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Conflicts of interest

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By Leandro Renou
For the Herald

After promising on the campaign trail to tackle corruption, Correogate has put President Macri under huge pressure — but he is far from the only politician in his administration to blur the lines of private and public

The media and judicial whirlwind unleashed last week, when the Post Office’s multi-million-peso debt deal agreed with the state was revealed, has revived a constant issue that’s faced the Let’s Change colition since it came to power — namely, the conflicts of interest between officials and the private sector.

This controversy involving the national mail service (which belongs to the Macri family) takes this conflict to new heights, becoming a major problem for the Mauricio Macri administration. Yesterday, the president was forced to announce he would try to annul the agreement the government had reached with his family’s company.

According to specialists consulted by the Herald, the case is a landmark, going far beyond the Macri presidency and raising questions range from legal procedures to crushing basic ethics. Correogate thus marks the zenith of a series of irregularities from a technical viewpoint.

Last Tuesday, before Macri’s decision to annul the controversial deal, Cabinet Chief Marcos Peña laid out the government’s line.

“We don’t think there has been any conflict of interest, everything has been done according to the law,” Peña said at a press conference. “The president did not intervene, that was done by the legal directors of the Communications Ministry.”

At the same time Communications Minister Oscar Aguad recognised that he did not consult the Anti-Corruption Office over a case which he considered to be limited to his brief. There were also assurances that the auditor-general would be consulted, including in the auditing of the handling of the Post Office by Kirchnerite and Peronist officials dating back from 2002.

Those who have been investigating overlapping interests for a while stressed to the Herald this week that there are two basic problems that arise and can be identified from this scenario of incompatibility between public service and private business. On the one hand, the vague text of the national Public Ethics Law and on the other, the historic tendency of the Anti-Corruption Office (OA) to line up alongside the government of the day, instead of operating as an independent unit.

Revolving doors

Agustín Carrara directs the Research Centre for the Prevention of Business Crimes (Centro de Investigaciones y Prevención de la Criminalidad Económica or Cipce). Last year he attended a hearing for the appointment of officials for the Unidad de Información Financiera (UIF) money-laundering watchdog, to challenge the choice of executives who are interwoven with the private banking sector. This was one of the first unresolved cases of conflict of interest under the Macri administration.

“When we challenged (them),” says Carrara, “we phrased it as what is known in the United States as the problem of the ‘revolving door,’ which refers to people passing from the private sector to the public, where they are supposed to control or supervise the same people for whom they formerly worked.”

In the eyes of the specialist, “the first thing needed is a good system of preventive control, well ahead of any court investigations, control which can only come from the OA. In the case of the Post Office, there could be different types of crime. The charge was influence-trafficking but you can also find incompatibility, malfeasance and even abuse of authority. As there is no actual crime of corruption, all these offences are breaches of public administrative ethics under the Criminal Code.”

When Laura Alonso — a historic PRO militant from the word ‘go’ — became head of the OA, she encountered a scenario plagued with incompatibilities and conflicts of interest among the new officials. At the close of 2016 she already had 31 cases of officials suspected of incompatible private business interests, 17 of whom had presented themselves spontaneously to ask what they should do.

The most important was Energy Minister Juan José Aranguren, who took office while retaining a large packet of shares in the Anglo-Dutch oil company Shell, whose Argentine branch he headed for over a decade. Aranguren ended up selling his shares, according to his own account of events.

But he was not the only case. The former Finance minister, Alfonso Prat-Gay, became Macri’s top economic dog while retaining positions as a private business consultant for many companies, as well as having administered the inheritance of one of the biggest fortunes in the country (that of Amalia Lacroze de Fortabat) while a deputy. Previously, when he was the late Néstor Kirchner’s Central Bank governor, he held shares in two firms, APL Economía and Tilton Capital. He resigned from APL of his own free will but kept the rest. Almost all his ministerial subordinates came from the boards of directors of these two firms (APL and Tilton), including the current Finance Minister Luis Caputo, another former bank executive.

There are also other examples missed by the OA, such as the political interference of Deputy Cabinet Chief Gustavo Lopetegui (a former LAN CEO) in aviation policy, including his decision to shun Aerolíneas Argentinas (AA) head Isela Constantini’s recommendation against opening up the market. That position ended up costing her her job and AA was left defenceless in the face of greater opportunities for other major airlines including Avianca and LAN itself. Tacit favours stranded in the text of the law.

Friends with benefits

Furthermore, there are cases of business being awarded directly or indirectly to presidential relatives or friends, such as the public works tenders going the way of Nicolás Caputo and the public works contracts won by Macri’s cousin, Ángelo Calcaterra. All these cases fall under a conflict of interest, say the specialists. But the problem is the OA’s interpretation. Indeed official sources confide that Laura Alonso knew about the conflict of interest with the Post Office several days before charges were laid. Both Modernisation Minister Andrés Ibarra and current trustee Jorge Irigoín were Post Office directors under Franco Macri in the years of the debt conflict.

Natalia Volosín, a trained lawyer and an expert in business crime, introduces another pivotal element of the Post Office debate — whether it is a question of crime or ethics.

“The ethical question is not divorced from the legal in the sense that there is a Public Ethics Law regulating conflicts of interest (Law 25.188, from 1999, which also governs sworn statements). The problem is that the regulation of conflicts of interest does not meet even the most minimal international standards,” she says.

“Many cases which are conflicts of interest for everybody else do not exist under this law because it is bad,” Volosín added, going on to address the Shell case.

“(It’s) tricky with grey areas. I think that there was one way of interpreting the norm which was more favourable to the state and another more favourable to Aranguren. And the OA picked the one more favourable to Aranguren.”

The explanation is concrete and the more so when observing the OA’s previous record. A detailed Cipce report from 2014 shows up only one case, assures Volosín. The reference is to “Resolution No. 83,” analysing the situation of a Central Bank director who had previously been director in the ABE specialised bank association. ABE, among other functions, “represents groups linked to defending common interests” yet the OA considered that “direct functional conflict only exists with ABE and not the entities making up that association.” Something similar occurred with the Aranguren case, where the OA presumed that the mere fact of holding shares was not a basis for assuming favours to that firm.

The legal expert adds: “What the law considers a conflict of interest is only a very small part of what technically is a conflict of interest. If you look up the manuals of the OECD (Organisation for Economic Co-operation and Development) or Transparency International, either of those will show the cases of both Aranguren and the Post Office to be clear-cut conflicts of interest. As well as Farmacity owner Mario Quintana, now deputy Cabinet chief. The usual rule for conflicts of interest is that if it looks like one, it is one. Because in reality what are considered conflicts of interest are also the potential and the apparent.”

The case of UIF is striking. Its two heads, Mariano Federici and María Eugenia Tallerico, both came from the private banking world where they advised private companies on money-laundering. More precisely, Tallerico had advised the British bank HSBC, which is involved in cases of money-laundering, capital flight and tax evasion in different countries. Just that precedent should have sufficed to challenge those appointments but they received a green light.

“There should be a competent, suitable and independent organism,” insists Volosín, which is something we don’t have because the OA is none of those three things. It could tell officials what they have to do in order not to fall into conflict but first those officials have to come forward. Almost nobody knows what a conflict of interest is, nobody asks the OA and the OA is not independent.”

Presidents and their conflicts

Mauricio Macri is not the first president emerging from the private business world to find severe conflicts of interest with his public role. Chile’s former president Sebastián Piñera created a blind trust to deposit US$400 million from his Chilean investments. But just like the one created by Macri for his offshore companies, it was incomplete.

Alfredo Popritkin, the head of Contadores Forenses who was an accountancy expert for the Supreme Court, considers that “with the Macri government in particular, where many of its members come from private activity, the clash of interests becomes much more relevant and is more delicate, starting with Macri himself.”

“When he took office and created the blind trust, he showed the enormous conflict of interests he has, which he has not resolved well,” Popritkin continues. “This gave him only a very partial way out, he only included around 40 percent of his assets and left out the most delicate pertaining to future business, such as the purchase of land in Salta and Buenos Aires.”

The other example is Donald Trump, the real-estate tycoon who delegated some interests to direct relatives, many of whom influence the United States’ current Cabinet.

On this point, Volosín affirms that “in the case of president it is very difficult to resolve conflicts of interest, as Trump is now showing in the US.”

“How do you resolve these frequent conflicts in general? You take the official away from decision-making but you can’t do that with a president — that is why we should think very carefully when we vote if those who are going to direct public affairs are people closely linked to the private sector,” she added.

The expert also recalled that Macri’s blind trust was headed by the government’s notary-general, a person directly linked to the president. She also cites the Kirchnerite experience: “Cristina (Fernández de Kirchner) awarded public works to the best friend of her family and that was not illegal, the law permits it. It is only a question of direct competition,” she explained.

Carrara points in the same direction when he says that “in Aranguren’s case, there was no direct responsibility but there was influence and favours to the company of which he was a shareholder. Those are the grey areas.”

Popritkin concludes that there is one supreme snag — the scant preparation of the court system for preventative action.

“The courts act on crimes which have already happened. If something is a crime, they will investigate. But they have a huge problem in the lack of trained investigators — there are only handful of cases they will touch. And the lack of funds makes it worse,” he said.

@leandrorenou

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