ICC Commercial Crime Service

Tackling Fraud in Guatemala

Make Transparency and Asset Recovery Part of Government Reforms

In the wake of two colossal government fraud scandals that captured international media attention, it appears that there may finally be a glimmer of hope for change in a beleaguered Guatemala, long plagued by fraud. Citizens from across the country have taken to the streets, calling for accountability, with an election looming in September. Public support for law enforcement efforts in a series of criminal investigations is high.

With public opinion in favor of broad reforms, leaders who care about good government and the country’s future should seize the opportunity for change.

Details of rampant corruption were made public following investigations by Guatemalan law enforcement authorities and the International Commission Against Impunity in Guatemala (CICIG). CICIG isan independent United Nations operation established in 2006 under an agreement between the UN and the Guatemalan government as part of efforts to investigate and prosecute secret groups responsible for violence, intimidation and corruption within the national government.

Investigations have revealed the existence of criminal organizations involving every branch of government, police, attorneys and members of the private sector. Between April and August of this year, more than 50 individuals have been subject to investigations in more than ten fraudulent schemes that exceed US$250 million.

Send a Clear Message That Citizens Matter
While the process will not be easy, citizens want serious reforms to guarantee a transparent and efficient use of public resources and access to information. They want to ensure that elected officials comply with ethics laws. They also want adoption of legislative reforms based on international standards that would modify our civil service regime, public contracting system, handling of the country’s annual budget and impose stricter regulation of the public ministry, general comptroller and tax administration.

Criminal prosecution of government officials of the highest rank is not enough. The governmentneeds to make every effort to return defrauded money to the people of Guatemala, sending a message that its citizens do matter.Public officials must then use the restored assets to strengthen law enforcement efforts so that criminals cannot operate with impunity within the government.

To address the millions defrauded from its citizens, the country must also adopt an enforcement plan that includes asset tracing and asset recovery through collaboration with international specialized agencies and professionals.

As asset recovery specialists and affiliates of ICC FraudNet, we often see the damage done by fraud in countries around the world and the impact on victims – both individuals and governments. ICC FraudNet is an international network of independent lawyers who are the leading civil asset recovery specialists in each country. We also see the success that a coordinated asset recovery network can bring to investigations, including restoring assets to victims.

Who are the Victims?
Victims of these fraudulent schemes are taxpayers and Guatemalan citizens, including the poor who lack access to education and healthcare. They deserve respect, dignity and restitution.

Investigations made public in April revealed that the state was defrauded by millions of dollars by tax agents taking bribes in exchange for lower customs duties.

The fraud at the Guatemalan Social Security Institute (IGSS) involved a $14.5 million contract for dialysis services that has allegedly caused the deaths of more than 20 patients covered by Institute’s health insurance. Prosecutors accuse public officials of bribery, trading in influence and gaining illegal commissions in connection with the contract awarded to a private firm.

According to a recent study presented by the Central American Institute of Fiscal Studies (ICEFI) and Oxfam Guatemala, in 2015, 6 percent of the approved budget will be lost by acts of corruption, equivalent to Q1.00 of every Q5.00. The study concludes that this loss violates respect for human rights, impeding opportunities for health, education, nutrition, housing, justice and overall quality of life for Guatemalan citizens.

Restoring Assets and Faith in Government
Assets can be traced and recovered in favor of the State. Traditionally, authorities have focused mainly on the prosecution of criminals and their punishment, not considering the full potential of civil lawsuits to recover stolen assets.

For example, in the case of former president Alfonso Portillo (2000-2004), who was extradited to the U.S., and in 2014 pleaded guilty to money laundering charges, tracing and recovery efforts are ongoing in jurisdictions including France, Switzerland and Luxembourg. Portillo has served his sentence, but the State of Guatemala has not recovered the lost funds channeled by Portillo through several financial institutions in America and Europe for the benefit of himself and his family.These funds are allegedly continuing to be used unchecked to finance Mr. Portillo´s run for congress.

With 21 resolutions being issued so far in 2015, civil-asset forfeiture efforts have recovered approximately US$4.5 million, which will be used to continue asset recovery efforts.Notwithstanding, the State should implement all available tools, through the General Prosecutor of the Nation (PGN) and Attorney General, to recover funds in favor of victims, including the State, its institutions (Tax Administration and Social Security Institute), and patients victimized by fraud at the Institute and other victims of financial fraud.

While Guatemala’s predicament may seem extreme, there is much for other countries to learn. Combattingand even preventing fraud and corruption requires an integral approach facilitated by a strong legal framework with the necessary tools -- technically savvy investigative authorities, a global approach to fraud and asset recovery, advanced technology, and most importantly, active citizens demanding accountability for the acts of public officials.

Rodrigo Callejas, partner with Carrillo y Asociados focuses on Insolvency, Fraud, Asset Tracing and Asset Recovery. He has actively participated in complex white-collar crime investigations in Central and South America, United States, the Caribbean and Europe.

The author gratefully acknowledges the assistance of Emanuel Callejas in preparing this article.





ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country.Our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit. FraudNet has been recognized by Chambers Global as the world’s leading asset recovery legal network.