La Línea corruption case

"Pacific demonstration" in Guatemala City, on April 25, 2015 after the first corruption allegations against the Pérez Molina Administration.

La Línea corruption case ("La Línea" meaning the "telephone line" used by the corruption ring) began in Guatemala on April 16, 2015, when the International Commission against Impunity in Guatemala (Spanish: Comisión Internacional Contra la Impunidad en Guatemala, CICIG) and the State procesecutors accused a number of politicians within the Administration of President Otto Pérez Molina of having set up a customs corruption ring with the help of high-ranking officials within the tax and customs administration. Several demonstrations ensued, calling for the resignation of Otto Pérez Molina and his Vice-President, Roxana Baldetti. Among the accused were retired captain Juan Carlos Monzón (then Vice president Roxanna Baldetti's private secretary) and the directors of the Tax Administration Superintendency (Spanish: Superintendencia de Administración Tributaria, SAT), entity analogous to the United States Internal Revenue Service. The situation became very difficult for Pérez Molina's regime, when his then vicepresident Roxana Baldetti quit in early May to the joy of thousands of demonstrators.

On 20 May 2015, CICIG and the Guatemalan Chief Prosecutor, Thelma Aldana, released another high scale corruption scandal, when they presented the Guatemalan Social Security Institute (Spanish: Instituto Guatemalteco de Seguridad Social) -IGSS- case in which the board of directors had complotted to assign a renal facility service to an external company that did not comply with the minimal requirements and caused the death of numerous patients. Investigations from both entities showed that the contract had been granted by heavy bribes to some of the board members, specially IGSS President Juan de Dios Rodríguez, former Pérez Molina private secretary. All the board members were sent to prison. And a few weeks later, yet another corruption scandal broke up when another former Perez Molina's private secretary was sent to jail accused of being involved in a high stakes case with energy company Jaguar Energy.

On 21 August 2015, prosecutors and CICIG asked for the former vice president's Roxana Baldetti capture and asked to start the impeachment process for president Otto Pérez Molina for their involvement in "La Línea case". In a press conference, CICIG chief, Colombian prosecutor Iván González, reported that during the procedures carried out on 16 April 2015, they discovered that Juan Carlos Monzón was not La Linea mastermind, but that both the president and the vice president, themselves, were the masterminds. Furthermore, CICIG even implied that they might have been involved with the customs ring even before they were inaugurated on 14 January 2012. Baldetti was sent to prison to the Women Preventative Detention Center, after she had spent a few days in the VIP jail in the Army's Matamoros Fort.

Events came to a climax when, during Baldetti's legal hearing, an intercepted phone conversation was played in which one could hear the voice of President Perez Molina contacting the SAT director and asking for Human Resources changes to, allegedly, accommodate the smuggling network. A National Strike was called in response to the release of that phone conversation, and finally, on September 1, Otto Pérez Molina was impeached and stripped of his immunity; he resigned on September 2 and was put in custody on the 3rd.

Introduction

The "Sindicato" and the «Cofradía»

In the 1970s, generals Manuel Antonio Callejas and Francisco Ortega Menaldo ―then-president Carlos Manuel Arana Osorio's son-in-law― created a powerful organization parallel to the Ministerio de Finanzas Públicas (English: Public Finances Secretariat) that the Guatemalan Army authorized allegedly to detect weapon smuggling for the guerrilla's during Guatemala Civil War. In reality, though, this organization was heavily used for smuggling and other illicit activities and from it two powerful groups emerged: the "Sindicato" (English: "Sindicate") and the "Cofradía" (English: Brotherhood).

Moreno smuggling ring

See also: Álvaro Arzú and Alfonso Portillo

Guatemala Supreme Court building

During Álvaro Arzú presidency (1996-2000) the smuggling ring was attacked when the National Prosecutor found evidences that implicated several high-ranking Army officers, among them general Luis Francisco Ortega Menaldo, colonel Salán Sánchez, general Efraín Ríos Montt, coronel Napoleón Rojas Méndez, major Byron Barrientos, and Mario Guillermo Ruiz Wong. Even then presidential candidate Alfonso Portillo was mentioned. According to the legal procedures that took place between 2000 and 2002, the ring controlled container transfers, imports prices, and the type of merchandise that was to be moved; the ring would take control of the containers and would not release them until after a hefty bribe was paid. None of these names immediately came to public light, and a middle operator named Alfredo Moreno was accused as being the ring leader. After Portillo's victory in the 2000 elections, the new Attorney General, Rodolfo González Rodas, dismantled the unit in charge of Moreno's case allegedly due to the ring's connections to Portillo and Ríos Montt -leaders of Portillo's political party. Finally, in 2001, Alfredo Moreno paid a million quetzals jail bond and was released.

Perez Molina's presidency

Retired general Otto Pérez Molina, president of Guatemala from 14 January 2012 to 3 September 2015.

Perez Molina was elected president in the 2011 general elections and shortly after his inauguration privatized the Empresa Portuaria Quetzal (English:Quetzal Harbor Enterprise) in Escuintla on Holy Wednesday of the first Holy Week under his tenure; the Holy Week is a highly respected holiday in Guatemala and his move prompted several complaints about its legality. Later on, Baldetti appointed Claudia Méndez Asencio -a close friend of hers- as SAT Customs Chief and only two months later, he intervened in the Superintendencia de Administración Tributaria and placed military personnel in key points in customs allegedly to increase tax collection and prevent smuggling.

When President Perez Molina took office in 2012, Vice President Baldetti Elías brought a retired general, Luis Francisco Ortega Menaldo, to work with her in the vice president's office, thus acknowledging their close relationship. Ortega Menaldo has been considered as former president Carlos Manuel Arana Osorio protégé, since Arana was his father-in=law and helped get Ortega to the high-ranking military intelligence in the 1970s. Ortega Menaldo, then a captain, was trained in the Telecommunication Regional Center, a.k.a. "La Regional", during Arana's government (1970-1974). In 1980 he was appointed as chief of the newly created Department of Security and Special Investigations of the Public Finances Secretariat, which allegedly was the origin of the smuggling ring. When Vinicio Cerezo was elected president in 1985, then Secretary of Defense, Héctor Gramajo, appointed him as chief of Military Intelligence in 1987, while general Manuel Callejas ―the "Cofradía"'s boss― was appointed as Defense Chief of Staff. Gramajo used them for support against the Army's hard line officers who worked closely with the extreme right wing party "Movimiento de Liberación Nacional" -MLN- and thus stop cup d'état attempts agains president Cerezo. With CIA help, Ortega Menaldo found the Military Intelligence School in 1987, and worked closely with the DEA.

Thus, the two executive leaders ―Pérez Molina and Baldetti Elías― bought an alliance to the main military groups that formed during the Guatemala Civil War: "Sindicato" and "Cofradía". But the presence of Luis Mendizábal ―owner of Emilio's boutique, the alleged ring headquarters― confirmed that yet a third group also had a strong position in the government: that of retired general Marco Tulio Espinosa Contreras, an Air Force general, who raised his profile during Alvaro Arzú presidency.

Pérez Molina's government was faced with a constant fiscal deficit since 2012, missing SAT's collection goals every single quarter; customs taxes dropped in 2013 from 15,800 million to 15,300 millon of quetzals -Guatemalan currency, and was even lower in 2014; the same happened with sales taxes over imports. The fiscal gap in those years was as high as 7,000 millon of quetzales, which had been covered by treasure bonds and international loans, thus increasing public debt. The financial crisis forced the Government to even create new phone, cement and mining taxes to balance its budget for 2015.

On September 2014, retired captain Byron Lima Oliva, who was already in prison with a 15-year sentence after being formally accused of being the material assassin of bishop Juan José Gerardi, was accused by CICIG of being the one that in fact controlled the Pavoncito prison where he was committed, and that he even practically had control of the whole Guatemalan jail system. Investigations showed that Lima Oliva came and went as he pleased in armored SUVs and police escort; when he was apprehended outside the prison and taken to the Supreme Court building to testify along with other accused, reportedly he said several times that he was a personal friend of president Otto Pérez Molina. It was not the first time he was captured outside his prison cell: in February 2013 he was captured in a SUV outside prison.CICIG accused Lima Oliva of creating a multimillion-dollar empire by controlling the prisons and charging up to US$12,000 for selling prison transfers.

In early April 2015, in discussions with the United Nations about extending CICIG's mandate for another two years, both Pérez Molina and Baldetti were adamant that the International Commission was no longer needed in Guatemala.

Investigation

On April 16, the International Commission against Impunity in Guatemala accused a number of politicians within the Administration of President Otto Pérez Molina of having set up a criminal network within the Tax and Customs Administration. At the time, it was believed that La Línea network was headed by such people as Juan Carlos Monzón Rojas (personal secretary to Roxana Baldetti) and Omar Franco (Chief Officer of SAT, the Superintendencia de Administración Tributaria de Guatemala).

From May, 2014, to February, 2015, this corruption ring dealt with at least 500 containers, benefiting from lower customs duties in exchange for very significant bribes, thanks to its control of the customs offices of Puerto Quetzal and Santo Tomás, as well as the central customs administration.

The name of the corruption ring, La Línea - "the (telephone) line" - comes from the phone number that any import company could call to ask for reduced customs duties. The network involved dozens of people, within the tax and customs administration as well as within the Otto Pérez Molina Administration itself.

Suspects

On 16 April 2015, a total of 23 operatives with 250 Civil National Police officers, besides CICIG and public prosecutor officials, results in an extensive information collection and 20 captured, among them SAT personnel, customs agents and entrepreneurs. Since the early hours, police started the operatives in Guatemala City and some rural areas.

The captured suspects were:

• SAT personnel:
  • Álvaro Omar Franco Chacón, SAT Chief Director;
  • Sebastián Herrera Carrera, Human Resurces manager;
  • Anthony Segura Franco, SAT union general secretary;
  • Karla Mireya Herrera España, Central Customs building manager;
  • Gustavo Morales Pinzón, South division manager;
  • José Rolando Gil Monterroso;
  • Melvin Gudiel Alvarado, administrator; and
  • Carlos Enrique Muñoz Roldán, former SAT Chief Director
• External ring:
  • Adolfo Sebastián Batz;
  • Carlos Ixtuc Cuc;
  • Geovanni Marroquín Navas;
  • Julio César Aldana Sosa;
  • Mónica Patricia Jáuregui;
  • Salvador Estuardo González;
  • Osama Ezzat Aziz Aranki;
  • Byron Antonio Izquierdo;
  • Francisco Javier Ortiz Arriaga;
  • Julio Estuardo González de León;
  • Herbert Francisco Cabrera;
  • Miguel Ángel Lemus Aldana.

According to Iván Velásquez, CICIG's Chief Commissioner, the criminal network was being investigated since May 2014, when they got tips that there were connections between importers and customs officers, who found ways for the former to pay fewer taxes. Velásquez said that this option was through a telephone contact, known as "La Línea", which was given to the importers. "La Línea" operated mainly in the major harbors and the central customs building. Velásquez did not specify the total amount of the embezzlement but it said that ring charged between 20,000 and 100, 000 quetzals per container that it handled. Finally, informed that the intercepted phone conversation showed that from the 40% of tax paid, 30% came from bribes, to decrease the amount of taxes that the importer had to pay. "La Línea" could have embezzled more than 2 millones quetzals per week in bribes. And there could be more than a thousand companies that used "La Línea" to avoid paying high taxes, and they are under investigation as well.

Alleged ring leaders: Otto Pérez Molina and Roxana Baldetti

Main articles: Otto Pérez Molina and Roxana Baldetti

Initially, Juan Carlos Monzón Rojas was accused of being the La Linea ring leader. Monzón Rojas would be linked with the Panamanian company Edengrove International, which was created on April 2011, according to Panama Public Registry. On May 2011, it was registered in Guatemala. Víctor Hugo Hernández is president the board; Hernández is also a founding associate of Inversiones y Proyectos Marbella, S.A. and Arrendamientos, Servicios y Proyectos, S.A., both Guatemalan companies that on May 2013 bought 58% of Corporación de Noticias, S. A. stock, a company that owns influential Guatemalan newspapers Siglo 21 and Al Día, for 25 million quetzals. Estuardo González, Corporación de Noticias president, is also one of the accused in La Linea. Later on, González would tell the complete story during trial: both companies were a front that he helped build for former vice president Baldetti to gain control of those influential newspapers. In December 2014, Guatemalan newspaper ElPeriódico had published that Monzón bought a lavish home in an exclusive neighborhood in Guatemala City for US$850,000.

On 22 April 2015 it was made public that Monzón Rojas' company, Canchas Deportivas S. A., had gotten up to 13 Government contracts worth several million quetzals and that the company was in operation since 2007, getting contracts from official sports federations in the country, although Monzón had stepped down from his company when he was appointed as vice presidential private secretary. When former SAT director Carlos Muñoz, was indicted, Guatemalan prosecutors showed an intercepted phone conversation between him and Juan Carlos Monzón, where they discuss possible personnel changes in SAT.

On 21 August 2015, CICIG the Guatemalan attorney general offered a shared press conference shortly after issuing a warrant for the arrest of former vice president Roxana Baldetti and asking for president Pérez Molina's impeachment; they informed the press that they had gathered evidence during the 16 April operations which linked both to La Linea, and they were most likely the leaders of the ring. On 17 April 2015 they had already presented an intercepted phone conversation in which some of the other accused were talking about "el Presidente", without saying his name, who asked them to open four bank accounts since CICIG already had too much information; Beside "el Presidente", the nickmanes "la R", "la R2" and "la Señora" were heard in those conversations, a person who had ordered personnel changes in SAT. At this point in time there were strong suspicions that both of these people were Pérez Molina and Baldetti, but CICIG did not ask for their arrest then because they did not have any solid proof against them.

On 21 September 2015, ElPeriódico reported that the 16 April operatives in Salvador Estuardo González Álvarez —a.k.a. "Eco"—, thousand of documents found revealed that besides "La Línea" there was a network of companies linked to Roxana Baldetti, which moved millions of quetzals for several reasons. Due to this, González could cooperate with the prosecutors to testify against Otto Pérez Molina and Baldetti. The same day, Guatemalan Supreme Court withdrew immunity from judge Marta Sierra de Stalling, due to her suspicions connection to the "Impunity Law Firm" and she was captured the next day.

"I was told that the project was to improve customs tax collections and that it was directly managed by the President. Let me tell you, honorable judge, that I was very proud of supporting help with tax collection improvements and a person like the President. The project was in Quetzal and Santo Tomás Ports and that is where I was told that the increase had to happen through some money that was asked through the customs officers. It was a bribe. I had to keep control, made a table and placed the code 1 and 2 instead of using president and vice president.»

Salvador Estuardo González, Eco
28 September 2015

Just like ElPeriódico had predicted on 28 September 2015, during the second part of the trial against the La Linea members, Salvador Estuardo González —a.k.a. "Eco"— voluntarily offered to testify, an offer which was initially opposed by the defense attorneys who argued that there were three accused missing. The judge rejected their objection. González--who said that he was willing to have a face-to-face with any other accused--methodically exposed a series of data that seriously incriminated several of the accused:

1. Baldetti was the first one that González met, and he helped her by setting up and managing seven companies that had not been operative for two years.
2. González was the one that created the codes "el 1" and "la 2" for the President and Vice president, respectively.
3. González kept control of the money that was embezzled.
4. 50% of the embezzlement was sent to both Otto Pérez Molina and Roxana Baldetti Elías.
5. Claudia Méndez Asencio was indeed aware of what was going on and even joined González in several meetings about it. Once she was appointed as Customs manager she was notified of what La Línea was and that she was getting 5% of the profits.
6. The United States Embassy was aware of the "collection tax project" and the work done by Javier Ortiz —a.k.a. "Teniente Jerez"—.
7. Gonzalez got 2% of the profits.
8. When "La Linea" was restructuring, González Álvarez stopped working for it and went back to work for Baldetti's seven companies, but he also started doing the same with four companies of former President Otto Pérez Molina, whom he met every Monday in an office located at 16 street, zone 10 in Guatemala City, where they were joined by the President's daughter, wife and daughter-in-law.

On 29 September 2015 González continued testifying, and was cross questioned by both prosecutors and defense attorneys, standing firm by his version of events and revealing more details:

• 61% of the bribes were made in cash, while the remaining 39% was in charge of the external network.
• González emphasized that he did not charged a penny for his services as "manager"; however, he did confess that he initially got 2% of the embezzled funds and a 5% later on.
• González allegedly met with former President Pérez Molina's daughter -who he called "Lissett"-, daughter-in-law -"Luisa"- and wife -Rosa Leal de Pérez-; these women allegedly got government contracts for their company Grupo Pixel S.A..
• González was the link between SAT and Pérez Molina to keep control of "La Linea", per Juan Carlos Monzón's request.
• González kept personal and email contact with Baldetti, who was coded in his cell phones as "2" or "MyLine".
• Customs personnel was chosen by Javier Ortiz -a.k.a. "Teniente Jerez"-, and then González coordinated with SAT Human Resources manager to settle the appointments. All the appointed personnel had years of experience with customs and tax law.
• Claudia Méndez Asencio allegedly coordinated González access to the SAT building eight floor through a private elevator.
• While "La Linea" was operative, Pérez Molina, Baldetti Elías, Osama Aziz Aranki, Javier Ortiz —a.k.a. "Teniente Jerez"— and Juan Carlos Monzón, used cutting edge technology untraceable phones.
• González used the same kind of phones to work at Siglo 21, a newspaper that he controlled at the time.

González also explained in detail how Roxana Baldetti's front companies worked, a version that remained unaltered after the lengthy questioning of lawyers and procesutors: González was hired to manage seven companies, and that there were other ones that were controlled by Víctor Hugo Hernández, Juan Carlos Monzón's trusted employee. González explained that his job was to make sure that all these front companies had offices that resemble the capital that they allegedly had and the servicies that they were supposed to offer; he also looked for mock stockholders and board members that fit the profile for the supposed type of companies.

Regarding PROINVER, registered officially under Baldetti's name, González told that he did not controlled it, but that he cooperated with it making projections for its dividends, projections that were met quarter after quarter. Baldetti was allegedly always on top of everything, setting up meetings with González and Hernández at the headquarters of her front companies. Guatemalan newspaper Prensa Libre researched several of these companies and found the following:

"The companies revealed by "Eco" [González] are: Publihaces, Publimerc, Corporación Urma, La Montaña Ecológica, Representaciones Alliancee, SA., Grupo Agro Industrial 2011, S.A. and Serpumer, S.A. Of them, Prensa Libre found for in the government records.
González Álvarez said that he made forecasts and projections of what the companies should falsely report as profits every quarter, thus making Baldetti's economic profile believable.

The first capital injection occurred on 23 August 2013, when Herbert Arturo Jacobo Dubón, Grupo Agro Industrial 2011, S.A. president of the board, added capital for Q50 million. The company had been opened on 2 June 2011 with an initial capital of only Q5,000.

The second capital injection occurred on 10 April 2015, and it was for Representaciones Alliancee, S.A., which from Q5,000 initial capital increased to Q18 million. The company was opened on 20 December 2006. Since then, this company has purchased real estate linked to Baldetti and her family, among them a warehouse next to La Aurora International Airport.

[...] The four companies that Prensa Libre found share attorneys, board members and addresses; they are all located at Avenida La Reforma 1-50, El Reformador building, fifth floor, zone 9 de la Ciudad de Guatemala.

Prensa Libre
30 September 2015 »

Aftermath

"I quit because I am not willing to lead a project whose only objective is to bring members of Congress with the mission of protecting obscure interests and to look for impunity spaces for corrupt government officials close to vicepresident Roxana Baldetti".
"I do have talked with [former president] Alfonso Portillo, as we share the vision for the Nation, with some difference on how to implement it".

Alejandro Sinibaldi former official presidential candidate.
19 April 2015

After "La Linea" was discovered on 16 April 2015, both Perez Molina's political party and Government began to break down. On Sunday 19 April 2015, Partido Patriota founder and presidential candidate, Alejandro Sinibaldi, quit the party along with tenths of majors and about 20 congress members, and it was speculated that he could run for a different party. His reason for quitting, according to Sinibaldi, were:

• The two contracts granted to Israeli company M Tarcic Engineering Ltd. for 137.8 million quetzals to "clean" Lake Amatitlán.
• "La Linea" case
• The hospital crisis that the country is submerged in
• The ill-advised interventions of the country's customs.

That afternoon, then-vice president Roxana Baldetti, after returning from South Korea in a press conference informed that was sorry to hear what happened with Sinibaldi and that they had always had some differences, but that she did not know how upset he was against her.

During the same press conference, Baldetti emphasized that she was not part of the millionaire fraudulent ring; she showed videos from earlier in the year in which she was shown saying that the offices under her in the Government were already investigating structures like La Linea, a time when Juan Carlos Monzón was her closest advisor. According to Baldetti, this was the first time that they travelled abroad together and that it was her who told her now former private secretary about the investigation against him and asked him to resign. Bombarded with journalist questions about her whereabouts, unknown for the last 48 hours, and upset Baldetti turned around and left her own press conference.

In July 2015, after the Jaguar Enegy scandal arrests, the alleged involvement of several members of Congress in bribes and money laundering and presenting a detailed report on how the Gutaemalan political parties financing works -mostly related to illicit activitivies-, CICIG demanded the Guatemalan Supreme Court to act accordingly; however, on 28 July 2015, the Supreme Court issued a statement in which it denounces the International Commission demands. In response, Guatemalan newspaper Diario La Hora reveals that the thirteen judges of the Supreme Court were designated thanks to the alliance between the official Partido Patriota and the main opposition party, Libertad Democrática Renovada -LIDER, a party that was almost positive that it was going to win the 2015 presidential elections-.

Guatemalan Supreme Court election votes in Congress

Name	Position	LIDER votes	Patriota votes
Josué Felipe Baquiax Baquiax	Supreme Court president	41	36
Silvia Patricia Valdés Quezada	Judge I	49	47
Nery Osvaldo Medina Méndez	Judge II	47	36
Vitalina orellana y Orellana	Judge III	38	41
Delia Marina Dávila Salazar	Judge IV	41	37
Douglas René Charchal Ramos	Judge V	39	38
Sergio Amadeo Pineda Castañeda	Judge VII	39	37
Blanca Aída Stalling Dávila	Judge VIII	39	39
Silvia Verónica García Molina	Judge IX	38	39
Vladimir Osman Aguilar Guerra	Judge X	38	40
Nester Mauricio Vásquez Pimentel	Judge XI	41	31
Ranulfo Rafael Rojas Cetina	Judge XII	35	38
José Antonio Pineda Barales	Judge XIII	35	36

External links

• Template:Es Desmantelan red de defraudadores, on prensalibre.com (accessed on September 6, 2015).
• Template:Es CICIG: Otto Pérez participó en "La Línea" (accessed on September 6, 2015).
• Template:Fr Guatemala: le président au cœur d'un réseau de corruption, selon la justice, on rfi.fr (accessed on September 5, 2015).
• Template:Fr Guatemala : accusé de corruption, le président Pérez démissionne, on lesechos.fr (accessed on September 5, 2015).
• Template:Fr Guatemala : démission du président, on humanite.fr (accessed on September 5, 2015).