Executives Are Jailed in Chile Finance Scandal
By PASCALE BONNEFOY MARCH 7, 2015
SANTIAGO, Chile — Four executives of one of Chile’s largest financial groups, a tax auditor and a former government official were taken into custody on Saturday after prosecutors filed charges of tax fraud, bribery and money laundering against them in a scandal that has shaken the economic elite and the main opposition party.
During three days of court hearings, prosecutors brought charges against 10 defendants in all: the owners and executives of the Penta Group, a financial holding company; two officials in Chile’s Internal Revenue Service; and two opposition politicians.
Judge Juan Manuel Escobar ordered the pretrial detention of Penta’s owners, Carlos Alberto Délano and Carlos Eugenio Lavín; its general manager, Hugo Bravo; a company accounting manager, Marcus Castro; an auditor at the tax service, Iván Álvarez; and Pablo Wagner, a former government official. The men were placed in a special unit of a maximum-security prison here.
The judge placed two other defendants under house arrest and ordered police supervision for another two.
During the hearings last week, National Prosecutor Sabas Chahuán detailed how Penta officials issued hundreds of fake invoices, evaded taxes, falsified statements and illegally financed the electoral campaigns of candidates from the right-wing opposition party Independent Democratic Union, known as UDI, with which Mr. Délano and Mr. Lavín had close ties.
Carlos Gajardo, another prosecutor, accused the Penta Group of having “a culture of tax evasion” and of becoming a “machine to defraud the state.” Mr. Gajardo told the court that the company “showed losses every year, but its executives filled their pockets with millionaire bonuses every year.” He added: “How do you explain that?”
Mr. Lavín has denied the accusations. “He presents us as a mafia, as if we were Al Capone or something of the sort, and it is unfortunate to hear that,” he told reporters after the first day of hearings.
The scandal, which has marred Chile’s image as being relatively free of corruption, began with an anonymous tip to the tax agency in August accusing Mr. Álvarez, the auditor, of fraud. Prosecutors say Mr. Álvarez helped falsify tax statements for 122 people, including Penta executives.
One of the men involved in the scheme was Mr. Bravo, Penta’s general manager. Investigators discovered in his computer false invoices issued by the wives of Mr. Délano and Mr. Lavín that helped the company evade taxes. Mr. Bravo cooperated with investigators, helping to unravel Penta’s financing of the electoral campaigns of nearly a dozen prominent members of the UDI and two former ministers under previous governments, Laurence Golborne and Andrés Velasco.
Telephone calls and emails intercepted by investigators revealed how UDI candidates asked Penta to fund their campaigns.
The scandal has shaken the UDI, and some political allies have called on its leaders to step aside. During a recent party meeting, UDI leaders decided not to take any action until after the judicial investigation.
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The Penta Group, with over $30 billion in assets, has investments in health insurance, pension administration, real estate, education and banking. Mr. Délano and Mr. Lavín began making their fortune in the insurance sector in the 1980s, profiting from privatization during the latter part of the military dictatorship.
“Pentagate,” as the local media has labeled the case, has become a test of the judicial system, which has often been criticized for leniency toward white-collar crime, as well as for the democratic system itself, said Marta Lagos, director of the polling firm Latinobarómetro. “It’s a turning point for democracy in Chile, an opportunity to restore public faith,” she said. “For years people have suspected this collusion, this incestuous relationship between money and politics, and this case confirms it.”
Scandal has also touched the government of President Michelle Bachelet. News emerged in February that Ms. Bachelet’s son and daughter-in-law had met with the owner of another financial institution to obtain a $10 million loan for a company they owned in order to finance a land deal.http://www.nytimes.com/2015/03/08/world/americas/executives-are-jailed-in-chile-finance-scandal.html