San José, Costa Rica, since 1956

Key Suspect in Caja Case Reveals Details

A key suspect in the corruption scandalinvolving the country’s national publichealth-care system, Eliseo Vargas, showeda new willingness to cooperate withauthorities during a ten-hour declaration atthe Prosecutor’s Office this week.The former president of the SocialSecurity System (Caja) on Tuesdayimplicated ex-President Rafael ÁngelCalderón (1990-94) and other high-rankingofficials in the distribution of analleged $9.2 million “commission” inconnection with the Finnish medical distributorInstrumentarium.The commission was allegedly paidout to officials after Costa Rica secured a$32 million loan from the government ofFinland for the purchase of medical equipmentfrom Instrumentarium’s subsidiaryMedko Medical, to be distributed amongCaja hospitals by the Costa Rican firmCorporación Fischel S.A. The Caja providescradle-to-grave health care to mostCosta Ricans (TT, Sept. 10).ACCORDING to Channel 7 TVNews, Vargas, who a month and a half agowas ordered to six months of preventivedetention in jail, declared that after theFinnish loan was approved, formerPresident Calderón, in a gathering at hishome, resolved to amplify the “commission”by an extra 5%. The total allegedlyincluded $70,000 each for Calderón, formerCaja board member Gerardo Bolaños,former director of the Caja’s modernizationproject Juan Carlos Sánchez, and$140,000 for Vargas.On Tuesday, Vargas declared hewished to return tothe Prosecutor’sOffice the$105,000 he hadreceived and investedfollowingCalderón’s recommendations,Channel7 reported.Although Calderóntold reportersWednesdaythat Vargas’ declarationwas a collectionof lies, the ex-President was arrestedimmediately following his testimonybefore the Chief Prosecutor’s Office yesterdayand transferred to the GoicoecheaSecond Circuit Court just outside of SanJosé (see separate story).According to Judicial Branch spokeswomanSandra Castro, Bolaños, who iscurrently under house arrest, was alsotransferred to Goicoechea yesterday.Vargas’ declaration is expected to result inBolaños’ relocation to jail to serve preventivedetention.AT press time, Juan Carlos Sánchez,who also was ordered to house arrest inconnection with the Caja corruption scandal,was testifying before prosecutorsregarding Vargas’ allegations, Castro said.Vargas’ declaration might also affectothers involved in the Caja scandal, suchas Marvin Barrantes, former head of thePanamanian company O. Fischel R. y Cía,who is also under house arrest.O. Fischel R. and Cía S.A. is aPanamanian company bearing the samename as a Costa Rican company created in1950 that later became CorporaciónFischel. While news reports have linkedthe company to transactions related to theFinland Project commission andCorporación Fischel, Fischel general managerAlfredo Brenes insists the companieshave no connection (TT, Sept. 10).Vargas also revealed in his declarationthat he bought a luxurious house in SantaAna, a western suburb of San José, withmoney from Marchwood Holdings, thePanamanian company belonging to formerFischel president Walter Reiche. This testimonyrepresents a reversal in Vargas’earlier statements about the house, the keyto a La Nación report in April that originallysparked investigation of the Cajacorruption case.At the time, Vargas told La Nación hewas renting the house from OlmanValverde, Fischel’s former financial head.Nevertheless, Vargas resigned his postas Caja president just hours after the reportwas published (TT, May 14).This week, Vargas said the claim that hewas renting the house was merely to concealthe fact that he owned the property.ACCORDING to Channel 7, Vargasalso accused Calderón of asking formerNational Liberation Party (PLN) presidentialcandidate Rolando Araya to helpapprove the so-called Finland Project in2001 – something Calderón and Arayaboth vehemently denied on Wednesday.Araya, who was head of the PLN whenthe loan was being considered, appeareddeeply aggravated by Vargas’ accusations.He said he “never spoke to Eliseo, noteven to say hello” and that he “has madeplenty of mistakes, but never any relatedto an arocity of this sort.”Scandal is not new to Araya. Duringhis presidential campaign in 2002, questionswere raised about the source of thecampaign funds. Araya was alleged tohave used a trust fund in Banco de CostaRica to generate $2 million in campaignfunding from undisclosed sources (TT,Sept. 27, 2003).Araya also drew fire for being the onlyone of the eight leading presidential candidatesto not sign a Transparency Pactrequiring the Internet publication of allcampaign contributions and expenditures(TT, Sept. 7 2003).The campaign funds from the 2002elections are still under investigation by aspecial Legislative Assembly committee,which has not yet reported its conclusions.NEW campaign-finance questions surfacedwhen La Nación’s investigationrevealed Araya and President Abel Pachecoeach received $100,000 campaign donationsin 2002 from Servicios Notariales Q.C., acompany that reportedly received fundsfrom Alcatel, a French telecommunicationsfirm that allegedly paid millions in “prize”money to government officials after it wasawarded a government contract during theadministration of former President MiguelAngels Rodríguez, who has been ordered tohouse arrest in connection with that scandal(see separate story).Araya, like Pacheco, admitted to havingreceived the donation, but said he didnot know Alcatel was the original sourceof the funds.The donation appears to have violatedthe country’s Electoral Code on threecounts, since it exceeded the $36,000limit, was from a foreign company, andwas not reported (TT, Oct. 1).Following the revelations regardingAlcatel, Araya called for new legislation toplace greater restrictions on campaigndonations, according to La Nación.

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