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Stress Test for Guatemalan Justice

ELITES AND CRIME / 1 DEC 2021 BY ALEX PAPADOVASSILAKIS EN

As day broke in Guatemala City on August 31, 2016, a judge named Carlos Ruano anxiously awaited a meeting with one of Guatemala's most powerful magistrates. 

It was six in the morning. Ruano had not slept, having worked through a night shift, and he now sat in his car with just over two hours to kill before the rendezvous.  

He had been summoned by Blanca Stalling, the mother of Otto Molina Stalling. The latter had been arrested in May 2015 and jailed for allegedly soliciting a million-dollar bribe from a pharmaceutical firm called Droguería Pisa de Guatemala (DPG) while he worked as an advisor at the Guatemalan Institute of Social Security (Instituto Guatemalteco de Seguridad Social – IGSS).   

*This investigation looks at a contentious deal between a major pharmaceutical firm and the Guatemalan Social Security Institute (IGSS). Following this deal, dozens of patients died and scores of others were infected. The case reached the highest courts where those implicated had bought what some said was an insurance policy to make sure they would never be prosecuted. Read the full investigation here.

Luckily, from the intercepted phone conversations, the team knew he was heading to a place by the name of "Zürich" – possibly Pastelería Zürich, a tranquil Swiss chocolatier in one of Guatemala City's wealthiest districts. 

Ruano had recently been handed that case. It was complicated. The players included not just the son of a prominent magistrate but also powerful economic and political elites. Still, Molina Stalling's role was more clear-cut. In multiple wiretapped phone calls and during a surreptitious meeting at a coffee shop, Molina Stalling had been caught allegedly arranging the bribe.  

Now his fate was in Ruano's hands. Ruano knew this meant the judge had only one item on her agenda that morning. 

"It was obvious she wanted to talk to me about the case," Ruano told InSight Crime later in an interview in the stuffy, weathered offices of the towering courthouse building in downtown Guatemala City.  

SEE ALSO: Why CentAm Social Security Agencies Generate Corruption, Crime

Do I go? Do I not go? he thought to himself. If I don't go, there will be reprisals. She's a Supreme Court judge. If I do go, I need to be sure that I don't compromise my work and that she won't meddle in my decisions.  

To cover his back, Ruano decided to secretly record the meeting on his telephone, an audio recording of which was used in a case against Stalling later and which InSight Crime obtained. And when she called him into her office, he hit record and placed his phone in a shirt pocket.  

"My son has been detained for a year and four months, and the [Pisa] trial hasn't started," she began. "All I'm asking is whether it would be within your powers, first of all, to work with the other judges…so that you try to speed up, to push forward, the chance of a hearing."  

Ruano was squirming in his chair. 

"The prisons are overflowing," she added. "I just wanted to ask if there's a chance of granting an alternative to imprisonment. I'll even act as my son's legal guardian." 

Ruano knew superiors shouldn't be telling subordinates how to do things, especially when it concerns a judge's independent review of a sensitive case. But Stalling did not stop there. 

"My son had no idea about the contract bid," she said, referring to the $15.3 million contract IGSS had awarded Pisa in November 2014, when her son had met with one of the company's employees over coffee hours before the deal was publicly confirmed. "He had nothing to do with the administrative branch." 

At the very least, this was a conflict of interest, Ruano thought, as she continued to plead her son's case. At most, he thought this was influence peddling, a crime in Guatemala. 

"It's in your hands and those of the other judges," said Stalling as the meeting came to an end.   

False Starts 

Like many of those arrested alongside her son in 2015, Blanca Stalling came from an elite bracket of Guatemalan society largely unaccustomed to meaningful scrutiny.  

With her father, ex-husband and brothers all having served in the army, Stalling maintains intimate ties to a military elite that became the driving force in Guatemalan politics during the brutal military dictatorships of Guatemala's civil war (1960-1996) and thereafter. As the country then transitioned into a young democracy, the military remained a tightly-knit clique entrenched in the corridors of power. On multiple occasions, it has shown it is capable of using its disproportionate clout in politics to shield its members from possible accusations of corruption and human rights abuses.  

A member of that fold, Stalling also ended up in a position of power, albeit with a questionable record. 

A lawyer by trade, in 2004, Stalling was elected head of Guatemala's Institute of Public Criminal Defense (Instituto de la Defensa Publica Penal – IDPP), where she was accused of nepotism after hiring several family members. She later became a Supreme Court judge, in 2014, following an election that was allegedly rigged by a group of political operators seeking to stack the country's high courts with their allies, herself included. InSight Crime reached out to Stalling for comment but did not receive a response. 

Blanca Stalling. Photo: El Periódico 

Despite this, Stalling was not accused of any crimes in those cases. As per her tape-recorded conversation with Ruano, she did not appear worried about leveraging her status within the judiciary to weigh in on her son's case. 

To be sure, this type of conflict of interest is familiar terrain for judges like Ruano. In Guatemala, where impunity rates for corruption reach almost 99 percent, judges that meddle with this status quo often find themselves in dicey situations like the one Ruano had agonizingly sat through in Stalling's office. 

"The independent judge is uncomfortable for a justice system like Guatemala's," he explained to InSight Crime as if he were talking about an endangered species.  

In high-profile cases, he added, it is common for judges to recuse themselves rather than face down legal injunctions and spurious accusations aimed at derailing their work. 

The Pisa case was about as high-profile as they come, with many of the defendants hailing from the political, military, economic and judicial elites that had long benefited from the high rates of impunity.  

"Several judges were taken off [the Pisa case]," said Ruano, himself a stand-in judge who had been handed the case in early 2016 after others had recused themselves by taking a holiday, calling in sick, or simply not answering their phone.  

Many who stepped down did so after rejecting appeals lodged by defense lawyers, some aimed at modifying the trial format, while others sought to spring clients from pre-trial detention. 

In Ruano's case, the meeting with Stalling had left him in an untenable position. So, in January 2017, he took his secret recording to the Guatemala Attorney General's Office and lodged a formal accusation against Stalling for influence peddling. 

It was an audacious move considering Stalling's rank. And in January 2017, he publicly announced this accusation during a bombshell trial hearing during which he and the two other presiding judges recused themselves from the Pisa trial. The trial later had to restart from scratch.   

Stalling's efforts to sway the case had backfired. Instead of getting her son out of jail, she was arrested the following month despite an audacious attempt to evade authorities by donning a wig and sunglasses as she exited an apartment building in Guatemala City. The following day, surrounded by camera crews outside the city courthouse, an upbeat Stalling, who denies attempting to influence Ruano's work, smiled and joked with lawyers as she was taken away to a nearby jail. Just like her son, she was placed in pre-trial detention.  

Ruano, meanwhile, fled the country. 

The Trial 

The incident with Blanca Stalling's saga was just one of many delays in a case that had riveted the country. With injunctions and recusals, it would be over two years between the arrests in 2015 of those accused of engineering one of the deadliest corruption scandals on record, and the beginning of the trial. And when it began, in August 2017, it was a lengthy affair. 

With over 20 defendants, it would take over a year to get through a total of 92 hearings before the judges were left to contemplate a verdict. 

Though over 50 kidney patients had become infected and over a dozen had died after IGSS had contracted Pisa – a company that prosecutors and an independent government watchdog said had neither the experience nor the infrastructure – to treat them, none of the defendants were on trial for manslaughter. Instead, the debate was mainly centered on who inside IGSS was to blame for awarding Pisa its contract.  

Had the IGSS executive board committed fraud by approving the decision to hire Pisa without adequately verifying whether the company had the capacity to treat kidney patients? Or was this the fault of the so-called tender board at IGSS, which had selected Pisa to win the bid prior to the deal's final approval? Were Otto Molina Stalling and his associates – including other IGSS staff and two Pisa executives – guilty of forming a criminal network that had coordinated the bribe that had allegedly set in motion this entire chain of events?  

For prosecutors, there was no ambiguity. If not for fraud at the highest levels, how else could IGSS have contracted a supplier without the required experience or infrastructure to administer the treatment it was being paid to provide?  

To back up their case, prosecutors drew from a trove of intercepted conversations they had acquired by tapping Otto Molina Stalling's phone. On the calls, according to prosecutors, the former IGSS advisor openly discussed plans to meet with a Pisa employee in Guatemala City and solicit a bribe worth 15 to 16 percent the value of the contract the company would be awarded by IGSS. One of Molina Stalling’s lawyers, Douglas Morataya, vehemently denied these allegations in a written response to InSight Crime's investigation, arguing there is no proof his client ever received the alleged commission.

In an attempt to explain where that money had gone, prosecutors called a witness who testified to "atypical and suspicious" cash withdrawals, totaling $660,000, made by Pisa in the weeks following the contract's approval. Pisa justified the withdrawals as a means of paying its staff. This was a dubious alibi, the witness alleged, given the firm used an online platform for salaries and that the amount of cash taken out equated to over one and a half years of wages. 

Still, Pisa, in a letter to InSight Crime prior to publication, would later state, "There was never any bribe," even while it did not directly address the circumstances of the meeting between the businessman representing Pisa and Molina Stalling. 

There was also the task of hammering home the case for negligence, for which the prosecution called a host of witnesses from the depleted group of surviving kidney patients healthy enough to testify, along with the family members of those who had died.   

In a series of harrowing testimonies, the witnesses spoke of how patients who had never suffered infections were soon besieged by an array of grisly ailments, ranging from stomach pain to vomiting and diarrhea to tingling sensations in their hands, fatigue and other bodily pains.  

One of those witnesses, Claudia Figueroa, told the court how her 62-year-old mother had fallen ill almost immediately after Pisa took over the treatment. Later, in an interview with InSight Crime, she spoke of how the dialysis solutions Pisa provided her mother in early 2015 led to stomach pain, vomiting, nausea and low blood pressure – in line with the symptoms reported by the vast majority of the witnesses. After a month-and-a-half of suffering, her mother developed an infection and was taken into emergency care. 

Multiple witnesses said part of the problem was Pisa's substandard and unhygienic equipment. They also claimed the company had slashed the training time for patients and caretakers to administer the treatment at home from two to three weeks down to less than an hour. Several witnesses stated that when infections occurred or patients needed their catheter changed, the company consistently failed to respond swiftly or competently. 

"People were already dying after three to four days," Figueroa told InSight Crime.  

Unsatisfied with how her mother was being treated in IGSS emergency care, Figueroa paid for an ambulance to take her mother to what she thought were Pisa's clinics in Guatemala City, but on arrival, they found no sign of the company.  

"No one from Pisa came," she told InSight Crime. "They were not there."   

Pisa, in its letter to InSight Crime, would later strongly contest this version, claiming, among other things, that the bid it won with IGSS was "absolutely legal." What's more, the company noted, a later investigation by Guatemala's national forensic institute, known by its Spanish acronym INACIF, had determined, "There was no negligence on the part of DPG nor its employees."

Prosecutors claimed the company did not have the infrastructure to provide the services they had been contracted to render. During the trial, they presented evidence that showed how Pisa had subcontracted a separate company with physical clinics and a staff as part of its bid to win its contract with IGSS. 

However, investigators later told InSight Crime the contract was a ruse. They said it was designed to allow Pisa to meet the bidding requirements despite the firm lacking the necessary infrastructure and personnel to do so. According to one of the investigators, the agreement basically amounted to Pisa renting rooms in a hospital owned by the subcontracted company, but several of the services were never provided.  

In its letter to InSight Crime, Pisa, referring to itself by its acronym DPG, said it was the only one of the two bidders who "complied with all the requisites of the tender," and that "all of the contracting of DPG to provide its services was absolutely legal."

The prosecution alleged that the information on Pisa's private arrangement and its technical capacities had been available to the IGSS executive board and the tender board prior to awarding the contract. It was that extreme negligence in allowing the deal to go through that, in its view, warranted a conviction.  

Nonetheless, the judges in the case dismissed the victims' testimonies, claiming the witnesses had been instructed to testify against Pisa's treatment, equipment and services and that the majority had received compensation from the company during the trial and decided to withdraw as plaintiffs. 

Figueroa's mother survived, for a while. They eventually found a doctor – with no affiliation to Pisa – who could treat her mother. But though she beat the infection, her condition steadily deteriorated. With her body severely weakened, her mother was unable to undergo a life-saving transplant and died during the trial.  

SEE ALSO: 5 Takeaways from CICIG, Guatemala’s Anti-Corruption Experiment

CACIF and CICIG: A Collision Course  

On June 12, 2018, after three years behind bars and the trial dragging on, Jesús Oliva Leal, the former dean of medicine at Guatemala's San Carlos University who was among the IGSS executive board that approved the Pisa contract, took his own life

Oliva Leal had been diagnosed with acute depression in jail, and just months before his death had twice asked to be placed under house arrest due to his ailing mental health. With his passing, he became the second member of the executive board to die behind bars. Erwin Raul Castañeda Pineda, a doctor representing Guatemala’s College of Doctors and Surgeons (Colegio de Medicos y Cirujanos de Guatemala), had succumbed to cardiorespiratory problems back in September 2016.  

Initially, the Pisa case had sparked controversy over the dozens of kidney patients who died on the company's watch. But now, with the trial drawing to a close and many of the accused having endured over three years behind bars, there were growing cries from those backing the defendants to end what they argued was unlawful imprisonment. 

The loudest of those cries would come from Guatemala’s most important chamber of commerce, the so-called Coordinating Committee of Agricultural, Commercial, Industrial and Financial Associations (Comité Coordinador de Asociaciones Agrícolas, Comerciales, Industriales y Financieras – CACIF). For decades, the CACIF had represented the interests of Guatemala's diverse but highly influential business elites, a task that sees its members rub shoulders with politicians at the highest level of government. 

One of these members was Max Quirin, a wealthy businessman and airplane aficionado who had previously served as the private sector representative on Guatemala's national bank before joining the executive board at IGSS in the 2000s.  

A well-dressed, pale-skinned man with bushy eyebrows and patchy grey hair, Quirin had gained prominence in Guatemala's world-renowned coffee trade. Hoping to use his business acumen to steer Guatemala's young democracy in the right direction, he had entered the world of public service in the 1990s and 2000s. He said he joined the IGSS executive board hoping to streamline the bidding process for contracts, cut costs and reduce potential corruption. 

Max Quirin. Photo: Prensa Libre

His slate had been clean before joining IGSS, but like many business elites, that had changed with the arrival of the International Commission Against Impunity in Guatemala (Comisión Internacional Contra la Impunidad en Guatemala – CICIG). The CICIG was a supranational judicial branch supported by the United Nations. According to those who set it up in 2007, the purpose was to prosecute pervasive corruption among Guatemala's government circles. It had helped lead the investigation into the IGSS' alleged corruption in the Pisa case. 

However, with his arrest in 2015, Quirin became one of the first in an expanding list of business elites on the receiving end of criminal investigations led by CICIG and the Guatemala Attorney General's Office.    

In 2017, CICIG would go after former CACIF president José René González Campo-Hinojosa, who prosecutors accused of making irregular campaign contributions in a nationwide bribery scheme that saw illicit funds channeled into the coffers of the formerly incumbent Patriot Party (Partido Patriota – PP). 

That same year, a host of other prominent businesspeople – including members of CACIF – were implicated in a separate CICIG investigation for allegedly making illicit contributions to the 2015 election campaign of former president Jimmy Morales (FCN-Nación, 2016-2020). In an extraordinary press conference in early 2018, several businessmen who had financed the party publicly apologized to the nation, admitting "mistakes were made." 

These were, in other words, humiliating and distressing times for Guatemala's business elites, which would set them on a collision course with the CICIG. And in the Pisa case, some decided it was time to push back.  

As the trial drew to a close, Quirin was the subject of a multi-pronged public campaign proclaiming his innocence and deriding the CICIG and Attorney General's Office for inhumanely detaining the accused without just cause.  

To be sure, Quirin denies any suggestion that the IGSS executive board acted illegally in approving the decision to award Pisa its contract. In an interview with InSight Crime in Guatemala's exclusive aeronautical club in November 2021, he qualified the CICIG's case as politically motivated and accused prosecutors of acting unlawfully on multiple occasions. He also described the noise that surrounded the kidney patients' ailments as a "media campaign" orchestrated by the company previously hired to provide peritoneal dialysis that had been disqualified from the bid eventually won by Pisa. 

Quirin's statements largely align with a scathing press statement released by the CACIF in August 2018, which criticized the "weak legal arguments" that had kept Quirin detained for over 1,000 days. 

Around the same time, prominent business elites penned scornful opinion pieces in the local press, one comparing the defendants' conditions in prison to concentration camps. Another, posted on CACIF's website, described the Pisa case as a "human and judicial savagery," citing the irrationality of keeping "innocent" defendants like Quirin in humiliating and devastating prison conditions. 

Throughout the trial, high-ranking members of the CACIF would regularly make appearances during the hearing. On occasion, they invited journalists covering the trial to lunch, according to CICIG officials close to the case and a reporter who covered the trial, all of whom preferred to remain anonymous for security reasons. 

Quirin's story even reached the United States, where an opinion piece in the Wall Street Journal accused the CICIG of illegally incarcerating Quirin and his colleagues and "running roughshod over law-abiding Guatemalans." 

That article echoed many of the criticisms made by CACIF in its August press release, including the CICIG's alleged failure to produce any evidence of Quirin's involvement in the fraudulent decision to approve Pisa's contract, as well as a lack of proof that he or the other defendants had received any financial benefit from the deal.  

Both alleged that the IGSS executive board to which Quirin belonged was not responsible for verifying Pisa's credentials; that responsibility, they insisted, fell on the tender board.  

In fact, Quirin told InSight Crime that the executive board is only responsible for making sure a report provided by the tender board meets certain administrative formalities, such as if the bids are received on time. The board cannot, he argued, interfere with the tender board's selections, nor are they responsible for reviewing the technical capacity of companies bidding for contracts with IGSS. 

Prosecutors had also accused Quirin and his colleagues of failing to staff the tender board with qualified personnel, but here it bore no responsibility, CACIF and the Journal editorial alleged, as the hiring was done at random – something echoed by Quirin. 

"There was nothing anomalous [in approving the contract]," Quirin told InSight Crime. 

The publications also argued that the IGSS executives had, in fact, complied with their only responsibility – ensuring a compliance bond was included in the deal. In other words, it was not the job of the IGSS executive board – the ultimate authority within IGSS – to check whether companies seeking contracts were qualified or not.  

The Verdict   

In the middle of a tightly packed courtroom, full of reporters, lawyers and anxious defendants, Blanca Stalling mingled with lawyers and some of the accused. Then, she took a front-row seat and waited for the hearing to begin. 

It was September 26, 2018. After a brief stint in prison following her meeting with Ruano and her dramatic capture, Stalling had been granted house arrest. Now, she had come to learn the fate of her son who, along with the other defendants in the Pisa case – including CACIF's Max Quirin and the former IGSS executive board president, Juan de Dios Rodríguez – were awaiting their verdicts.  

By then, 51 kidney patients had reportedly died, and a further 150 were disabled due to the procedure and could no longer walk.   

The three judges entered the courtroom and took their seats behind a wooden podium facing the crowd. Then Miriam Hernández, one of the trio of judges presiding over the case, began to read aloud the verdict.  

At first, it appeared to be a stunning victory for the prosecution. The judges ruled that Pisa did not have the necessary "human resources, basic infrastructure and facilities to administer peritoneal dialysis," a grave oversight that had put their lives in peril.   

What's more, the fact that IGSS had approved the contract, despite Pisa's deficiencies, amounted to a criminal act perpetrated by both the IGSS executive board and the tender board that had initially selected Pisa as a supplier, the judges ruled. Members of both boards were found guilty of fraud and sentenced to six years and three months in prison. 

Inside the courthouse on the day of the verdicts. Photo: Nómada

"The function of the executive board was not simply to arrive and sign the contract," the judges said. These were "fraudulent and damaging conditions for IGSS which [the executive board] was legally obliged to safeguard against." 

Otto Molina Stalling, who the judges found guilty of soliciting a bribe in exchange for facilitating Pisa's contract, was also sentenced to six years and three months in jail. The judges cited his many wiretapped conversations as crucial evidence against him. 

Still, Pisa, the company at the center of the case, was largely off the hook. There was no evidence in the intercepted phone conversations to prove that the company had offered IGSS officials a bribe, the judges declared. In addition, prosecutors had not managed to show where the money had gone. For that reason, the businessman representing Pisa who had met with Molina Stalling in a café allegedly to finalize the deal, as well as another company executive, were acquitted.   

In the end, the company was ordered to pay over $400,000 in reparations to the kidney patients and families who had suffered after receiving its treatment. The judges made no mention of the heavy human toll, and a court would later reverse the decision to fine the company. 

Minutes after the verdict was handed down, there came another twist. All of the defendants who had been found guilty would be granted conditional liberty provided they signed an attendance form once a fortnight, in virtue of the three years they had already spent behind bars. 

That decision was met with celebrations from the defendants, their families and supporters, and gasps from others in the courthouse.  For the victims and their families, it would only get worse.  

*Mattia Fossati contributed reporting to this investigation. 

*This investigation looks at a contentious deal between a major pharmaceutical firm and the Guatemalan Social Security Institute (IGSS). Following this deal, dozens of patients died and scores of others were infected. The case reached the highest courts where those implicated had bought what some said was an insurance policy to make sure they would never be prosecuted. Read the full investigation here.

**This article was updated to include a written response from one of Otto Molina Stalling's lawyers on December 7, 2021. Prior to publication, InSight Crime requested comment from Molina Stalling, but did not receive a response to a series of questions related to the investigation.

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