San José, Costa Rica, since 1956

New Corruption Scandal Breaks

AS the second state institution in as many monthsbecame engulfed in a shocking corruption scandal thisweek, the government announced it will increasefunds to departments responsible for the investigationand prosecution of such corruption.In the latest scandal, various officials from theCosta Rican Electricity Institute (ICE) and their familymembers allegedly received several million dollarsfrom the French telecom firm Alcatel, one of ICE’sbiggest suppliers, the daily newspaper La Naciónrevealed Tuesday.The wife of a former board member, who allegedlyreceived $2.4 million, left the country bound forNew York Tuesday morning.PRESIDENT Abel Pacheco congratulated thepress for fighting corruption at his weekly Cabinetmeeting Tuesday, and said the government must collaborate in this fight.La Nación and other San José media lastmonth broke what has become one of thelargest corruption cases in the country’s history,involving the Social Security System(Caja).Also on Tuesday, President Pachecoannounced a special extra budget to assistthe Prosecutor’s Office and JudicialInvestigation Police (OIJ).Cuts will be made from various agenciesto finance 20 new prosecutors, sevenOIJ agents, two judges and two judicialaids – all to investigate corruption complaints.Finance Minister Federico Carrilloadded that despite likely budget cuts inother areas, the government hopes toincrease the 2005 budget for the Ministryof Justice by $58.3 million (16.5%) tocombat corruption.IN the latest scandal, Alcatel allegedlymade payments to ICE officials through anaccount at a Bahamas branch of CuscatlánInternational Bank that belongs to a companyheaded by a relative of Alcatel’s topofficial in Costa Rica.Funds from the account also were usedto make a $100,000 donation to PresidentAbel Pacheco’s presidential campaign justbefore the 2002 elections. Pacheco thisweek admitted receiving the donation. Hesaid it was normal and “how things work,”and did not result in any special treatmentof Alcatel.Jean Philp Gallup, the wife of formerICE board member José Antonio Lobo,reportedly received $2.4 million fromAlcatel in 2003. Gallup had planned her departurefor New York before the allegationsbecame public, Channel 6 news reported.Lobo served as a board member from1999 until he was recently fired becauseof his involvement in another controversysurrounding a trip to Europe with anotherICE provider, telecom firm Ericsson (TT,July 23).THE payment to Lobo’s wife wasmade by Servicios Notariales Q.C., a companyowned by the law firm of Luis AdriánQuirós, and directed by Quirós’ wife.Alcatel’s general manager, EduardoValverde, is married to Quirós’ sister.According to La Nación, ServiciosNotariales’ account in the Bahamasreceived $9.6 million in transfers fromAlcatel during 2003.Alcatel is one ICE’s largest providers.During the past three years, ICE awardedAlcatel $258 million in contracts related tocellular phones and other telecommunicationsservices.The allegations prompted the resignationTuesday afternoon of the NationalLiberation Party’s (PLN) secretary general,Carmen Valverde, sister of Alcatel managerValverde. Although she is not implicatedin the scandal, party officials indicatedTuesday that she wished to avoid anyassociation between the political party andthe alleged payments.On Wednesday, José Antonio Herrero,a member of PLN’s finance committeeduring the 2002 presidential campaign,said that, like Pacheco, PLN candidateRolando Araya received a $100,000 donationfrom Servicios Notariales in 2002.Herrero told the daily Al Día thatwhen he received the donation, he wasunaware of any connection to Alcatel.LA Nación reported it has uncoveredevidence of numerous payments made byAlcatel to ICE officials through theBahamas account.Bosques del Olímpo, a society headedby another former ICE board member,Joaquín Alberto Fernández, allegedlyreceived $1.2 million. Fernández, whoserved on the ICE board from 1998 to2002, is under fire this week after LaNación reported he had been sentenced to39 years in prison in 1988 for fraud andwriting bad checks. The sentence was laterreduced to six years.Another alleged payment recipient,Rodrigo Méndez, an engineer with ICE for30 years, resigned Monday in connection toallegations of corruption. He reportedlyreceived $55,000 in payments from theBahamas account.Méndez also allegedly received paymentsfrom Marchwood Holdings Inc., aPanamanian firm implicated in the ongoingscandal involving Costa Rican medicalequipment provider Corporación Fischeland Caja, currently under investigation(see separate story).NEITHER Alcatel manager Valverdenor former ICE officials provided furtherdetails on the alleged payments this week.Fernández limited his conversation withthe press, citing a hearing problem.President Pacheco showed no suchreluctance to discuss the $100,000 campaigndonation from Alcatel, deposited into theaccount of Second Vice-President LuisFishman. In his Cabinet meeting this week,he stated there is nothing irregular about thedonation.However, the contribution appears tobe in violation of the country’s ElectoralCode, which establishes a limit of ¢13 million(approximately $36,000 at the timethe donation was made) for a private donation.In addition, political parties arerequired to report all donations, and campaigncontributions from foreign companiesare prohibited.FISHMAN told La Nación that thedonation was made to his bank accountafter a meeting that included Pacheco,Fishman, and Alcatel manager Valverde,and that Fishman in turn made variouspayments to the publicity firm associatedwith Pacheco’s campaign and politicalparty, the Social Christian Unity Party.A special legislative commission isinvestigating other foreign campaign donationsreceived by Pacheco.The allegations related to Alcatel cameonly a few days after the replacement ofICE board members Lobo and HernandoPantigoso because of a scandal involving adifferent ICE contract.President Pacheco fired Lobo andPantigoso on July 20, after an investigationrevealed that in October 2003, during a tripto Prague, Czech Republic, the two hadstayed in hotel rooms paid by Swedish telecomfirm Ericsson (TT, July 23).At the time, Ericsson was involved in a$130 million public bid to provide ICE with600,000 late-model cellular telephone lines.Ericsson later won the bid, and the contractwas signed in June of this year.In July, the Comptroller General’sOffice rejected the contract, citing 28objections (not including the Prague trip).Last week, Comptroller General AlexSolís ordered the entire bidding process tobe started over.Ericsson ran full-page ads in LaNación this week, saying that because ofthe comptroller’s decision Costa Rica willhave to wait to switch to GSM technologyand instead continue to use older TDMAtechnology. At the beginning of the year,ICE ran out of GSM lines.AFTER Lobo and Pantigoso were firedin late July, they filed an injunction beforethe Constitutional Chamber of the SupremeCourt (Sala IV), claiming the President’sCabinet lacked the authority to fire them.The Sala IV agreed to study their case, therebysuspending the decision to fire them.On Sept. 24, the Sala IV rejected theinjunction filed by Lobo and Pantigoso,resulting in their immediate firing and reinstatingPacheco’s previous appointments tothe board, engineers Jorge Gutiérrez andFrancisco Lay.Lobo was Housing Minister during theadministration of former President MiguelAngel Rodríguez (1998-2002), and legislatorfor the Social Christian Unity Party from1986-90 and 1994-98.(Tico Times reporters Fabián Borges andRebecca Kimitch contributed to thisarticle.)

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