Six Ecuadorian journalists from the daily newspapers El Universo and El Comercio were part of the global investigation known as the ‘Panama Papers.’ Coordinated by the International Consortium of Investigative Journalists (ICIJ), reporters had access to more than 11 million documents leaked from Mossack Fonseca (MF), a company providing offshore services, i.e. the creation of companies in tax havens. According to the ICIJ, MF’s clients in Ecuador include the former President of the Central Bank, Pedro Delgado, and the current Attorney General, Galo Chiriboga.
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The case of Pedro Delgado. After it was discovered that he had falsified his qualification as an economist, Pedro Delgado, former President of the Central Bank of Ecuador and a cousin of Rafael Correa, fled to Miami in 2013, where he lives in luxury. In 2015, Delgado was sentenced to 8 years in prison for embezzlement after illegally granting $800,000 in credit to an Argentine citizen. According to the Panama Papers, Pedro Delgado obtained a mortgage for his home in Miami for $190,000 with the assistance of the Panamanian law firm. “In 2012 an MF client, Austrobank Panama SA, a banking subsidiary of Eljuri Group, one of the largest business conglomerates in Ecuador, granted a mortgage to Delgado and his wife María Verónica Endara. At the time, she was the Ecuadorian Vice-Consul General in Miami. The mortgage was for the purchase of a house in North Miami Beach.” The ICIJ goes on to state that “an agent of Austrobank emailed MF seeking legal advice. The first law firm MF approached declined to process the loan, but MF found another lawyer who processed the mortgage in Miami. Delgado has confirmed to the Univisión Network that he was the owner of the property in Miami.”
Galo Chiriboga’s house. During the selection process for the new Attorney General in 2011, the then opposition lawmaker Cléver Jimenez and his adviser, Fernando Villavicencio, denounced the case of a lawsuit filed by two German nationals against Chiriboga, who they accused of defrauding them out of a mansion located on the outskirts of Quito. As reported by the website Focus, the Function of Transparency & Social Control took no action on the matter. “In 1999, during the financial crisis, Chiriboga turned to the firm in order to create the company Madrigal Finance Corp. Documents obtained from Panama’s public register indicate that on December 30, 1999, MF established the Madrigal Finance Corp. trust to manage the Attorney General’s house.” According to Focus, the house is located in Quito’s area of greatest capital gain, has 2,500 square meters of land, a swimming pool, sauna, lighted courts, gardens with paved paths and a stone wall. In Chiriboga’s first statement of assets after taking over as Minister of Labour in 2005, the property was not declared. Instead, it was covered up as an asset of a company incorporated in Panama.
According to the Panama Papers report, Jimenez and Villavicencio’s allegations were correct: “in 1999 the lawyer Chiriboga was hired to collect a debt from a couple who had a house in the exclusive residential area of La Viña. In November of that year, Chiriboga registered Madrigal Finance Corp. in Panama. In December, in order to buy the house, the company provided Chiriboga with a notarized authorization granting him “full permission to set the price of the property.” Madrigal made the purchase for less than $2,800. The former owners, who estimated that the property was worth approximately one million dollars, sued Chiriboga for fraud. The court found in favor of Chiriboga, ruling that the couple had not demonstrated the real value of the property. Between 2005, when he was appointed Labor Minister, and today, as Attorney General of Ecuador, he has been inconsistent in clarifying his relationship with this company in his financial statement.” According to the ICIJ report, “Weeks before taking office as Attorney General in July 2011, Chiriboga’s wife Maria Victoria Espinal asked MF to stop listing her husband and others as administrators of Madrigal, to be replaced by proxies provided by the Panamanian law firm, although her husband remains the sole shareholder.”
Galo Chiriboga’s comments: “In 1999, when I was not a public official, Madrigal Finance Corp. was established. Madrigal has no economic or banking activity. It is just the owner of the property for which I am mentioned in the Panama Papers. The company Madrigal is reported among my assets prior to the date I assumed the role of Attorney General. I will demonstrate that the resources invested in this house are the fruits of my labor of many years. I have made it clear that the relationship with MF in Panama was purely professional for the collection of a debt.”
In an interview, the Chiriboga admitted that between 2005 and 2008 he did not declare the Madrigal property to the Comptroller because at that time it was in the hands of the trust. He also admitted that before assuming his current office, he requested that he no longer be listed as an administrator: “That is correct because a State Attorney General cannot be linked to a company of any kind.”
The Lava Jato case. The Panama Papers add information to the confession of Ricardo Trombeta, the whistleblower in the Lava Jato case. The ICIJ report states that Kingsfield Consulting Corp., a firm created in Panama and represented by MF, is part of the corruption network surrounding the Brazilian company Constructora OAS in Ecuador and Peru. The report has become part of the Lava Jato inquiry, which is investigating links between companies and political power in Brazil. In June 2015, Trombeta confessed that he had diverted $9.1 million from the contract of the Baba Multipurpose Project (PMB), via Kingsfield, by hiring a fake consulting firm.
The CWE case. According to the leaked documents, the Ecuadorian subsidiary of China International Water & Electric (CWE) simulated the outsourcing of consulting services to the Spanish company De Calidad Hispania SL and the Swiss firm YouSee AG for the management of the Cañar and Naranjal projects, as well as the Toachi Pilatón hydroelectric plant. This would have allowed CWE to take millions of dollars out of Ecuador without paying taxes. Research carried out by the newspaper El Universo reveals that Roberto Silva Legarda, a partner at Tributum Consultants, advised CWE to hire a consulting firm in Switzerland for $32.8 million, with the assistance of MF. CWE has public contracts in Ecuador worth $621.4 million. On April 12, 2016, the Attorney General and the Internal Revenue Service raided the consultants’ offices in Quito.