012)

The investigation allows the conclusion that the publicity companies were instruments to hide the channeling of money to Baldetti Elías by the television company representatives. This money was not reported to the Supreme Electoral Tribunal (TSE) and was used to buy the latest models of vehicles for use in the PP’s presidential campaign: 10 trucks, 1 micro-bus, and 4 Toyota and 1 Chevrolet pick-up.

* The financing of the Patriot Party

Modality 2 of illicit electoral financing: Company conglomerates
It was easy for the PP’s criminal structure to gain power thanks to financing from all kinds of businesses. The businesspeople would give money to whatever entity the PP operators indicated, knowing they would not receive goods or services in exchange, as in most cases they were fake companies. As regards the payments through construction companies, the businessmen would bill for intangible, hard-to-trace services, for example, “use of machinery for a thousand hours,” a modality repeated constantly.

Modality 3: Simulating the origins of the financing reported to the TSE
Just like all political organizations, the PP turned in its monthly campaign expense reports to the TSE. In the reports about Monetary Contributions from Members and Supporters, signed by Julio César Godoy Anleu of the party’s auditing body, several financiers were involved in triangulatimg funds to hide the money’s origins.

With this method the PP brought money into the electoral campaign from people and companies whose origin was hidden by the companies of Juan Carlos Monzón and Víctor Hugo Hernández. In the reports turned in to the TSE month after month, it is seen how the companies of Monzón and Hernández appear over and over again as financiers, when in reality they just received funds from other entities.

* They were the real power

The criminal structure came into power on January 14, 2012.
Starting that year the illicit money laundering machinery that had been used to get into power continued operating and spread out. To do that they took advantage of key operators who were assigned to certain institutions and responded to a single command structure that consisted of Otto Pérez Molina and Roxana Baldetti. From there an entire parallel framework was coordinated to operate in accordance with the criminal group’s interests, by charging commissions in contracts with the State, assigning services and works, among others.

It is important to point out the roles that different operators took on within the criminal scheme, as they were crucial to the structure achieving its objectives.

1. They were the real power. They had the real power over the entities. In some cases the operator was de facto, i.e. was not appointed to his position in the institution, and in other really did have a public post.

2. They determined priorities in the institutions depending on the structure’s interests. In this way, programs, projects, contracts and debt payments, among others, were prioritized with the objective of collecting certain commissions.

3. They would fix the price for the commissions. They had instructions to negotiate a commission of at least 10%, called the Commercial Monetary Incentive (ICM), to process new and existing contracts.

4. Control over payments. They would control the negotiations to obtain money for the structure according to the hierarchical position—normally 60% for the President and Vice President and 40% for the rest of the participants.

5. Levels of operators. There were also divisions within this position; big and medium operators are identified according to the number of institutions under their charge.

* The extent of the mafia structure

During the investigation, at least 450 contracts within state institutions negotiated by this criminal structure have been identified.

What has been presented to date is a kind of “cash closing” showing the current situation of the investigation. It is important to point out that in several cases the analysis of the digital and documentary evidence recovered during the searches done since April 2015 was crucial in discovering the control records of the illegal financial income registered by Juan Carlos Monzón.

The records found provided evidence of contracts that the entities intervened by the structure had assigned to certain contractors in which the payment of commissions were distributed among the chiefs and team. This perverse mechanism within the structure was called ICM. It has been determined that the ICM amount is at least half a billion quetzals, which at a value of 7.75 quetzals to the dollar, would amount to US$64.5 million.

* Arrests and detentions

During the investigation, 23 men and 2 women were arrested, accused of different crimes: illicit electoral financing, illicit association, money laundering, and active and passive bribery. Seven arrest warrants were issued internationally: four for men and three for women. Six orders to appear in court were requested to expand on Otto Pérez Molina and Roxana Baldetti’s new criminal acts—illicit enrichment and money laundering—along with four other men.

Seventeen men and three women are fugitives of justice. Fourteen people have been subpoenaed to give their first testimony. There have been 42 search-and-seizures in the department of Guatemala, 3 in Izabal ad 1 in Zacapa.

All these operations have required 300 National Civil Police agents with 60 patrol cars.

A new scandal:
The “Cooperacha,”

Initially, the list of fugitive men included Flavio Rodolfo Montenegro Castillo, who until recently directed the Granai Townson-Continental Bank and is a member of the Castillo family, whose origin goes back to the conquistador and chronicler of the Indies, Bernal Díaz del Castillo. The family owns the brewery and founded the Banco Industrial. Also among the fugitives was Daniela de la Luz Beltranena, additionally a member of an old Guatemalan elite family. Both of these have since turned themselves in.

A new scandal exploded only days after CICIG made this information public. On June 11, 2016, Minister Rivas, Attorney General Aldana and the CICIG commissioner called a press conference to read Communique No. 51, titled “La Cooperacha,” a word used in Guatemala to indicate money collected to celebrate a party for relatives or friends, or collected by a group of friends to give someone a gift for his/her birthday.

The communique read that day detailed the case and announced the arrest of two of Pérez Molina’s former ministers, Héctor Manuel López Ambrosio (Defense) and Héctor Mauricio López Bonilla (Government). We also reproduce it here because it reveals what was happening in this country...

* “To please the boss”

As part of a perverse logic in the exercise of political power, President Otto Pérez Molina and Vice President Roxana Baldetti, together with a group of ministers close to them, came together every year around the dates of both their birthdays for the purpose of cooperating to collect large sums of money for acquiring super luxurious goods given as “presidential and vice-presidential gifts”

The intention of the public officials who repeatedly participated in the purchase and delivery of these sumptuous goods was to “please the boss.” Granting gifts to the head of organized crime structures was very much within the custom of such organizations to guarantee one’s own permanence within the hierarchy and permission to operate in it.

What did the “Cooperacha,” involve? In 2012, 2013 and 2014 several of Otto Pérez Molina’s then-Cabinet ministers gave him very valuable presents each time he had a birthday. For that they would make a type of “cooperacha,” or cash contribution, which was collected by Juan Carlos Monzón, Vice President Baldetti’s private secretary, who would then decide what would be purchased. In three documented gifts, several ministers and the social security head invested large quantities that in some cases didn’t match the assets they reported in their probity statements.

* “To leave no trail”

Among the gifts given to Otto Pérez Molina was a luxurious boat, a beach house in Taxisco, Santa Rosa, and a helicopter. The boat was bought for 2 million quetzals, the beach house for US$1 million and the Bell 470GX, model 213 helicopter US$3.5 million. The grand total for these and other gifts for the then-President was 33 million quetzals.

The same scheme used for the gift-giving to Otto Pérez Molina was used to purchase real estate in Pristine Bay, Roatán, Honduras, for Roxana Baldetti, with the difference that they switched roles: in this case Pérez Molina organized the collecting of contributions.

Juan Carlos Monzón received US$500,000 as a contribution from the same officials who organized to raise funds for Pérez Molina’s gifts.

The origin of the funds raised was illicit. The contributions were in cash to hide the transactions and avoid leaving a trail, revealing the intention of hiding both the origin and destiny of the funds...

In some cases, even if the probity statements showed that disposable income capacity, delivering the money as cash in boxes or bags and to the institutions where the contributing officials worked in order to cover up the amount of the contributions is a powerful attention grabber. This method is commonly used to hide transactions and leave no trail, indicating that they wanted to hide the money from third parties.

* “Uncontrollable desire
for a life of luxury”

Abusing their positions as public officials, the members of the structure developed actions through which they took over state institutions like booty, extracting enormous amounts of money with total discretion to ensure their own positions in government by giving such expensive gifts to the President and Vice President.

The conduct of the organization’s higher members, who decided what gifts to acquire, plus that of the ministers and other government officials in getting illicit money to satisfy all those incomprehensible and unjustifiable whims show the total disrespect this structure had for the good use and execution of the state’s resources.

Replacing the public interest with the selfish interest of illicit enrichment was a constant in the Patriot Party’s government. This case illustrates the extremes to which this structure went in its uncontrollable desire to flaunt a lifestyle of unlimited luxury.

In addition to Otto Pérez Molina and Roxana Baldetti, currently in prison for other crimes, those involved in this case are former Defense Minister Hector Manuel López Ambrosio and former Minister of Government Héctor Mauricio López Bonilla, both of whom are under arrest; former Communications Minister Alejandro Sinibaldi Aparicio and former Minister of Energy and Mines Erick Estuardo Archila Dehesa, both of whom have an international warrant out for their arrest, as well as Ulises Noé Anzueto Girón, another former defense minister, and former Social Security Director Juan de Dios de la Cruz Rodríguez.

Monzón is a scorpion

The preliminary hearing against Pérez Molina and Baldetti was not held until June of this year. Juan Carlos Monzón, Baldetti’s former private secretary, is acting as a witness, an “effective collaborator of the Public Prosecutor’s Office.”

After several sessions Pérez Molina and Baldetti finally gave their testimony. Pérez Monila has denied the charges, rejected that the trial be based on Monzón’s testimony and claimed that no tax audits exist that prove his enrichment. Baldetti told Emisoras Unidas she didn’t know she had “a scorpion in her shirt that has betrayed her” and assures that only the TCQ and La Línea cases have any basis, whereas the case of co-opting the State and the Cooperacha case are “inventions.”

Both have accused CICIG of sowing hatred among Guatemalans and have denounced the State for declaring the extinction of their dominion over their properties before any sentences.

A blow to the great tax evaders

In addition to these revelations, Juan Francisco Solórzano, son of the murdered poet Alaíde Foppa Falla, was appointed the new superintendent of the SAT and has begun to work quite seriously.

One of the cases he has opened is that of tax evasion by one of the biggest companies, Aceros de Guatemala (Guatemala Steel), whose main stockholder is José Luis Gabriel Abularach. According to the digital medium “Plaza Pública,” the more than 9,000 wiretapped phone calls that helped the Public Ministry and CICIG investigate La Línea also enabled them to “identify other criminal operations of this structure and they have caught the case’s first big fish: Aceros de Guatemala S.A., which is the lead company in the sector of iron for construction.” It is accused of millions in tax fraud between 2006 and 2009.

Aceros de Guatemala was registered in 1981 with a capital of 3.5 million quetzals, which reached 800 million by 2013. It is said that its sole administrator, José Luis Gabriel Abularach, has accepted responsibility and proposes to start a new path by paying much more than 800 million quetzals in order to keep his business.

A “protectorate”
of the US Embassy

Everything that is happening in Guatemala today, both these cases and others to come, lead us once again to underscore the role of the US Embassy. Without it none of this would have happened.

Although Guatemala’s big capitalists often express their amazement, saying they don’t know what the United States is up to, US Ambassador Todd Robinson repeatedly reminds them of the importance of paying their taxes and investing in Guatemala. If they don’t, he explains, it won’t be possible to build up enough prosperity in the country to stop people’s desire to live a better life by migrating to the United States.

Many people today both in Guatemala and outside think this “protectorate” the US has installed in our country has the advantage of putting the heartless business classes, those whose only homeland is their own wealth, up against the wall. While true, we must remain cautious having seen the disasters induced by US intervention in other countries with cultures deeply different from the Anglo Saxon one.

A wide world that’s
not for those who emigrate

Today’s world is no home for emigrants, despite all the data indicating that their presence improves the economies in the receiving countries. The disruption in cultural identity caused by migrants weighs more, so economic evidence is falsified. We see this in the US Supreme Court’s inability to come down in favor of President Obama’s measures on behalf of immigrants. We see it in the British and Welsh Brexit (which Scotland and Northern Ireland rejected). We see it in Bavarian Christian Democracy’s rejection of Chancellor Merkel, its federal ally. It is accentuated by the prison-like migrant camps in Greece to get Syrian families seeking peace to stop entering Macedonia and the rest of Europe.

Above all, we see the advances of nationalist populisms that are about to elect such a President in Austria and could elect Marie Le Pen in France, as well as the rejection of emigrants in Hungary, Poland, Denmark and other countries, including Spain, which pledged to receive 18,000 Syrian refugees and has only received 80.

Pope Francis, who went to Lampedusa and Lesbos and brought Syrian families to the Vatican, must be deeply hurt by the lack of response to his actions. The only piece missing from this bleak picture is if the polls are wrong and Trump gets elected in the United States. Yes indeed, a high degree of inhumanity is hovering over all of us.

Juan Hernández Pico, sj, is the envío correspondent in Guatemala.

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