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REPORTS: FINANCE - SOUTH AMERICA |
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Bank
Frauds Highlight Lax Controls,
Possible Collusion by Officials
Alejandro
Sciscioli and Darío Montero
ASUNCION, (IPS) - A chain of bank
failures in Argentina, Paraguay and
Uruguay, the latest of which involved
Multibanco in the Paraguayan capital,
has highlighted problems of lax
oversight and pointed to the possible
collusion of government officials with
bankers who are either behind bars
today or on the lam.
Multibanco directors Pedro Miraglio
and Oscar Pérez Samaniego remain in
prison after Paraguay's Supreme Court
overturned an appeals court decision
last week that would have allowed them
to be placed under house arrest.
Jun. 27 was the deadline for the
approximately 32,000 clients who were
affected when Multibanco went under to
obtain a government guarantee for
their deposits. Under a new law, the
account-holders are entitled to a
payment of up to 50 minimum monthly
salaries, equivalent to around 7,600
dollars, from the Central Bank.
The prosecution of Miraglio, Pérez
and other bank officials began after
the Central Bank of Paraguay decided
on Jun. 2 to take over Multibanco - a
consequence of the collapse of the
Banco Alemán, which belonged to Velox,
a transnational consortium.
The downfall in Paraguay of Velox,
which is owned by the Peirano clan
from Uruguay, triggered a domino
effect in which the group's banks and
other businesses began to go bankrupt
in Argentina, Brazil, Chile, Ecuador,
Peru and Uruguay.
A similar fate was suffered by a
consortium headed by the brothers
Carlos and José Rohm, two of
Argentina's most powerful financiers,
who controlled the Banco Comercial in
Uruguay and the Banco General de
Negocios in Argentina, which were
partly owned by J.P. Morgan Chase,
Dresdner Bank and Crédit Suisse.
Among the Rohm brothers' friends
figure former Argentine president
Carlos Menem, George Bush Sr. and
Henry Kissinger.
Argentina's late 2001 economic
meltdown and the capital flight that
surrounded it also had a heavy impact
on the banking systems of neighbouring
Uruguay and Paraguay, and brought to
light irregularities in the
administration of banks in the three
Southern Cone countries, including
maneuvres designed to cover up effects
of the crisis, and others that dated
further back.
Analysts consulted by IPS concurred
that the controls in Argentina and
Uruguay failed to kick in when they
should have, even though the
legislation and oversight mechanisms
exist in both countries to prevent
such things from occurring.
That has given rise to growing
suspicions of laxity or malfeasance on
the part of authorities, and judicial
and parliamentary investigations are
underway in both countries.
For example, investigators are looking
into the frequent contacts between the
Rohm brothers and Uruguayan
authorities over the past decade,
their close ties to the Argentine
government of Carlos Menem
(1989-1999), and the long-standing
relationship between the Peiranos and
local authorities in Uruguay.
In Paraguay, meanwhile, the collapse
of banks and finance companies was the
result of factors like "informal
sector” financial activities that
take place outside of the official
channels, sloppy handling of
information, and laws that only focus
on banking operations that take place
within the legal framework, financial
analyst Félix Lugo told IPS.
The controls exercised by the
Superintendency of Banks are only
based on the sworn statements provided
by the owners of the banks themselves,
or on reports produced by external
auditors hired by the financial
institutions, he explained.
Hence, according to Lugo there is
always a possibility that information
has been falsified or that the data
provided covers up the real situation
of private institutions or
transactions with associated
companies.
However, "there are stiff
sanctions for authorities with
oversight responsibilities who break
the law, who can even be sent to
prison,” he noted.
Although the mechanism is apparently
effective, the question is what
happens when an institution carries
out operations outside of the formal
economy and official channels, said
Lugo.
”That's when the problem starts.
Savers who today feel they have been
cheated (by Multibanco or Velox) were
lured in to deposit their money in
institutions that were operating
outside of the official legal
channels, and thus they enjoyed no
protection from those laws” - which
is something that those
account-holders should be aware of, he
said.
Hundreds of holders of accounts in
Multibanco chose to assume a greater
risk for the sake of higher returns,
”and that's how things went for
them, because once the institution was
taken over, they were unable to
recover their capital, not to mention
the promised interest payments,” he
stressed.
The prosecutors investigating the
Multibanco accounts have already
detected serious irregularities, like
the granting of loans to more than 50
associated companies, and the drawing
in of investment outside of the legal
system channels.
One of the businesses associated with
Multibanco was the Asunción
Investment and Financial Co. (Asifi),
an offshore financial body that
operated out of the bank's
headquarters.
Asifi was not authorised by the
Central Bank, nor was it registered
with Paraguay's tax authority. And
according to the documents seized by
the investigators, its offices were
located at an address in Montevideo's
financial district where there is
actually only a parking ramp.
Asifi took in large deposits, offering
an interest rate higher than the going
market rate in Paraguay, which enabled
it to make high-risk loans at high
interest, a source with the courts
explained to IPS.
Multibanco sent funds to the Cayman
Islands and Montevideo through
irrecoverable loans and evaded taxes.
The Central Bank take-over of
Multibanco also led to the liquidation
of the Parapiti finance company, which
had been purchased from the Velox
consortium after the debacle into
which it was dragged by its Banco Alemán,
the largest private financial body up
to that time in Paraguay.
The Velox group also had business
interests in Argentina, where its
Banco Velox was liquidated, and in
other South American countries.
However, its centre of action was in
Uruguay, through the Montevideo and
Caja Obrera banks and the illegal off
shore Trade and Commerce Bank (TCB)
based in the Cayman Islands.
Uruguayan Judge Pablo Eguren
determined that the Velox group was
headed by Jorge Peirano Facio, who
died last April at age 82 while in
preventive detention on charges of
fraudulent bankruptcy.
Peirano Facio served as minister of
industry and foreign minister in the
late 1960s, and in 1973 he spent three
months in jail for embezzling the
money held in the now-defunct Banco
Mercantil, in complicity with his
brother Juan.
His sons Jorge, José and Dante
Peirano Basso, who were also co-owners
of Velox, remain in prison awaiting a
ruling from a court of second instance
in connection with the same offences
as well as other charges.
Juan Peirano Basso, the fourth son of
Jorge Peirano Facio and the man
considered the real chief executive of
the group, remains at large. He has
been wanted for a year by the
Uruguayan and Paraguayan justice
systems, which have asked the
international police (Interpol) for
his capture. Courts in Argentina are
also after the clan.
The crimes that Juan and José Peirano
Basso and other directors of the Banco
Alemán are wanted for in Paraguay are
embezzlement and violation of trust,
misconduct during a crisis, and fraud,
the prosecutor handling the case,
Adolfo Marín, told IPS.
Uruguayan and Argentine judges are
also after José Rohm. He was quicker
than his brother Carlos, who was taken
into custody last year for fraud just
as he was boarding a plane in Buenos
Aires.
In May, Argentine journalists found
José Rohm living in a posh home in
Miami. But U.S. authorities have not
acted on the arrest warrants issued by
the two countries, because "he is
innocent until proven guilty, and
there is no risk that he will leave
the country,” in the words of U.S.
Ambassador in Montevideo, Martin
Silverstein.
The shady activities of the Rohm
brothers, which included granting
loans to ghost companies and fraud
concealed by complex financial
movements, went on for nearly a
decade, according to Uruguayan legal
investigators.
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