SOUTH AMERICA:
White Collar Criminals
Slip Through Legal
Loopholes
By
Jorge San Pedro*
BUENOS AIRES, (IPS) -
The snail’s pace of
justice and large gaps
in the criminal codes of
Argentina, Paraguay and
Uruguay are the biggest
hurdles to cracking down
on financial crime in
general, and bank fraud
in particular, lawyers
and anti-corruption
experts say.
An avalanche of
bankruptcies and
liquidations of
financial institutions
shook the southern cone
of South America in the
late 1990s and reached
its peak in 2002. Years
later, the courts have
failed to provide an
effective remedy.
In fact, many cases are
still being investigated
and prepared and have
not yet gone to court.
The bankers are accused
of various crimes, from
fraudulent
administration and asset
stripping to capital
flight.
"There are clear
failures in criminal law
related to banking.
There are no instruments
to deal with these kinds
of crimes," Pedro
Biscay, head of the
Buenos Aires based
non-governmental Centre
for Investigation and
Prevention of Economic
Crimes (CIPCE), told IPS.
"New forms of
prosecuting financial
crime, which has banking
at its core, are
needed," he added.
The epidemic of bank
failures followed the
euphoria of financial
globalisation, and was
largely a result of that
phenomenon.
In Uruguay, the
fraudulent bankruptcy of
Grupo Velox, which
controlled the Banco
Montevideo and Banco
Caja Obrera as well as
the Trade & Commerce
Bank (TCB) in the Cayman
Islands, and the
collapse of the Banco
Comercial owned by
Carlos and José Rohm
drove up the country’s
debt from nine to 12
billion dollars.
The Peirano brothers
Dante, Jorge, José and
Juan, who owned Grupo
Velox, may have
misappropriated 800
million dollars from
savers, according to the
liquidators of TCB, the
offshore bank in the
Cayman Islands tax
shelter.
The Peirano scandal
revealed a string of
frauds, diversion of
funds and other illegal
manoeuvres with
depositors’ funds, which
affected Argentina,
Paraguay and Uruguay and
touched on Chile, Peru
and southern Brazil, the
entire area where Grupo
Velox operated.
The Banco Alemán in
Paraguay was intervened
by the country’s Central
Bank in June 2002, and
the Peiranos are accused
by the courts in that
country of diverting 27
million dollars of their
clients’ money,
deposited abroad, to
assist other companies
belonging to the group
experiencing financial
difficulties in
Argentina and Uruguay.
Also in June 2002,
Argentina’s Central Bank
suspended operations at
the local branch of
Banco Velox, which held
deposits amounting to
about 135 million
dollars.
The Rohm brothers, for
their part, controlled
the Compañía General de
Negocios, Banco General
de Negocios (BGN), Nuevo
Banco Santa Fe and San
Luis Financial
Investment in Argentina.
It also undertook
offshore operations in
tax havens. The BGN
collapsed in 2002.
José Rohm promptly
accused his brother
Carlos of all
wrongdoing. Judge María
Servini de Cubría,
hearing the BGN case,
said in 2002 that the JP
Morgan bank had
presented written
charges that José Rohm
had requested a loan of
260 million dollars to
cover up fraud
committed, he said, by
Carlos.
Servini de Cubría said
that the BGN was also
involved in illegal
capital flight, for
sending abroad at least
70 million dollars after
the Argentine
authorities had frozen
all deposits as a result
of the country’s late
2001 economic meltdown.
The BGN crash followed
that of Banco Patricios,
managed by Alberto
Spolski, Alejandro Bilik
and Sergio Fryd. When it
went bankrupt in 1998 it
swept away over 300
million dollars
belonging to 152,000
account-holders.
Banco Mayo, presided by
Rubén Beraja who was
also the head of the
Delegation of
Argentine-Israeli
Associations (DAIA),
took over the Banco
Patricios and began to
return the lost
deposits. However, Banco
Mayo soon closed down.
But there is nothing new
about the collapse of
financial institutions,
the absence of adequate
instruments to prevent
it from happening, or
the lack of political
will to do so.
In Paraguay, 12 banks
went under between April
1996 and June 2002.
According to a study by
CIPCE and the University
of Buenos Aires (UBA),
financial crimes caused
damages estimated at
over 10 billion dollars
from 1980 to 2005. And
the Peirano family in
Uruguay was involved in
fraudulent bankruptcies
as far back as the
1960s.
The lack of specific
laws to deal with these
crimes encourages their
repetition, Biscay said.
In Argentina,
"corporations with legal
status cannot be charged
with criminal
responsibility. Banks
cannot be prosecuted,
only their directors.
Fraud is treated as an
internal matter, which
means that the banks can
come to court as
plaintiffs," he said.
"The banker can present
him or herself as a
victim, not of bank
fraud, but of external
circumstances: it’s the
fault of other partners,
of macroeconomic
conditions, or of
intervention by central
banks," Biscay said.
The Peirano brothers
have taken the Uruguayan
Central Bank to the
civil courts, claiming
hundreds of millions of
dollars in "damages."
The slow pace of justice
also conspires against
remedying the social and
economic damage caused
by white collar crime.
In the study by CIPCE
and UBA, the average
trial length in
Argentina of a sample of
24 cases of financial
crimes -- 12 of which
involved banks -- was 14
years.
Out of 407 lawsuits
filed in federal courts
between 1980 and 2005,
only three percent
resulted in convictions,
while 35 percent of the
cases were dismissed,
and 47 percent are still
at the investigation
stage and have not yet
made it to court.
This is a gift to the
accused. The Peirano
brothers, prosecuted in
Uruguay, had the
privilege of becoming
the first case of
lengthy pre-trial
detention to reach the
Inter-American
Commission on Human
Rights, which
recommended that they be
released, given the
delays in their trials.
Diego Camaño, the
Peirano brothers’
defence lawyer in
Uruguay, told IPS that
there is no reason for
any of his clients to
remain in prison. They
have already been behind
bars for five years,
which is the maximum
sentence for the crimes
with which they were
charged.
In the case of
Paraguay’s Banco Alemán,
two of the five chief
members of the board,
Francisco Peterlik and
Luis Sorrentino, were
given two years
suspended sentences. A
third, Ricardo Castillo,
who was sentenced to
eight years in prison,
was acquitted on appeal
by the Supreme Court.
Biscay also pointed out
that "there are no laws
for the recovery of
stolen assets. A fine
and property seizure may
be imposed after a
conviction, but the
justice system shows no
anxiety to recover the
money."
"If the embezzled funds
were transferred abroad,
there is no way to get
that money back," he
added. And since
corporations with legal
status cannot be
prosecuted, the funds
must be recovered from
the bank’s directors,
and it is often
difficult to prove what
their assets are, he
said.
The major shareholders
in the BGN were JP
Morgan, Credit Suisse
and the Dresdner Bank,
which also brought a
claim against the
Uruguayan state for
damages over the closure
of the Banco Comercial,
said Biscay.
"There is a trend
towards local banks
being taken over by
foreign owners, who take
the state to court when
there are losses," said
Biscay.
Pilar Callizo, president
of the Paraguayan
chapter of the
anti-corruption watchdog
Transparency
International, agreed.
"Unscrupulous big
capital seeks out
countries like ours
where the institutions
are weak, there is a
large amount of leeway
for those connected to
political power, and the
justice systems aren’t
up to the mark," she
told IPS.
In a 2002 press
conference, Judge
Servini de Cubría
emphasised that surprise
inspections of banks to
oversee their operations
had been discontinued in
1994. The banks were
always "advised of the
inspection date one or
two months beforehand,"
she admitted.
At present, Carlos Rohm
is out of prison on bail
while his trial takes
its course. So is his
brother José, who fled
to the United States
where he stayed until
the Argentine justice
system exempted him from
prison in 2005, at which
point he appeared in
court to testify, and
was prosecuted for the
same charges faced by
his brother.
Beraja has been released
on bail while the case
against him remains at
the investigation stage.
His lawyer, Marta
Narcellas, told IPS that
they would sue Pedro Pou,
the president of the
Central Bank at the time
that Banco Mayo
collapsed. The case
involving the directors
of the Banco Patricios
has gone to trial.
In Uruguay, Dante
Peirano is free after
posting bail in the
amount of 250,000
dollars. Jorge and José
Peirano were also
granted conditional
release, but have to
remain in jail in
Montevideo by order of
the judges who are
processing extradition
requests from Paraguay
for the crash of the
Banco Alemán.
The fourth brother, Juan
Peirano, considered to
be the brains of the
Grupo Velox, was found
in the United States
carrying fake documents,
and is now in a Miami
prison awaiting the
outcome of Uruguay’s
extradition request,
which was issued earlier
than Paraguay’s and thus
takes precedence.
Their father, Jorge
Peirano Facio, was one
of the most influential
businessmen in the
country from the 1960s
on, and served as a
government minister on
two occasions. He died
at the age of 82 in the
Central Prison of
Montevideo, in 2003.
* With additional
reporting by Darío
Montero in Uruguay and
David Vargas in
Paraguay. |
