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Comparing Presidential Corruption Scandals in Guatemala and Brazil: Part 1

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Comparing Presidential Corruption Scandals in Guatemala and Brazil: Part 1 Comparing Presidential Corruption Scandals in Guatemala and Brazil: Part 1 Comparing Presidential Corruption Scandals in Guatemala and Brazil: Part 1 Written by Mike LaSusa Thursday, 27 October 2016 Brazil Guatemala Elites and Organized Crime Over the past several years, both Brazil Twitter and Guatemala have been rocked by revelations of widespread corruption at the highest levels of government. Former presidents in both countries are now standing trial for their alleged roles in the respective scandals. InSight Crime Recent corruption scandals have reached the highest levels of government in Guatemala and explores some of the similarities and Brazil differences between these cases. In addition to reporting by InSight Crime and other outlets, this article also draws on a discussion InSight Crime moderated recently between Mike Allison, an expert on Central American politics who serves as an associate professor and chair of the political science department at the University of Scranton, and Matthew Taylor, an associate professor at American University's School of International Service who focuses on state capacity and corruption in Latin America and who has extensive experience in Brazil. An edited transcript of that conversation has been published here. Who was involved? Guatemala: Former Guatemalan President Otto Pérez Molina and former http://www.insightcrime.org/news-analysis/comparing-presidential-corruption-scandals-in-guatemala-and-brazil[10/28/2016 11:10:25 AM] Comparing Presidential Corruption Scandals in Guatemala and Brazil: Part 1 Vice President Roxana Baldetti were accused in June 2016 by the United Nations-backed International Commission against Impunity in Guatemala (Comisión Internacional Contra la Impunidad en Guatemala - CICIG) of leading a "criminal mafia structure that had co-opted power through the ballot box." The criminal network also allegedly included Baldetti's private secretary Juan Carlos Monzón as a key intermediary, as well as numerous other government officials and business elites. Brazil: The cast of characters in the Brazilian case bears a striking resemblance to the Guatemalan one. Former Brazilian President Luiz Inácio "Lula" da Silva was accused in September 2016 by prosecutors in the South American country of "setting up and controlling an illegal scheme…to buy partisan support in Congress and thus ensure the perpetuation of his party in power." In March 2016, Lula's former chief of staff José Dirceu was convicted and sentenced to 23 years in prison for his role in the scandal. Involvement in this scheme also allegedly extended to a slew of politicians including current president Michel Temer as well as private business elites and executives of state companies, particularly the government-run oil giant Petrobras. How did the schemes work? Guatemala: After losing a bid for the presidency in 2007, Pérez Molina and Baldetti allegedly set up a network of front companies that accepted and laundered illicit campaign funds from prospective state contractors, which helped finance their successful 2011 run for office. Once in power, investigators say Pérez Molina and Baldetti rewarded these contributors with state contracts, some of which were used to fund kickbacks to the president and vice president. This case became known as the "Cooptación del Estado," or "Cooptation of the State." But the "cooptation" case was not the only corruption scheme in which Pérez Molina and Baldetti were allegedly involved. Other investigations have resulted in at least three additional sets of accusations against the former president and vice president. One of these plots, known as "La Linea," involved companies paying bribes to customs officials in exchange for help avoiding import taxes; Pérez Molina and Baldetti allegedly received a percentage of those bribes. Another scandal involved allegations that Pérez Molina accepted bribes from a Spanish http://www.insightcrime.org/news-analysis/comparing-presidential-corruption-scandals-in-guatemala-and-brazil[10/28/2016 11:10:25 AM] Comparing Presidential Corruption Scandals in Guatemala and Brazil: Part 1 company in exchange for help obtaining a contract for upgrading a major shipping terminal, the Quetzal Port. Shortly after the "cooptation" case broke, the Attorney General's Office described yet another corruption scheme dubbed "Cooperacha," or "Kick-in," in which Pérez Molina and Baldetti allegedly received gifts purchased by government employees with state funds. Attorney General Thelma Aldana said the purchases were made "with the intention of 'pleasing the boss,' much like the practice of [members of] organized crime structures that guarantees their position within the hierarchy and their license to operate." Following the revelation of the "cooptation" case, CICIG head Iván Velásquez said the evidence uncovered by the investigations indicated the existence of "structural corruption" in Guatemala, involving "consolidated structures" that could "reach relationships and understandings with each government." InSight Crime spoke with a source in CICIG who asked not to be identified, who described illicit campaign funding as "the original sin" by which powerful actors "substitute the public interest for the interests of certain elites who finance the campaign." In other words, political and business elites created illicit networks that served the dual purpose of keeping each other in power while siphoning off government resources for their own personal enrichment. Brazil: Prosecutors in Brazil allege that Lula was at the "vertex of various criminal schemes" aimed at keeping the political party he founded, the Worker's Party (Partido dos Trabalhadores - PT), in control of the levers of government. The September 2016 indictment of Lula (pdf) described two separate alleged corruption schemes as "sides of the same coin." The first scheme, known as the "Mensalão," or "big monthly payment," came to light in 2005 during Lula's first term as president. In this case, prosecutors alleged that public funds were used to make illegal payments to members of Congress in return for political favors. More than two dozen politicians and businessmen, including Lula's chief of staff Dirceu, were convicted of involvement in the scandal, but the president himself was not directly implicated at the time. The other "side of the coin," according to prosecutors, was a corruption scandal that broke in 2014 primarily revolving around the state oil company Petrobras. At first, the investigations focused on accusations that Petrobras http://www.insightcrime.org/news-analysis/comparing-presidential-corruption-scandals-in-guatemala-and-brazil[10/28/2016 11:10:25 AM] Comparing Presidential Corruption Scandals in Guatemala and Brazil: Part 1 executives had awarded public works contracts to private companies at inflated prices in exchange for kickbacks, some of which were funneled into political campaigns. More recently, however, prosecutors have accused Lula of using his position as president from 2003 to 2010 to appoint participants in the corruption scheme to important government positions. There, they could accept bribes for their own personal enrichment, while funneling some of the money into a "general fund" for buying political favors and covering the costs of disguising its illicit origin. Using a phrase similar to the one used by CICIG's Velásquez, the judge in charge of the Petrobras case, Sergio Moro, has described the scandal as an example of "systemic corruption" in Brazil. However, there are a few key differences between Guatemala's "cooptation" case and the Petrobras scandal. For one, the bribery in the Brazilian case appears to be more closely linked to political incentives than the desire for personal enrichment on the part of the participants, though the latter certainly played an important role. As the Washington Post explains, Brazil's fractured political party system makes it difficult to form governing coalitions to pass legislation. One solution to this problem -- which was apparently applied in this case -- is to offer illicit payments to members of Congress in exchange for their votes. In Guatemala, on the other hand, the evidence suggests personal enrichment trumped political expediency as the primary motivation for the graft. Another key difference between the two corruption cases is who benefitted, and how. Brazilian prosecutors allege that Lula received upwards of $1 million in free construction work on a luxury apartment connected to one construction firm involved in the Petrobras scandal. He is also accused of accepting speaking fees from another construction firm in exchange for helping the company obtain contracts and financing. But unlike in the Guatemala case, the former president is not accused of personally taking a cut of a multitude of graft schemes occurring at various levels of government. This suggests that the corruption in Brazil took place in a much more decentralized fashion than in Guatemala, where Pérez Molina and Baldetti appear to have acted like mafia bosses, personally taking a cut of each of the numerous illegal activities occurring under their direction. What is the outlook? http://www.insightcrime.org/news-analysis/comparing-presidential-corruption-scandals-in-guatemala-and-brazil[10/28/2016 11:10:25 AM] Comparing Presidential Corruption Scandals in Guatemala and Brazil: Part 1 Guatemala: The charges against Pérez Molina, Baldetti and others accused of involvement in Guatemala's recent graft scandals came after a years-long struggle to establish
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