Foreign Policy: Only Criminals Can Clean Up Argentina’s Corruption

Tuesday, November 20, 2018

In August, Argentina’s leading newspaper, La Nación, published an explosive report on public corruption. The newspaper obtained notebooks from a former government chauffeur that detailed tens of millions of dollars in bribes the driver delivered over a decade. Bribery was an open secret during the administrations of presidents Néstor Kirchner and Cristina Fernández de Kirchner, but never before had such voluminous evidence publicly emerged.

As Argentines pored over the diaries, the “notebooks” scandal raised expectations that at last, the jig was up for the country’s thieving elites. The notebooks not only implicated two former presidents and their top advisors, but also senior executives from some of the country’s largest corporations that had benefited from government contracts. Recent anti-corruption movements had touched nearly every other corner of the Western Hemisphere, including Brazil’s sprawling Odebrecht probe that spread throughout Latin America in the wake of the Paradise Papers. Finally, it appeared Argentina was next.

Unfortunately, Argentines daydreaming about a monumental comeuppance might end up disappointed. The Argentine criminal justice system has proven in the past inadequate for such tasks. Fortunately, a relatively simple fix could solve its biggest problems.

Argentina has long suffered from high levels of corruption, which has plagued the country under all political parties and economic models. Fraud was commonplace in the 1990s during the privatization of state-owned enterprises. After the country’s 2001 economic collapse, the Kirchners reasserted the state’s role in the economy, opening new avenues for graft, including reports of multimillion-dollar kickbacks for government contracts.

The scale of public corruption under the Kirchners was widely suspected. In 2015, the last year of Fernández de Kirchner’s administration, Argentina placed 106th out of 168 countries in Transparency’s International’s corruption rankings. In 2016, a former senior public works official from Fernández de Kirchner’s government was caught tossing bags of cash over the walls of a monastery. This year’s “notebooks” revelations leave no doubt about rampant misconduct.

Yet there are many reasons to doubt that the Argentine criminal justice system—notoriously slow and subject to outside interference—is capable of tackling the “notebooks” scandal. After all, it has made little progress prosecuting Odebrecht corruption, even though the U.S. Department of Justice says the Brazilian company paid at least $35 million in bribes in Argentina. Former President Carlos Menem, who supervised the discredited privatization program in the 1990s, is now a senator, not a prisoner. (He serves alongside Fernández de Kirchner, who was elected last year.) Impunity is the norm for less prominent suspects as well. Cases move glacially in the country’s overburdened federal courts, and the independence and integrity of some judges is widely questioned.

But Argentine justice’s most debilitating weakness is not run-of-the-mill inefficiency, nor even its compromised and politicized judiciary. Rather, it is a poorly designed plea bargain system, which remains inadequate despite a 2016 reform—enacted with great fanfare—permitting the use of arrepentidos, or “remorseful criminals,” as cooperating witnesses are known. For prosecutors, this tool is essential; our experience in the United States has shown that conspiracies of all kinds, from political corruption to organized crime, simply cannot be dismantled without cooperators.

Regrettably, Argentina limits cooperation agreements to a small subset of crimes, excluding key categories such as criminal fraud, which would eliminate, for example, WorldCom and Enron. Moreover, under Argentine law, a cooperating witness is rewarded only for evidence related to the case in which he faces charges, even though he might have knowledge of a range of unrelated wrongdoing. And although cooperators in other countries plead guilty, admit their crimes, and appear as witnesses against others, in Argentina a cooperator stands trial right beside the person against whom he is testifying, and must be found guilty by the tribunal. These pointless restrictions elevate form over substance, and needlessly burden the process.

At the same time, it is hard even to qualify as a cooperating witness in Argentina. The law requires that a cooperator be equally or less culpable than the person against whom he provides evidence, a potentially befuddling calculus that invites needless, and lengthy, litigation. (Who is worse, the bribe payer or bribe receiver? The inside man at the bank heist, or the bandit brandishing the machine gun? You get the idea.)

Finally, for defendants who actually make the cut, the rewards are meager. At best, a defendant facing life in prison must serve at least 15 years, regardless of the value of his testimony. For lesser crimes, a cooperation agreement still lands you behind bars for at least half of the minimum sentence. For many defendants, that provides little incentive to cooperate. After all, the risk of conviction in Argentina is low; less than 1 percent of criminal complaints result in a conviction, and cases often die after dragging on for years.

In the early days of the notebooks scandal, Argentina has indeed seen some individuals flip, and apparently cooperate with authorities within the limited confines of cases in which they were implicated. But it is clear this is a function not of an effective plea bargain system, but rather of the power of investigating magistrates to jail suspects in pending cases. That may work in the short-term, but it is a shaky foundation upon which to base a system that seeks to encourage cooperation.

In fact, the Argentine cooperation law is far worse than the rules in neighboring Brazil, where the Odebrecht case—and the broader Operation Car Wash—have leaned heavily on witnesses involved in the conspiracy. Brazil’s law, for example, does not distinguish between the severity of a cooperating witness’s crimes and those of the defendant against whom he is testifying. Importantly, Brazil also offers far greater benefits for cooperation, including generous sentence reductions—and sometimes even total immunity, as in the United States. Plea agreements have produced hundreds of indictments against public officials and corporate executives in the Car Wash investigation.

Argentina’s anti-corruption crusaders should not despair, but they should move quickly. President Mauricio Macri, whose election in 2015 reflected widespread disgust with public corruption, is rewriting the criminal code. The reforms have already been developed, after a review led by an Argentine federal judge, Mariano Borinsky. Those reforms are generally an improvement, including changes to close bribery loopholes, introduce strong measures targeting drug kingpins, and establish more uniformity in sentencing.

The design of the cooperator law, however, appears to reflect too many political compromises, or perhaps a misunderstanding of this powerful prosecutorial tool. And any effectiveness to date relies on the unseemly foundation of preventive detention, which is coming under broad scrutiny in Argentina and elsewhere in Latin America, where prisons are bursting with inmates awaiting a sentence. Before pursuing congressional approval of the entire criminal code makeover, the Argentine government should considerably strengthen the rules for cooperators.

Reducing official impunity is itself a worthwhile objective. Greater accountability would deter wrongdoing. It would also increase confidence in democratic institutions and help prevent the emergence of populists such as Brazil’s president-elect, Jair Bolsonaro, a far-right firebrand whose far-fetched candidacy was fueled by anti-establishment fury. As awareness of corruption has increased throughout Latin America, support for democracy has swiftly fallen. In Brazil, the epicenter of South America’s anti-corruption movement, only 34 percent of the population now prefers democracy.

Argentina has already emerged from a populist experiment, after expunging Fernández de Kirchner’s political movement three years ago. But it has other motivations to tackle corruption. For one, corruption siphons scarce public resources. A recent study by the Inter-American Development Bank found that Argentina loses 7 percent of gross domestic product to inefficient pubic spending, the highest level in the region.

Moreover, as Argentina seeks foreign investment to recover from its latest economic crisis, it needs to demonstrate it is finally taking the rule of law seriously. To do so, it will have to rely on cooperating witnesses to prosecute big fish. In that, Argentina has an advantage; as the notebooks reveal, its pond is full of them.

 

Daniel R. Alonso, a former corruption prosecutor in the U.S. Attorney’s Office for the Eastern District of New York, is managing director and general counsel at the global compliance firm Exiger. Read the article in Foriegn Policy here.

 
Contact Us

Get our Newsletter

Be the first to hear from our experts. Subscribe today!

Daniel R. Alonso, Managing Director | General Counsel

Click to read in Spanish | Click to Download Full Spanish Bio

Daniel R. Alonso is a Managing Director based in Exiger’s New York office, where he focuses on monitorships, investigations, and financial crime compliance (including anti-bribery and corruption). A lawyer and former high-ranking federal and state prosecutor and ethics official, he brings a distinguished enforcement career of more than 20 years to Exiger. At Exiger, Mr. Alonso has led monitorships, other third-party assignments, complex investigations, and compliance reviews. He also serves as Exiger’s General Counsel.

More like this