San José, Costa Rica, since 1956

Government Corruption Scandal Explodes

PROSECUTORS are investigating formerPresident Rafael Angel Calderón and several topgovernment officials for allegedly having receivedlarge sums of money to arrange a multimillion-dollargovernment contract for a pharmaceutical company.Analysts say it is the most devastating corruptionscandal to hit the country in decades, and some say itcould permanently mar Costa Rica’s reputation as anexemplary Latin American Nation.News of the payments was reported on theChannel 7 News program Telenoticias last Saturday,the first of a number of revelations this week relatedto the corruption scandal linked to a $39.5 millionloan from the government of Finland. The loan cameas part of the now highly controversial FinlandProject, a plan to update medical equipment in CostaRican hospitals run by the Social Security System(Caja) – the country’s state-run public health-caresystem.Former Caja executive director Eliseo Vargas,who proposed the project when he was a legislativedeputy in 2001, was arrested Tuesday and given a sixmonthpreventive detention order for allegedly interferingwith a government investigation and makingillicit payments of $200,000 in certificates to formerCaja modernization chief Juan Carlos Sánchez.Sánchez, who had been transferred to theCalderón Guardia Hospital, resigned from the Caja onMonday.CHANNEL 7 reported that the payments toCalderón, who was President from 1990-94, camefrom a $9.2 million “commission” requested by theexecutives of the Costa Rican pharmaceutical companyCorporación Fischel. According to Channel 7, thefunds came from the controversial Finland Project,which the Legislative Assembly passed in a recordthree days in December 2001. In January 2002, thedebt was transferred to the state.The loan was granted on the condition that at least 50% of the medical equipment purchasedbe Finnish, criteria only one companycould meet during the public biddingprocess. That company was Finland-basedInstrumentarium, which distributes its equipmentin Costa Rica through CorporaciónFischel, meaning the Costa Rican companydirectly profited from the contract.Calderón received $440,500 of thefunds through a Panama-based company heowns and manages, according to the broadcast.Local media also reported Monday thatthe Panamanian company MarchwoodHoldings, presided by Fischel’s executivepresident, Walter Reiche, provided $23,700to purchase a 2002 Toyota Rav4 for Vargas’20-year-old daughter Andrea. She reportedlysold the vehicle a week after La Nación reportedon April 21 that Marchwood Holdingsfunded a luxury home for Vargas, which herented at half-price from a former Fischelexecutive. Vargas resigned from the Caja theday after the reports ran (TT, May 14).The report did not detail how theremaining $8.7 million of the alleged“commission” may have been distributed.IMMEDIATELY after the report airedSaturday night, prosecutors obtained awarrant and raided the offices of the bankBAC San José, seizing documents relatedto the transfers, which allegedly were madeby Panamanian companies linked toFischel. After the raids, a judge prohibitedCalderón from leaving the country duringthe investigation. The judge issued a similarorder for Sánchez.In direct response to the allegations, theSocial Christian Unity Party (PUSC) grantedCalderón’s request to be separated fromthe party, which he both founded andchaired, during the course of the investigation.Calderón also immediately contractedcriminal lawyer Gonzalo Castellón.Confronted by an army of reporters earlythis week, 55-year-old Calderón refused toprovide details about the transactions “out ofrespect for the investigation.” He repeatedlytold reporters to “be calm” and said “everythingwill be explained in its moment.”MEMBERS of the press cornered himMonday as he went to visit economiccrimes prosecutor Warner Molina in SanJosé. Molina declined to see Calderón,explaining to the former President that hehad “a full agenda.” Calderón gave him aletter that declared his intention to cooperatefully with the investigation.Calderón, in a statement he issuedSunday in response to the initial Channel 7broadcast, admitted his company receivedthe payments, but said the transactionswere for “correct acts” and “have nothingto do with the public offices I held.”“I am a professional and a businessmenwho works, invests and undertakes, justlike thousands of Costa Ricans, with thegoal of receiving an income,” the formerPresident said.Local media also reported thatCalderón’s wife received part of the payments.Calderón’s first cousin, AlfonsoGuardia, allegedly cashed certificates totaling$80,000 from money sent to BAC SanJosé by Panama-based Harcourt Holdings,also managed by Reiche. Guardia, whencashing the certificates, asked that themoney be sent via a check to former FirstLady Gloria Bejarano de Calderón, LaNación reported.THE original transfers were reportedlymade by the company Datex-Ohmeda, abranch of Instrumentarium (according toDatex-Ohmeda’s Web site), to companiesin Panama managed by Fischel’s executivepresident, Walter Reiche.Costa Rican financial prosecutorsworking in Panama told the press this weekthat the transaction was one of manybetween banks in Finland and businessesowned by Reiche in Panama and theBahamas.Cecilia López, a Panamanian anti-corruptionprosecutor who has investigatedcorruption cases involving a formerNicaraguan president and Peru’s former intelligence director, is also investigatingthe scandal, Al Día reported.Fischel’s Reiche remains behind barsin Costa Rica serving a preventive detentionorder since early June. He is suspectedof destroying documents sought during thegovernment’s investigation of the FinlandProject, threatening witnesses and bribinggovernment officials.Investigation into the loan began inApril, after La Nación revealed the houserental arrangement between Vargas andOlman Valverde, Fischel’s former financialchief.IN a press declaration, CorporaciónFischel general manager Alfredo Brenesdenied that the Costa Rican company hadany connection to the Panamanian companiesinvolved in any of the transactions.However, La Nación reported that all threepresented themselves before the bank BACPanama as “companies related to CorporaciónFischel.”One of the companies, O. Fischel andCía S.A., carries the same name as a CostaRican company established in 1950 thatlater became Corporación Fischel. Also,the Panamanian companies were all at onepoint presided by Fischel executives.The executive president of Oscol S.A.,the first company to receive the $9.2 millionfrom Datex-Ohmeda, according to Channel7’s report, is Emilio Bruce, president ofFischel’s board of directors. Reiche isOscol’s vice-president. After the initial allegationsagainst Vargas, Bruce stepped downfrom his post as president of the Costa RicanChamber of Commerce (TT, May 14).Reiche is also the executive presidentof Harcourt Holdings, the Panamaniancompany that allegedly transferred$440,500 to Calderón’s company, Sultana.THE scandal has had a devastatingimpact on the ruling Social Christian UnityParty, with both its founder and a formerparty head involved – Vargas was the PUSCLegislative Assembly faction leader when hepresented the Finland Project. In a statementreleased Sunday, party leaders LorenaVásquez and Federico Vargas said the Channel7 broadcast about Calderón “causes usgreat pain, as it affects a loved human beingto whom this country owes very much.”Though much remains to be resolved,some analysts say the scandal is the worstthe country has seen in decades.“THIS is the end of Costa Rica beingexceptional,” said Luis Guillermo Solís, apolitical analyst with the University ofCosta Rica (UCR). “This (corruption)equalizes Costa Rica in the regional context,in the Latin American context.”Edgar Cascante, an independent politicalanalyst, agreed with Solís on the gravity ofthe crisis, since the Finland project fundswere intended to assist in Costa Rica’s development.However, Cascante said Costa Ricacan still salvage its image in the long term.Instrumentarium, the Finnish medicalequipment company that won the Cajacontract in 2001, was bought in October2003 by General Electric Medical SystemsInformation Technologies. InstrumentariumCEO Olli Riikkala spoke at a conferencein Helsinki, Finland, announcing thetakeover.Riikkala said GE and Instrumentarium“share uncompromised integrity. If you arein the medical business, that’s the firstthing you have to have – integrity in everythingyou do.”

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