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21/09/2014 | Justice and the Creation of a Mafia State in Guatemala

Steven Dudley

As Guatemala's Congress gears up to select new Supreme Court Justices and appellate court judges, InSight Crime is investigating how organized crime influences the selection process. This story details the interests of one particular political bloc vying for control over the courts and what's at stake: millions of dollars in public money, much of which is siphoned for individual and political use, and the ability to pillage it with impunity.


It took 40 minutes for the interview to officially start, but it never really began. The judge, a veteran of decades in the judicial sector who had held positions in every courthouse except the Supreme Court, spent most of his time with me answering phone calls, signing papers and talking to others coming in and out of his office.

You look like you are in the middle of a political campaign, I noted, half-asking and half-stating a fact.

"I am," he nodded.

That campaign is about justice, Guatemalan style. The country is in the midst of selecting its Supreme Court Justices and appellate court judges for the next five years, a process that culminates at the end of September.

Officially, both processes are controlled by what is known as a "postulation commission," a committee of 34 people that selects the candidates from a long list of applicants, before Congress makes the final selections. Unofficially, it is a free-for-all with various political, economic and criminal interests trying to control who gets to join that commission, so they can better wield power over the court system.

The most powerful of these special interest groups is called the "oficialista," or the "official" bloc. The oficialista bloc gets its name because it consists of many people linked to the current government, specifically to President Otto Perez Molina and Vice President Roxana Baldetti. While these top officials deny trying to influence the postulation commissions, several former commissioners, watchdog groups and the media routinely refer to the oficialista operatives in their public discourse, analyses and in interviews.

You do not get a high court position without campaigning, the judge said.

"The process is politicized," he told me, as if stating the obvious.

Almost on cue, a younger judge came into the room. He too is seeking a high court position and thinks politicking his elder colleague will get him one step closer.

"No one has total control [of the commissions]," the veteran judge said after the younger judge left the room. "Everyone needs to negotiate."

The judge then got another call. It was his lunch date: a group of former high-level officials with influence on the commissions. He had to go.

The New Power Bloc in Guatemala: the Oficialistas

On paper, the means by which judges are selected is a very open, democratic process. The selection of the Supreme Court and appellate court judges are controlled by separate commissions. Each commission has 34 members from different parts of the government, academic community and the bar association.

In an ideal world, each of the commissioners would be independent actors that vote for the candidates based on their record of service, experience, education and other factors clearly outlined by the country's legal code and its constitution.

The laws that establish these commissions were designed precisely to ensure the independence of the majority of the commissioners. That is the reason the commissions include law school deans and bar association members, each of whom have 11 representatives of the 34 total in both commissions for the high courts.

But what was meant to distance politics from the process has only politicized the non-governmental institutions. Both the universities and the bar associations have become key battlegrounds where everything on the table is traded, negotiated and bartered, all in the name of justice. Internal elections for these universities and the bar association representatives resemble political campaigns, complete with advertisements, T-shirts, transport services, placards, private parties, backroom meetings and public rallies.

The most powerful political operators -- such as the oficialistas -- spend hundreds of thousands of dollars trying to influence who becomes part of these postulation commissions. The investment is worth millions of dollars in contracts, jobs, procurements and other booty from mostly state coffers.

"Corruption has become the norm," Helen Mack, the head of the Myrna Mack Foundation, told InSight Crime.

For a long time, there was but one major political bloc in Guatemala with a say over this process. This bloc was controlled by traditional economic elites such as large exporters, bankers and industrial interests. They wielded power via their control over the bar association, the universities and, in many cases, the judges themselves.

Over time, however, the traditional elites have ceded economic and political space to new, "emerging" elites with economic interests in non-traditional exports and imports, fledgling construction, tourism and mining. Many of these emerging elites' economic projects depend on government largesse, so it is little surprise that one of the most powerful among those vying for influence over the postulation commissions comes from the heart of the government.

That so-called oficialista bloc tries to control the selection of the judges by exercising its influence over key government posts and many of the government's most important economic levers. In order to understand how the oficialistas work, we need to explore their links to these levers, specifically Guatemala's social security agency and the military, as well as how they milk public works contracts.

The Oficialistas and Social Security

One of the main ways the oficialista bloc manipulates the selection of judges is via its ties to one of Guatemala's largest government agencies, the Social Security Institute (IGSS). The current head of social security is a major political operator for the oficialistas, and a key lobbyist for ensuring that the oficialistas' picks make it to the commissions that then select Guatemala's judges. And because the IGSS manages such a huge budget – and is responsible for awarding so many lucrative contracts – this has invested the agency with additional political influence that goes beyond the selection of judges.

The IGSS has been called the "petty cash" department, i.e., a means to buy favors from other government officials, politicians and judicial authorities. When it comes to the postulation commissions, the IGSS works like oil does for a car. Current IGSS president and former military colonel Juan de Dios Rodriguez is the oficialistas' chief political operator for these commissions. He helps to negotiate who will serve on them and how those commissioners will vote, according to watchdog groups and media accounts.

Given the size of the IGSS, Rodriguez wields plenty of power that goes well beyond the formation of the postulation commissions. At any one time, the IGSS has about $5 billion under its purview, according to an IGSS financial statement from 2012, more than half of which is in circulation via investments, medicine purchases, contracts with private laboratories and public infrastructure projects. The budget for 2014 (pdf) was $1.8 billion. Most of the IGSS money is spent via no-bid contracts. In fact, eighty percent of government purchases were direct during the first quarter of this year, according to an analysis by Prensa Libre. The IGSS and the Health Ministry are the two government entities that do the most no-bid and "exceptional" purchases, the report said.

These contracts make the IGSS an important political tool for whoever controls it. This is, in part, because the medicine lobby is one of the largest political campaign financiers in the country. Gustavo Alejos, whose former company, J.I. Cohen, benefits from millions in government medicine purchases each year, was a key backer of the campaign that elected Alvaro Colom as president in 2008, according to a Southern Pulse report. Alejos later served as Colom's "private secretary."

These medicine purveyors are known to play dirty and some have connections to the underworld. In its report, Southern Pulse said Alejos threatened a public official who was moving to end J.I. Cohen's contract with the Health Ministry. Alejos also reached out to contacts in the Constitutional Court to ensure that legal challenges to the contract's validity were squashed, Southern Pulse reported.

But proving this undue influence is nearly impossible, analysts say, in part because these political actors control the courts. There are, quite simply, no known investigations against Alejos, Rodriguez or any other current high-level official associated with the IGSS, and the use of IGSS to buy influence in and around the postulation commissions has never been proven.

"We don't have the evidence," Renzo Rosal, a columnist for Plaza Publica who is also affiliated with watchdog group Guatemala Visible, told me about the IGSS "petty cash" assertion. "But the fact these people who are managing this [maneuvering to select high court judges] are from IGSS tells us a lot."

The one formal investigation into the IGSS, in which personnel orchestrated an inflated deal to build apartments for the elderly that were never built, has resulted in only one incarceration to date. One of those implicated but never arrested in that IGSS case was Gustavo Herrera. Herrera is named as another of the government's key political operators in arranging the postulation commissions to the oficialistas' liking.

SEE ALSO: The War of Paz y Paz: Portrait of a Guatemalan Political Broker

Herrera went on the run while the IGSS case moved through the judicial system in the mid-2000s. The case is now reportedly "frozen," as one prosecutor told InSight Crime, and Herrera is back operating in Guatemala City -- allegedly alongside Rodriguez -- meeting with judges, lawyers and politicians alike in an attempt to engineer the courts.

Herrera has direct ties to the underworld, local investigators told InSight Crime. Specifically, in 2004, then-presidential security commissioner Perez Molina tied Herrera to a prominent drug trafficking network whose top leader was later extradited to the US, where he served six years in prison. And when InSight Crime asked now President Perez Molina about Herrera earlier this year, the president reiterated in his written response his belief that Herrera had "a relationship with drug trafficking."

A Mafia State

Guatemala has long struggled with corruption, and it has long been infested with organized crime. The problem now is that the two seem to be fused together more tightly than ever, and that this new ethos has permeated the state at all levels.

The currency in this system is what they call "quotas of power" in Guatemala. These quotas are numerous and dynamic. They are traded when the state signs a public works contract to build a road; when the social security institute buys medicine; when the police get new bullet-proof vests; and when someone moves contraband, illicit drugs or dirty money.

Quotas of power are also favors, introductions and invitations to parties. They ensure some become rich, and some gain more political power, so later they too can become rich. Most importantly, they contain a near padlock guarantee that anyone who participates will not be prosecuted.

The result is what some insiders like Julio Rivera Claveria call a mafia state.

"This is part of a scheme that is needed so that the country remains in the hands of the mafia," Rivera Claveria told me.

Rivera Claveria knows better than most. He was a former high-ranking official in the Interior Ministry, who is now part of the Attorney General's three-person oversight board.

"It has been a process in which the mafias and the criminals have gained more and more space," Rivera Claveria explained. "If we had a strong judicial system, the country would be in a different place."

The judicial system, however, is not strong. Its impunity rates are amongst the worst in the hemisphere. Guatemala is one of the five most violent places on the planet not currently at war, according to the United Nations. And it has a chronically impoverished and unprepared group of police and prosecutors who respond more to the political whims of their bosses than their mandates as the protectors of justice and order.

The Oficialistas and Public Works Projects

If the IGSS is the oficialistas' "petty cash" department, public works contracts are its "cash on hand." More than any other economic activity, public works have become the motor for development of a new class of entrepreneur-politicians in Guatemala, a type best represented by the oficialistas. Some of these are legitimate, legal efforts. But a large number are part of the questionable quotas of power shuttled around the country amongst politicians, public officials, contractors and their criminal beneficiaries.

"If the big business deals with the state are the 'party,' the public investment budget is the cake and the contractors the ones who dig in and eat," writes Ricardo Barrientos, an economist at the Guatemala-based ICEFI think tank, in a forthcoming paper for an American University project on elites in Central America.

One case moving through the courts now typifies how this works. Arnoldo Medrano, the mayor of a small municipality called Chinautla, has been charged with money laundering, illicit association and embezzlement. Investigators claim Medrano and another mayor illegally moved at least $45,000 between them for reasons that are not clear.

The mayor says he is innocent, but his record shows a clear penchant for using his quotas of power to benefit himself, his family and his allies. Medrano has formed at least 24 companies and five of what are called "non-governmental organizations," or NGOs. The NGOs are, in essence, contracting agencies. Numerous relatives and friends work for these companies and NGOs, which have been the beneficiaries of dozens of no-bid contracts. In fact, since 2009, of the 567 contracts given out by the mayor, 490 were no-bid.

Politicians like Medrano gained the space they needed to operate in the late 1990s and early 2000s. As Barrientos outlines in his paper, during this time Guatemala reorganized the institutions controlling public works projects, and gave more power to the municipalities and states to exercise control over these projects.

As it was with the postulation commissions, the law was intended to democratize the process, and in many ways it did. A proliferation of construction companies, both big and small, has followed, as well as a rise in ancillary businesses, all of which can benefit from the public works projects around the country. As Barrientos notes, there are now over 2,000 companies in Guatemala that are registered with the government's infrastructure management database, compared to just 84 in 1998.

But this proliferation of smaller purveyors came with its own issues and complications. These purveyors realized that their relationships with local politicians gave them a great opportunity for repeat business, so they began to finance local and congressional campaigns in return for more contracts. For their part, the politicians began to collect "commissions" on these contracts. The snowball effect that followed has put some of these companies and politicians in a league with the traditional political and economic powerhouses.

"It turned out to be a way to embezzle funds, manipulate the budget for election purposes, and pay 'favors' to the financers of election campaigns," Barrientos writes.

The owners of these construction companies and frequent financiers of these campaigns include some of the most notorious names in Guatemalan underworld lore. The legendary Lorenzana clan, whose "Patriarch," Waldemar Lorenzana, pled guilty to drug trafficking in a US court in August, controlled numerous companies that benefited from public works contracts in their stronghold, the Zacapa province. The daughter of Otoniel Turcios, who is also in the United States facing drug trafficking charges, ran a development program in a central state, channeling money from a national project into infrastructure projects. The man who facilitated those contracts was assassinated in Guatemala City, allegedly by the Zetas criminal organization.

Public works projects have done more to create a mafia state in Guatemala than nearly any other single government program.

The result of this democratization of public monies is that public works projects have become extremely important quotas of power. In fact, public works projects have done more to create a mafia state in Guatemala than nearly any other single government program. The evidence for this is manifested in the number of cases brought against mayors, congressmen and governors for corruption, embezzlement, and money laundering, few of which end in convictions.

Given what's at stake, it is little surprise that the oficialistas have a congressional operator trying to influence the postulation commissions. Sources told InSight Crime that person was Congressman Baudilio Hichos. They say Hichos is helping to arrange a favorable set of candidates from which Congress can choose its judges, keeping its merry-go-round of public works contracts going.

Hichos has been in politics since 1990 and in Congress since 1994. In Hichos' stronghold, the border state of Chiquimula, he holds sway. At one point, at least nine members of his family held government posts related to public works and other state projects. His brother ran an agency controlling roads projects in Chiquimula and a nephew worked in what was called the Social Investment Fund; two other brothers worked with a municipal services program and a national development program; his wife ran a government literacy program; and two other relatives worked in the province's education department.

Hichos' contacts may reach into the underworld as well. According to an account in elPeriodico, he was close with Giovanni España, an alleged drug trafficker who was killed in the Peten province in 2010 by the Zetas criminal organization. One of España's companies, elPeriodico said, held a government contract to pick up the garbage in Chiquimula for the next two decades.

Oficialista operators like Hichos are maneuvering to protect this massive and lucrative merry-go-round. Without it, the emerging elite has little access to large influxes of campaign cash that keep their political parties afloat, their campaigns flush and their increasing power intact.

The Politics of Trading Favors

It is erroneous to think of the Guatemalan state as an appendage of the mafia, although parts of it surely are. It is more that different parts of the state act like a mafia. What this means in practice is that Guatemala has networks of current and ex-officials who -- either through their control of key government posts, their ability to control policy, or their economic might -- are sucking the country dry.

"It a voracious type of capitalism," explained a government prosecutor who wished to remain anonymous because of his investigations into government corruption and illicit financing for political campaigns. "It is only for carnivores."

Trading quotas of power can lead to fraud, illegal enrichment and obstruction of justice, among other legal transgressions. But perhaps it is most aptly expressed in something called "trafico de influencia," or "influence peddling." (See PDF version of full corruption law) Influence peddling, the law says, is to influence an official or public employee using "hierarchy, position, friendship or any other personal connection to obtain an undeserved benefit." The penalty is up to six years in prison and banishment from government.

Guatemala has networks of current and ex-officials who – either through their control of key government posts, their ability to control policy, or their economic might – are sucking the country dry.

This law, however, is no impediment. Quotas of power are being traded at the highest and the lowest levels. But it remains a very closed system. Gain entry to the system and reap the benefits. Cross the system and pay the consequences.

"There is a democratization of corruption," a former high-level official, who did not want to be identified because he still has relations with the government, told me.

The official says this is in part motivated by economic concerns and in part motivated by politics. Decentralizing power has increased the number of players vying for a spot at the table. And all of them want something to eat.

The former official used a different metaphor, calling it a "mercantilist" approach. It has permeated the political parties as well, which appear to be more short-lived, economic ventures than long-term ideological movements, he said. He cited recent shifts in party affiliations that changed the balance of power in Congress literally overnight.

"To think that there is a rational state that is making decisions is to misunderstand the way the Guatemalan government works," the former official explained. "They are all thinking about how to make money."

The Oficialistas and the Military

The oficialista bloc aims to protect other actors as well, many of whom are former and current Guatemalan military. President Perez Molina -- a former general who headed up military intelligence -- has a cadre of former military officers assisting him. IGSS-head Rodriguez is a former colonel who worked in military intelligence under Perez Molina. Former General Ricardo Bustamante is the head of the powerful Security Council; and former Colonel Mauricio Lopez Bonilla is the Interior Minister. Others are littered throughout government, making up what could be called a Praetorian regime.

The oficialista bloc, through representatives like Rodriguez, is maneuvering to protect sweetheart military contracts and ensure its cadres do not get prosecuted for human right abuses. To be sure, many ex-military officers are facing charges for human rights violations and other crimes committed during the country's brutal civil war that ended in 1996. The reality of what could happen if they do not control the courts became apparent after a former general and the leader of a 1980s coup, Efrain Rios Montt, was convicted of genocide in 2013. Even though the Constitutional Court quickly overturned the decision, it spooked a number of high-level former military officials, including President Perez Molina.

There is also a lot of money at stake. The 1996 peace accords brought an entire restructuring of the security sector. Guatemala's Armed Forces were cut by two-thirds, and the bulk of the security monies shifted to the Interior Ministry, whose budget has ballooned to $500 million a year. The ministry uses the budget to buy weapons, uniforms, and bullet-proof vests, among other security-related products. Like in the IGSS, many of these purchases are made through no-bid contracts, which often go to security companies controlled by ex-military officers who left service when the military downsized.

The military also still administers the purchase of thousands of weapons and munitions for its remaining forces. Although they are less than they once were, the expenditures are rising again. Between 2004 and 2008, the United Nations registered a more than three-fold increase in munitions imports, and a two-fold increase in imports of pistols and revolvers.

In addition, there is a large underground market for these Guatemalan weapons procured by the military. A Wilson Center report, citing sources from the US Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), said that an ATF analysis of hand grenades and other military ordinance seized by Guatemalan police between 2006 and 2009 showed that 85 percent could be traced back to the military's own stockpiles. Many of these weapons have also turned up in crime scenes in other countries in Central America and Mexico.

Military procurements are also seemingly triangulated for profit. In a 2009 report, the UN noted that Guatemala was an exporter of weapons, despite the fact that it does not have a domestic weapons industry. More recently, the Military Industry -- the military's own munitions, clothing and boots factory -- sold $6 million in tennis shoes and balls to the Ministry of Culture. As noted by elPeriodico, there were several problems with the deal: there was no open bidding process for the contract; the Military Industry does not produce tennis shoes or balls, so it imported them and resold them at a 3 to 6 percent markup; and the purveyor of the shoes was never revealed.

Undeterred by the critics who say these sweetheart deals include kickbacks on all sides, the government recently opened up direct sales between the Military Industry and the Interior Ministry.

Ensuring Impunity

The oficialistas are certainly not the only power bloc bilking the state and fixing the judicial system to ensure they will not be prosecuted. Traditional elite economic interests have long held a stranglehold on government public works contracts and have engineered more than a few elections and judicial selections as a result of this control. They are also wedging into new economic territory such as mining and hydroelectric power, both of which often need the courts to green light massive land grabs and large-scale evictions.

What's more, there are "emerging" elite rivals to the oficialistas, the most notable of which is Roberto Lopez Villatoro, a.k.a. "The King of Tennis Shoes," a kind of political, entrepreneurial wildcard who made his fortune selling "replica" athletic shoes.

See the adjoining story in this investigation: The 'Tennis Shoe King' Who Became Guatemala's Gentleman Lobbyist

And the judges themselves have their own power. Once in the courts, they can, and often do, take surprising turns. One appellate court judge I spoke to -- on condition of anonymity since he is vying for a spot on the high courts -- offered a more nuanced view than many others in this regard. He said people "overestimate" political influence, quotas of power, and nepotism. He insisted that he was a relative unknown before becoming an appellate court judge, and that he had gained the position on his own merits, not because he had campaigned for it by promising leniency in tough cases. The judge said the differences between the magistrates are more generational than political, and that quotas of power were not evident in the postulation commissions.

"There is not any influence peddling," he told me, referencing the legal code.

Technically, he is correct. There is not one mention of any prosecution of anyone for "trafico de influencia" in the last two years of annual reports of the Attorney General's Office, since the law came into being.

It is, in fact, nearly impossible to prosecute someone for "influence peddling." The burden of proof is high. More importantly, the incentives are low. Prosecuting someone would require establishing a legal precedent that certain types of interactions amongst officials, contractors, military personnel, companies, criminals and others, are unacceptable practices, when the reality is that trading quotas of power is exactly how the government and the justice system works in Guatemala.

"Criminal networks co-opted the justice system so that they would receive protection, so that they would receive alerts, and so that they wouldn't be prosecuted," Rivera Claveria told me.

Despite what some judges might say, that criminal system seems to have a stranglehold on the current postulation commissions and the judges vying for high court posts. The other judges I saw were scrambling from office to office and from one lunch to the next, politicking for their next position. The people they were meeting included men like the IGSS President Juan de Dios Rodriguez and his associate, Gustavo Herrera, as well as other powerful players in this high stakes poker game.

The judges have but one chip to play: access and influence in their decisions. In return, they often get access to their own quotas of power or benefit from them. Numerous judges, for instance, hold multiple government and private posts, as Nomada pointed out in a recent report. Others open private law firms, which administer government contracts or are hired by government agencies.

Who amongst these judges will make the next round depends on this maneuvering. Court watchdogs, such as the organization Pro Justicia, say that the final selections will come from a negotiation between the oficialista bloc, a wing controlled by the aforementioned "King of Tennis Shoes" and several commissioners who work closely with traditional economic powers. (See pdf version of report) These blocs, of course, have different motivations but share a common interest in protecting themselves and their allies.

"You have to control the courts, so that once you leave office you have enough juice to protect yourself," newspaper columnist Renzo Rosal told me.

The results are not in, but the fix is, Rosal and other court watchers say. The high courts, it appears, will be controlled by these blocs who are trading quotas of power via their commissioners to protect their licit and illicit interests. Once the postulation commissions have decided who the candidates are, the process moves to Congress. The judges Congress selects will hold their posts for five years, and the wheels of corruption, crime and impunity will continue to churn in this mafia state. (Estados Unidos)


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