aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019 SPECIAL FEATURE Corruption in Peru: An overview of systemic corruption and an interview with former prosecutor José Ugaz By Mario Levin Associate Head of Latin America Practice Aperio Intelligence Like other countries in Latin America, Peru has suffered for decades from systemic corruption that has reached the highest tiers of its executive, judicial and legislative systems. Over the last couple of years, revelations in the Odebrecht scandal, otherwise known as the “Lava Jato” case have highlighted the sheer scale and scope of corruption in the country, with allegations levelled Photo: Cristo del Pacífico, Lima. A replica of Rio de Janeiro’s Christ the Redeemer, which was given as a gift by Odebrecht to against all living former presidents. former president Alan García, and is now called “the Odebrecht Christ” by Lima locals. It is therefore no wonder that current president Martín Vizcarra, who came to Peru is one of the countries that suffers America, uncovering a pervasive scheme in power in March 2018 after corruption from the worst levels of political corruption which Odebrecht used money to influence allegations forced his predecessor in Latin America. In Transparency elections and bribed politicians and public to resign, has described 2019 as the International’s 2018 Corruption Perceptions officials to win billions of dollars-worth of year of the fight against corruption. Index, Peru fell to 35/100, eight points lower public work contracts in a dozen countries in Vizcarra’s anti-corruption efforts, which than the global average of 43, two points Latin America. have faced keen resistance from an lower than its score in 2017. According opposition-dominated congress, include to the National Institute of Statistics and In 2016, Odebrecht admitted to paying political and constitutional reforms, Informatics of Peru, at the end of 2018, 6.6 nearly USD 800 million in bribes to officials as well as increased regulation of million of its citizens (representing 20.5 in several Latin American countries in companies operating in the country. percent of the general population) lived exchange for winning concessions and These themes were exemplified in the in poverty. These figures are even more public tenders across the region. In June International Congress of Compliance unsettling when the scope of the bribes paid 2019, Odebrecht filed for bankruptcy in a and Anti-Corruption in Peru, organised to Peruvian officials by Brazilian engineering Brazilian court. While investigations on who by the Lima Chamber of Commerce and construction conglomerate Odebrecht exactly was on the receiving end of these and the World Compliance Association, S.A. are considered. payments is still ongoing, Peru is one of the which was held in June 2019. This countries most affected by Lava Jato, which article provides a short overview of the The investigations by Brazilian authorities, caused a political earthquake in the country. history of corruption in Peru, as well which began in March 2014, were originally According to independent Brazilian journalist as the current administration’s efforts aimed at allegations of corruption at the association Jota, in 2017 and 2018, nine to solve the problem, which place into Brazilian state-owned Petróleo Brasileiro countries in Latin America sent a total of context an interview with anti-corruption S.A. (Petrobras). In June 2015 however, the 118 requests for cooperation to the Brazilian prosecutor José Ugaz, former Ad-Hoc arrest of former CEO, Marcelo Odebrecht, authorities. Peru alone was responsible for Attorney of Peru and the former chair of by the Brazilian authorities revealed one more than half of the requests, with a total of Transparency International. of the largest corruption cases in Latin 68 requests made. 23 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019 SPECIAL FEATURE continues from previous page Alberto Fujimori: the cult of personality in prison for his role, among others, in killings On 9 December and kidnappings that were carried out by the Grupo Colina death squad. Grupo Colina, 2018, coinciding with which was created by Fujimori’s regime, was the United Nations’ a military anti-communist death squad that was active from 1990 until 1994, during International Anti- his government’s battle against Sendero Corruption Day, nearly Luminoso and other leftist guerrillas. 18 million Peruvian Fujimori’s long tenure had an important voters approved three political impact on the country, primarily Photo: Reuters constitutional reforms represented by Fujimorism, a political ideology based on his cult of personality. Peru’s most prominent case of corruption is Despite Fujimori’s crimes, Fujimorist parties, which Valentín Paniagua served as interim usually cited to be that of Alberto Fujimori, led by his children Keiko Fujimori and Kenji president of Peru (2000-2001), Toledo came who served as the country’s president from Fujimori, still benefit from widespread to power as the leader of Perú Posible, the 1990 to 2000. Fujimori came to power at a support in Peru. Keiko Fujimori ran for liberalist party that he had founded in 1994. time when Peru had been severely affected presidency several times while her father Like Fujimori, Toledo was supported by his by homegrown terrorist movements, namely was in prison, most recently in the 2016 close assistant César Almeyda, who served Maoist rebel group Sendero Luminoso. Peruvian general election, when in the as chief of the National Intelligence Service Throughout his tenure, Fujimori was second round she obtained 49.9 percent of Peru (2003), president of the National supported by his close adviser, Vladimiro of the vote. Fujimori’s children have also Institute for the Defence of Free Competition Montesinos. While never officially appointed attempted to gain him a pardon. In 2017 and the Protection of Intellectual Property to any office, Montesinos, who had strong he was granted release from prison by (2002-2003) and a member of the links to the American CIA, was in practice president Pedro Pablo Kuczynski, but the Investment Promotion Agency of Peru chief of the National Intelligence Service decision was overturned by the Supreme (2003-2004). Almeyda was incriminated by of Peru. On behalf of Fujimori, Montesinos Court and Fujimori was sent back to prison an audiotape in which he discussed bribing bribed opposition parliament members to in January 2019. judges with a corrupt military general and in join Fujimori’s party while covertly recording 2006 was sentenced to eight years in prison. Alejandro Toledo: awaiting extradition? the acts to extort them later. The same recordings were also used to incriminate Since stepping down from the president’s Montesinos himself and Fujimori. office in 2006, Toledo has resided most of the time in the US, where he had studied In May 2001, after evidence of Montesinos’ in his youth. Toledo attempted to rerun involvement in bribery had been revealed, for presidency in the 2016 elections, but Fujimori, who is of Japanese descent, fled his party Perú Posible failed to reach the to Tokyo. Fujimori eventually announced his 5 percent threshold to remain an official resignation from presidency in the Peruvian political party. In February 2017, Toledo’s embassy in Tokyo, and was in hiding in arrest was ordered by the Peruvian Japan until 2005, when he was arrested Photo: BBC authorities after he was implicated in Lava while on a trip to Chile. In 2007 he was Jato. According to the allegations, during extradited to Peru, and in 2009 Fujimori was his tenure as president, Toledo received convicted of bribery and abuse of power, as Fujimori’s successors were two of his most approximately USD 31 million in bribes from well as crimes against humanity and severe obstinate opponents, Alejandro Toledo Odebrecht in exchange for granting the violations of human rights. In a historic trial (2001-2006) and Alan García Pérez (2006- company a billion dollar contract to build in 2009, Fujimori was sentenced to 25 years 2011). After a short transition period, in the Interoceanic Highway between Brazil 24 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019 SPECIAL FEATURE continues from previous page and Peru. In another case, known as the as one of Peru’s youngest presidents at argument that he had been the victim of Ecoteva case, Toledo and his wife Eliane the age of 35. García’s first tenure (1985- political persecution. In April 2019, after Karp were accused of money laundering 1990) is considered by many as disastrous officials from the national police and the through a Costa Rica registered company since his economic policies, including the prosecution arrived with an arrest warrant at named Ecoteva Consulting Group and nationalisation of the banking industry, García’s house in Lima, the former president founded by Karp’s mother, Eva Fernenbug. In brought the country to inflation of 7,500 shot himself and died shortly after. Though June 2019, based on testimony from Israeli percent, while his efforts against Sendero García’s supporters blame the authorities for businessman Yossi Maiman, who allegedly Luminoso proved to be ineffective. In 1992, a political witchhunt, many Peruvians have served as a mediator in the Odebrecht García fled to Paris where he remained in considered his suicide as a confession of bribery scheme, the Peruvian prosecution exile during most of Fujimori’s presidency. wrongdoing. Ironically, his legacy will also claimed that USD 18 million from Odebrecht In his second tenure (2006-2011), García be remembered by a giant replica of Rio de was transferred through Ecoteva’s bank encouraged foreign investment to the Janeiro’s Christ the Redeemer statue on the accounts in Costa Rica. country and oversaw a boom in Peru’s coast of Lima, which Odebrecht had given to mining sector and its economy in general. In him as a gift during his period in office, and Since February 2017, Toledo has not 2007, García signed a free trade agreement which is now called “the Odebrecht Christ” returned to Peru.