Lavish Rewards for Corrupt Government in Colombia
|November 13, 2003||Posted by Staff under Archive, Progress Report, The Progress Report|
Lavish Rewards for Corrupt Government
Privatization or Pillage? Fishing for Gold in Colombia
Now that the Clinton administration wants to give $1.6 billion in military aid to the government of Colombia, many people have questioned whether this is not simply a corporate welfare handout to the two makers of military combat helicopters who would benefit. Going beyond that, we can also ask whether Colombia has a government that deserves aid of any sort. Here you will find a long, long article discussing government activities in Colombia. Funny how it appeared in the French publication “Le Monde Diplomatique” rather than in a mainstream USA venue. Latin America is rich in examples of corruption associated with the privatisation of the more promising state-run industries. In Colombia it has led, with the active connivance of the politicians, to the biggest white-collar hold-up in the country’s history. This has not prevented the International Monetary Fund, called in by Bogota, from dictating a fresh round of restructuring – to be paid for by the people – and recommending further privatisations.
by Maurice Lemoine
Time was when the skull and crossbones fluttered over the Caribbean. In those days, gold, silver, crowns and pieces of eight all found their way into the capacious pockets of corsairs, pirates and buccaneers. They were the scourge of these troubled waters, intercepting galleons and sacking the jewels of those far-off, warm and wealthy lands – Maracaibo, Puerto Bello, or lovely Cartagena de Indias, the flower of New Granada (later to become Colombia).
A Frenchman, Robert Baal, took the governor of Cartagena by surprise in the middle of a banquet and made off with 310 kilos of gold. He was the first of a long line of buccaneers and adventurers, English and French: John Hawkins (1567), Francis Drake (1586), Jean-Bernard Desjeans and Jean Ducasse (1697), and Admiral Edward Vernon (1741). After Vernon, this pearl of the Caribbean, safe within its walls, thought it had done with the host of pirates intent on plundering it. But at the end of the 20th century, a man called Cesar Gaviria Trujillo came along.
Going for a song
A member of the Liberal Party and elected president on 27 May 1990, Gaviria opted for neo-liberalism, opening up the markets, and globalisation. At the time Colombia had five nationalised ports – Cartagena, Barranquilla, Santa Marta (on the Caribbean coast), Buenaventura and Tumaco (on the Pacific) – all run by a single organisation, Colpuertos (1). Very skilfully, the president drummed up a press campaign claiming the ports were in a mess and needed to be privatised. So privatised they were, by Law No. 1 of 1991 (Ley primera de 1991).
In the grand tradition of state sell-offs, assets and machinery vanished into thin air, no inventories of the dock installations were made, no calls for tenders issued. The business of awarding contracts was left to the discretion of a civil servant, the superintendente portuario, who placed them where he saw fit. Article 12 of the law allowed this: “Within five months of the date of the application [for the concession] the general superintendent of ports shall publish a decision indicating the terms under which the concession is to be granted.”
That was all. And it was pure coincidence that behind the front men who rushed to land this lucrative deal were all the top brass of the liberal and conservative parties, political leaders like Vidas Lacouture and Davilas, powerful families from the coastal strip, like that of Francisco Villas Cos , cronies of those in power and people to whom the president owed a favour. The port installations were handed over, for a song, to companies that had sprung up out of nowhere and private individuals with no experience in this kind of activity. Article 30 of the law had made provision for this contingency: “Companies running the ports may engage subcontractors …”. So all these happy incompetents would be able to become instant multimillionaires. The ports invoice their services in US dollars, so it is a good line to be in.
So far, nothing out of the ordinary in the vast game of Monopoly known as the market economy. “But,” as Senator Ingrid Betancourt was to declare in Bogota eight years later, “it doesn’t stop there. This privatisation has in fact been no more than a diversionary tactic to open the way for the biggest hold-up in the history of Colombia.”
At the time, the five ports run by Colpuertos had more than 15,000 workers. They belonged to eight trade unions, and a federation that had won major privileges and, it was said, had been leading one government after the other by the nose. So President Gaviria had to find some way to avoid any violent reaction from the workforce when the privatisation was announced. The solution was simply to sack them and, to everyone’s amazement, this didn’t cause a riot.
While the Ley primera transferred the state’s assets to private business, it provided, quite rightly, that all the liabilities should be shouldered by the national exchequer. “The nation shall,” Article 35 ran, “be responsible for paying retirement pensions of whatever kind, other social benefits, and compensation and costs [our italics] for which Puertos de Colombia are liable.” The sting was set up and ready, for there were going to be lots and lots of costs.
Strangely enough, six new collective agreements were signed with the unions during the final months of Colpuertos’s existence, between May and August 1991. These gave the workforce all kinds of advantages, via “wage factors” (factores salariales), with some forty allowances and bonuses that would have to be taken into account when calculating redundancy pay and retirement pensions. They included breakfast, lunch and dinner allowances (already chargeable to the company), travel, Sundays and public holidays, overtime, sickness, accident, hazardous work and children’s schooling – but also, more imaginatively, for periods on strike, help with funeral expenses, compensation for unfair dismissal, Sunday-best shoes, long-service and shirt allowances, bonuses of all kinds, anything and everything.
When the time came to go ahead with the sackings and settle the retirement pensions (2), innumerable mistakes were deliberately made by the Colpuertos officials in charge of the operation in the various ports. They “forgot”, in particular, to apply the famous factors. These irksome omissions were going to allow the workers to sue the state, as represented by the Puertos de Colombia social liabilities fund (Foncolpuertos) set up to pay the pensions after the closure of the ports.
Very conveniently, on 27 November 1992 the post of director-general of this new public body was entrusted by the president to Hernando Rodriguez.
Of the man himself, next to nothing is known: only that he is married to the highly controversial Marta Catalina Daniels, a member of congress “already known as one of the most corrupt people in Colombia.” He started in at once on what was to be his main contribution to an imminent masterpiece of management: creating total chaos by destroying the computer database that contained all the information about the workers.
“From that point on,” confides an official particularly well acquainted with the affair, “there was no telling who they were, how many of them there were, what they could claim, whether they had worked or not and if so for how long, and what wage factors they were entitled to. We were left with a database riddled with holes and containing incomplete information at best.”
The former port workers felt cheated by these irregularities and dissatisfied with the pay-offs. Once a submission for out-of-court settlement had failed, unhappily bringing no response, “they handed the matter over to a lawyer. He in turn put them in touch with various other lawyers whose identity remains rather mysterious.” Not all that mysterious, actually. The plethora of disinterested advocates who spontaneously offered their services included a large number of former Colpuertos officials (no more qualified lawyers than you or I). They were the very people who had made the “mistakes” when the ports were being closed down.
A vast number of claims were filed (30,000 for 16,000 workers). In the absence of computer records, the only way of proving that they were well-founded was to produce a CV or hoja de vida recording the worker’s service with the company. But these had been left behind on the port premises, quite unusable, tipped loose in their thousands into containers, piled up disastrously in damp corners.
From then on all claims became possible, even the most far-fetched and least authenticated. Damages were awarded, based on judgments reached on no valid grounds. Or rather, on two grounds rather than one: a group of workers, represented by their lawyer, would ask for 1.55 billion pesos (around $800,000). The judge, in his infinite wisdom, would consider this inadequate, award 2 billion (around $1m) instead (3) and pocket the difference.
We were told in detail, under a strict promise of anonymity, how the system worked. Under the law, an ex-worker granted a pension for which the “factors” have been taken into account wrongly or not at all has to submit an overall claim. In fact, he puts in a claim for each error (20 per pensioner, on average). “Here there are four. This one entitles me to so much, that one to so much, and that one to so much.” The whole is endorsed by the magistrate, who adds: “for each day overdue, the state will pay a day’s wages in compensation.” On one claim, the penalty would be, “say, for eight months, at 160 days’ wages, $6.75 x 160 = $1,080. Plus interest at the current rate. But as the costs awarded are for four claims, that’s 1,080 x 4 = $4,320. Sometimes there will be ten, or fifteen or twenty claims. And some cases drag on over several years. You work it out.”
The lawyers ask for and get whatever they want. The fines and other “interest on back-payments” bump up the amounts to be paid out (4). As no checks are made, and there is no cross-referencing of information, the same claims are put in to different tribunals (at Cartagena, Barranquilla, Santa Marta, Bogota, and so on). “So that no-one will notice, a slight change is made to the names or the identity-card numbers.” Claims for a million dollars are submitted ten times. Pensions that ought normally to amount to $150 or $200 a month literally explode, and invalidity pensions are paid out to able-bodied adults in rude health.
The most feather-bedded beneficiary of all is beyond argument former union leader Arturo Forbes Rye. Taken on as a storeman on 4 April 1973, he was being paid, at the end of his working life, a wage of $310. Now he gets a monthly pension of $13,000 (5). With no system for checking what is going on, and no objective evidence to show if the awards are reasonable, the Treasury is paying out the most exorbitant sums without batting an eyelid.
One might smile at all these scams and see them as the democratisation of corruption: the men who used to work for Colpuertos are being paid to keep their mouths shut and becoming the richest section of the working class in the world. In fact, it is only a smoke-screen.
A civil servant, seething with indignation, runs through details of the schemes she knows like the back of her hand. “All these people come from along the coast, they have their own culture, their own way of doing things, but on top of that they’ve enjoyed the more than active connivance of …” The voice tails off, and with a glance towards the tape-recorder a sheet of paper is grabbed and the words “the politicians” silently scribbled. Then, a little tensely, it goes on: “… to strip the state of its assets.” One contact, with first-hand information, starts the interview by saying solemnly: “If you mention my name, I’m dead.” Another, thoroughly familiar with the subject, says quietly but firmly: “You don’t know me, you’ve never seen me, and we’ve never met.” In this country, you can negotiate a price of around $200 with a sicario (hit-man) for a contract to have someone murdered. Enormous interests are at stake at the very highest level.
Greed on the part of the former workers does not explain the mind-boggling amounts being paid out by the state. And anyway, as we are told, “many of the workers never knew they had a lawyer working for them, and in fact few of them have actually received these staggering sums.”
“Up to then,” explains Ingrid Betancourt, “the lawyers had taken a commission on the unjustifiable sums granted to the workers. Now they just help themselves. As the file doesn’t exist, you fill in whatever details you like.” Foncolpuertos is becoming a lucky dip. Every day people turn up with claims against the state. Every day, with no relevant paperwork to go on, the judges rule against the state. In an exchange of courtesies, Omar Niebles, a director at Foncolpuertos, gives a latest-model motor van to a judge in Santa Marta, and gets in return a judgment in his favour that lets him pocket the modest sum of half a million dollars.
Legal representatives petition in the name of groups of 100 employees who have never existed. Caicedo Maria Teresa is paid $23,000 three times, using three different ID cards (nos. 229,222,061, 129,222,061 and 329,222,061). Adalberto Berdugo gets three payments of $52,000, $44,000 and $70,000 (under resolutions 1052, 1059 and 1019, all signed by the director-general of Foncolpuertos, Salvador Atuesta Blanco). Five “workers” pick up $383,000 because 29 days on strike at the Barranquilla port terminal were not taken into account when calculating their pensions. According to ID card no 122,687,993 (and in Colombia there is no identity card numbered above 100 million) one beneficiary was first employed in 1899 (which gives quite a few years of building up pension rights) (6).
Better still, Oswaldo Brochero, who died on 3 October 1993, signs a power of attorney three months later to lawyer Alfredo Tapta, who then (case file 1798 bis) wins his “client” a monthly pension of $10,500 – payable for the rest of his life! This settlement forms part of a batch of 471 ghost cases claiming a total of $275m – among other things, for the non-payment of rest-day allowances and for handling corrosive substances (of these awards, over $100m were paid out in 1998). According to a preliminary enquiry carried out by the Procuraduria General de la Republica (PGR) (7), a 40% commission on sums recovered for each of the accounts involved was paid to Bogota officials (8). Lawyer Leydith Correa Laffont managed, using false or altered documents, to get herself paid $3m, doing even better than her colleague Dulis Escobar, the “arbitration king”, whose wealth is estimated at $2m.
Corruption of databases, miscalculation of benefits and pensions, acceptance of forged documents, lost invoices and illegal payments, bought trade-union leaders, workers happy to defraud, corrupt officials, lawyers, judges, assessors, treasurers, swindlers of any and every kind -all lead back to Foncolpuertos (9). And first and foremost to its successive directors -Hernando Rodriguez, Deyfan Silva, Maria Fressia Suarez, Juan Manuel Cubides, Manuel H. Zabaleta, Salvador Atuesta, Maria Piedad Mosquera – appointed by the liberal governments of Cesar Gaviria (1990-94) and Ernesto Samper (1994-98).
The present Contralor (auditor-general, CGR), Carlos Ossa, says bluntly: “From what has been established during checks by the Procuraduria, it is more or less clear that the disorganisation that led to this whole mess was deliberate and carefully planned.” One can judge for oneself. Of 120 staff at Foncolpuertos, only 11 executives are civil servants. The others have no qualifications for the complex and difficult administrative task they have been given to do. The head of the economic services office is an architect. The liquidators include law graduates, nutritionists, engineers, draughtsmen – all recruited on the recommendation of politicians or, as some of them discreetly put it, “through contacts with third parties”.
There is no manual on the procedures to be followed, and no internal audit. Even better, and almost unbelievably – the passwords for accessing the computer network of the national payments system (sistema nacional de pagos) have been entrusted to 61 of Foncolpuertos’s (ever so highly-qualified) employees. This will enable the data in the files used to administer the state’s funds to be altered, erased and manipulated. Once that is done, money flows like water – into the pockets of those who, in the shadows, have instigated and are benefiting vastly from the financial hemorrhage. “A real cartel has been built up, and it works like this: a tiny amount for the worker, a comfortable amount for the trade-union leader, a percentage for the lawyer, judge and official, and a cut for the go-between who brought the lawyer and official together and who, in turn, pays the top politicians.”
Electoral campaigns and the amassing of personal fortunes under the Gaviria administration are described in Bogota, with a bitter smile, as a gravy train. A scandal broke in 1994 that was to shake president Ernesto Samper, who was accused of accepting $3.7m from the drug traffickers of the Cali cartel to fund his election campaign. In prison, the defence minister Fernando Botero, who ran the campaign, talked: yes, Samper had indeed asked the drug barons for money and got it in exchange for a promise not to extradite them to the US (10). Brought before Congress, Samper was acquitted on 15 December 1995, to everyone’s surprise, at the end of a very confused hearing in “Case 8000″.
At the time a number of political figures close to the president – Marta Catalina Daniels, Carlos Alonso Lucio, “Chucho” Garcia, Jaime Lara (currently in gaol for drugs offences), Jose Name and others – had their own men in key positions in Foncolpuertos. So was the institution used to buy the president’s acquittal at a high price?
“There’s no formal proof,” some people say hesitantly, “but it’s what’s being said everywhere, even in Congress.” “Heyme Mogollon,” others add, “the very man who was to head the investigation into the president, left Congress with one and a half million dollars in his pocket, and went off to lord it in his village at the back of beyond, right at the end of the Colombian coastline.”
Only Senator Ingrid Betancourt, a thorn in the side of the political establishment because of the courage and tenacity with which she carries on a relentless battle against corruption, dares go further. Tapping a pile of documents in front of her, she says: “This batch includes the ‘liquidation accounts’ submitted at the time of the Samper trial. They were written as if they’d been drawn up in 1993, and submitted at Barranquilla because people in Congress knew they had the most corrupt judges in the world there. As bad luck had it, there had just been a CGR audit at Barranquilla (11), which showed that that port had settled all its debts and that all the liquidation accounts had been paid. And then all of a sudden, all these umpteen claims fall out of the sky. There are 575 million dollars’ worth of them.”
Auditor-General Carlos Ossa chooses his words more carefully. “Everybody is muttering this, but apart from Ingrid Betancourt no-one is saying it out loud in public.” Nonetheless he makes his feelings known. “I’m sure, for my part, that certain political groups took an active part in the fraud. The investigation now under way will surely prove it.”
How could it be otherwise? The swindle came to light in 1993. On 24 May that year the CGR handed the finance minister an alarming report on the total shambles reigning at Foncolpuertos and nothing happened. In 1995 a fresh CGR audit sounded more alarm bells. There was no hurry to set up an enquiry, even by Francisco Becerra the state auditor-general, though it was his department that was sounding the alarm (12). The ministers, who were supposed to be ensuring that the procedure was open and who were on the junta directiva running Foncolpuertos, similarly failed to respond.
On 21 January 1997 the Constitutional Court joined in, and it too in turn discovered – which was not all that difficult – that there had been irregularities (13). On 19 February it called on the contralor, David Turbay, to open a tax investigation of a first batch of 34 court decisions dealing with 470 former workers (involving $3.5m). Several months later, on 29 September, the investigation by the CGR’s enquiry unit (14) was called off and the matter closed by the contralor, “it being understood that no irregularities of a fiscal nature had been found … and considering that the state had paid what it actually owed to its workers, in accordance with the various legal and contractual benefits … without detriment to the public purse” (15).
One after another, all the ministers of labour, development and finance over this long period have been alerted to the situation, as have all those managing the national budget. Top officials like Ramon Zuniga Valverde, a magistrate in the supreme court’s chamber dealing with labour affairs (as a magistrate, he had had false compensation claims paid; on retirement, he became the lawyer for the judges now in prison because of these corrupt practices).
“Presidents Gaviria and Samper knew, as well they might,” Betancourt says, emphatically. Every investigation is systematically called off, from the top. Just a few (often lower-rank) officials, disgusted at what has been going on, have quietly carried on against orders, gathering evidence, laying bare the scams: anonymous men and women who do their country credit, carrying on the battle with all the risks this involves.
“Pressure? Threats? Yes, a lot,” confirms Betancourt, who has become their standard-bearer at the head of her small political movement, Green Oxygen. “I, as a senator, enjoy [police] protection guaranteed by the state, for what it’s worth. But they have nothing.”
The present contralor Carlos Ossa, appointed to the job after the conservative president Andres Pastrana came to power in 1998, also seems to ignore the pressures. “My conclusion is, and I’ve said this to Congress, that there has been a conspiracy against the nation, a conspiracy in which by acts of omission or commission the highest officials in the land have been taking part.”
It now remains to assess the scale of the crime, a particularly difficult task. Foncolpuertos has been careful not to keep reliable files that would make it possible to work out the amount of costs awarded and sums still owing. No office or ministry has kept the slightest scrap of paper documenting the sums paid out. “The national exchequer has handed out more than $500m, probably 40% of it fraudulently,” Ossa estimates. “But the problem doesn’t stop there.” According to the ministry of labour working party, 18,232 cases were under way in June 1999, with the actual value of 1,000 settlements (assumed to be falsified) from December 1993 still to be determined -a sum, by Ossa’s reckoning, of “between $1.25bn and $1.5bn” (16). In total – estimating on the low side – some $1.75bn to $2bn (17). Betancourt thinks the loss could be as much as $3bn. “In a country with 25% unemployment, where 40% of the population is living below the poverty line, this is equivalent to twice the social, education, health and housing budgets for the year 2000 put together. It’s monstrous!”
Monstrous, but for the time being not having any dramatic consequences. Forty or so workers, lawyers, judges and their stooges have been arrested. From one minor court case to the next, the whole business is being watered down, and the media – allied to the big economic groupings, and thus to the political establishment – are not taking much interest (18). The national council of magistrates (Judicatura) has announced that almost 18,000 of the judgments handed down will have to be reviewed. “But the judicial system is so heavily implicated that it will be hard for it to point the finger at senators, deputies, ministers and presidents.”
The supervisory bodies are still in the hands of people close to ex-president Samper. Alfonso Gomez Mendez, the state prosecutor who is now to carry out the enquiry, was the lawyer for the ministers accused, during Case 8000, of taking money from the mafia. The procurador (19) Jaime Bernal was, just before taking office, the personal advocate of Hernando Rodriguez, principal director of Foncolpuertos and prime organiser of a rip-off said to have netted him $10m.
An action was in fact brought against Rodriguez, but he left Colombia two years ago to buy cigarettes and hasn’t been seen since. The assets of the Hermac construction company he owned together with his wife Marta Catalina Daniels (Hermac = Hernando y Marta Catalina) were seized; she still, for all that, occupies her seat in Congress. During this time, with the support of his peers (in particular the US Government), ex-president Gaviria has been reinstalled as secretary-general of the Organisation of American States. Faced with a horrific economic crisis, the present Colombian government has had to ask for help from the International Monetary Fund.
Just as it has never had wind of the misappropriation of funds that has bled Russia white (20), the IMF has never heard of Foncolpuertos. On 20 December 1999 it granted $2.7bn to Bogota (roughly equivalent to the amount that has disappeared into the pockets of the politicians). A condition for the loan is a serious tightening-up: cuts in the state budget, reforms in taxation, social security and public-sector pensions, greater flexibility in the labour market, and – guess what? – further privatisations.
At the beginning of January, the minimum wage – $150 a month – was upped by 9%. Members of parliament and the top managers of the state bureaucracy (whose salaries range from $2,000 to $6,000) got a 15% rise.
(1) Ports of Colombia
(2) Redundancy payoff: one month’s wages for each year worked, based on 100% of the wage earned during the past 12 months. Pension: 80% of monthly wage, including all allowances and factores, for those who have worked 20 years, and pro rata for those employed for a shorter time.
(3) The figures below are quoted, for ease of reading, in US dollars: for simplicity the conversion has been based on 2000 pesos = $1, although in December 1999 the dollar was in fact well under that figure. All the sums quoted are therefore appreciably lower than in reality.
(4) As an example, on 14 pay slips eleven of which were issued in September 1998 for sums supposedly paid to groups of “workers” and totalling $950,000, the interest on overdue payment amounts to $2.75m (see Tiempos del Mondo, Bogota, 7 October 1999.
(5) Since then the former trade unionist has studied law and taken up the cause of 150 people.
(6) These examples are taken from the Contraloria General de la Republica report, “Foncolpuertos `Foco de corrupcion’, pruebas y consequencias” CGR-DSS-No. 032, December 1998.
(7) A body partway between a government accounting office and a general tax inspectorate.
(8) El Tiempo, Bogota, 8 November 1999.
(9) It emerged in August 1998 that, in a database comprising 16,515 transactions, 12,233 recorded by Foncolpuertos under code 999 were without supporting evidence and could not be related to any document. Source: “Foncolpuertos `Foco de corrupcion’, pruebas y consequencias”, op. cit.
(10) A constant bone of contention with Bogota is Washington’s insistence that drug traffickers arrested in Colombia be extradited to the US.
(11) This CGR audit, covering $1bn, revealed that senators had liquidation documents and that these were forgeries.
(12) The CGR has powers not only to carry out audits, but also to launch investigations – which it has never done.
(13) Sentencia T-001 of 21 January 1997.
(14) Investigacion fiscal No. 00229-97, related to sentencia T-01/97.
(15) Gaoled in February 1998 under Case 8000 for “illegal amassing of wealth” ($50,000 from the Cali cartel), ex-inspector David Turbay was sentenced on 29 December 1999 to 5 years and 10 months imprisonment.
(16) The Pastrana government has decided to suspend all payment of new claims.
(17) The sums mentioned here, predating our peso conversion, take no account of the fact that while there are around 1,800 pesos to the US dollar today, there were only 1,000 in 1992 when the affair began; the actual amount is accordingly higher. Moreover, the Foncolpuertos managers never provided any estimate of the future cost of pensions. Taking a life-expectancy of 70, and bearing in mind the level of pensions awarded, the liability is likely to be very substantial.
(18) Carlos Viera de la Fuente, director of the major daily El Espectador, was lawyer to a company that benefited from the privatisation of the ports.
(19) In charge of the Procuraduria, and responsible for disciplinary measures against public officials.
(20) See Jacques Sapir, “West’s autistic view of Russia”, Le Monde diplomatique, English edition, December 1999.
This article was translated by Derry Cook-Radmore.
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