Corrupt businessmen: Owners of Chile's political class
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Corrupt businessmen: Owners of Chile's political class

The CEOs of Penta Group, one of Chile’s biggest holding company, are facing trial for illegally financing political campaigns and committing tax fraud.

Last August, the former director of Penta, Hugo Bravo, along with Carlos Alberto Délano and Carlos Eugenio Larraín, founders of the company, were charged with tax fraud after a police investigation discovered that one of their employees was bribing an IRS worker to modify the company’s income to avoid paying the total sum of its taxes. It’s estimated that the quantity of money embezzled is anywhere between $420,000 and $1 million.

In the process, the investigation uncovered another scam. Authorities found that Bravo, Délano and Larraín had illegally financed the political campaigns of several members of the Independent Democratic Union (UDI) – an ultra right-wing party. The first people implicated were Senators Ena von Baer and Iván Moreira, former presidential candidate Laurence Golborne and Jovino Novoa, one of the founders of the UDI.

In the midst of the investigation, documents and conversations between the businessmen and the politicians were leaked to the press. These included a series of emails from Moreira to Bravo, asking the latter for money for “the last 1,000 meters” of the electoral campaign. One of the emails Moreira sent Bravo read,

“For the last 1000 meters, are there any more gas coupons? Let me know. A huge hug and my gratitude forever.”

Bravo answered, “That’s how it’s gonna be. I’ll write you two for five. Total 10.”

Even though the evidence is clear, the UDI’s immediate response was to deny all accusations. But at the beginning of January, the smokescreen was lifted when Moreira and von Baer admitted to asking Délano, Larraín and Bravo for money to finance their senatorial campaigns. After their confession, the president of the party, Ernesto Silva, held a press conference to publicly apologize for the scandal. Some Chilean citizens, however, are calling the UDI just another branch of the Penta Group.

Pentagate comes at a key time in Chilean politics, when changes to the electoral system and its financing mechanisms are being discussed in Congress.

An unbiased lobby

UDI politicians, however, are not the only ones accused of asking Penta’s CEOs for money. The name of Andrés Velasco, a former pre-presidential candidate for the left-wing coalition, has also been mentioned.

But Velasco stands out for a slightly different reason; he was paid almost US$32,000 for a “private consultation” for Délano, Bravo and Larraín on national and international economy and public policies. This lunch meeting occurred right in the middle of the primary elections in June 2013. According to Velasco, he was paid for offering a “professional service.”

“In this case, it was a private presentation in front of the chief executives of the company and it was paid, as the market stipulates, for a person with my professional qualification and academic experience,” Velasco said.

It has not yet been proven that the money given to Velasco by the Penta executives was used to finance his campaign, which is why his political advisors continue to insist that his case is completely different from that of the accused UDI members. Nevertheless, Velasco has yet to explain what his former campaign manager, Juan José Santa Cruz, was doing in the meeting.

What happens now

It will take a long time to sort out the legal measures and a trial might last months. As the case develops many other incidents of this type have been uncovered, and it sometimes seem that no one in Chile’s political sphere is safe.

A few weeks ago, it was President Michelle Bachelet’s turn in the spotlight. In a local newspaper, former Chilean chancellor in New York Heraldo Muñoz admitted having participated in a dinner party on a yacht, along with national and international figures, to help raise money for Bachelet’s presidential campaign. The people invited had to contribute $1,000 to the campaign in order to enter the private party.

While such campaign fundraising events are normal in many countries, Chilean law clearly states that “no contribution to electoral campaigns can come from foreign naturals or legal persons, with the exception of those made by foreigners legally authorized to practice their right to vote in Chile.”

Muñoz later changed his statement, saying only Chileans were present at the dinner party and thus all contributions were legal. Since the law also allows “reserved” or anonymous donations, it remains clear as to whether the funding was legitimate or not, but some in Chile say that the accusations are a tactic of the UDI to divert attention from its own embarrassing situation.

Members of the UDI demanded Bachelet come clean about the funding of her 2013 presidential campaign, while Bachelet has made statements saying that the campaign was funded transparently. Communist Party Deputy Camila Vallejo, a former student leader, said on her Twitter account that “the UDI is now applying their transposition policy: if you can’t deny bad news, invent others to distract them. ”

The latest CEP public opinion survey found that 57 percent of Chileans do not identify with any political party, a growing trend that could be a response to these increasingly public examples of political corruption.

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