HomeNewsAnalysisMassively Overpriced Contracts Hamper Honduras’ Pandemic Response
ANALYSIS

Massively Overpriced Contracts Hamper Honduras' Pandemic Response

COVID AND CRIME / 17 JUL 2020 BY ZACHARY GOODWIN EN

An audit of a Honduran agency charged with procuring emergency medical supplies to fight the coronavirus has found tens of millions of dollars wasted -- an egregious case of profiteering in a country that has already seen massive graft in its government health sector.

The most brazen example was the purchase of seven mobile hospitals for $47 million, at an excess cost of $12.3 million, according to the Association for a More Just Society (Asociación para una Sociedad más Justa – ASJ), a joint US-Honduran non-governmental organization focused on corruption.

The finding was part of an audit scrutinizing some $80 million of contracts by INVEST-H, the Honduran government entity tasked with providing coronavirus pandemic relief contracts to private firms.

SEE ALSO: Honduras News and Profile

Honduras’ Attorney General’s Office is now investigating the former director of INVEST-H, Marco Antonio Bográn Corrales, on allegations of abuse of authority, fraud and embezzlement, El Heraldo reported.

Axel López, the businessman awarded the mobile hospitals contract by INVEST-H, has also come under fire. López, the proprietor of a company that claims to provide medical supplies, contacted the firm SDI Global about constructing mobile hospitals in Honduras, SDI Global’s director, Michael Murphy, told CNN Español. SDI Global, which is headquartered in Turkey, has operations in the United States and provides defense, security and medical services.

López allegedly then falsified SDI Global’s logo and used its information in documents presented to the Honduran government to secure the contract for his own firm, CNN Español reported. SDI Global immediately cut off contact with López and has accused him of intellectual property theft.

López later used another one of his companies, Vertisa, to contract with a separate firm in Turkey with no previous experience in hospital construction to build and ship two mobile hospitals to Honduras, El Heraldo reported.

The two hospitals from Turkey arrived in Honduras on July 10, as noted in El Heraldo. According to López and INVEST-H, the other five hospitals, subcontracted through other companies, will arrive in August. Meanwhile, López has still yet to turn in the proper paperwork, La Prensa reported.

The ASJ audit also determined that overpriced contracts for biosecurity equipment, such as ventilators and masks, had been awarded to firms that never delivered the promised products.

Four of five companies contracted to provide this equipment never delivered any goods at all. The only company to make a partial delivery missed its deadline by 65 days, according to the audit.

One firm, Grupo GyT, signed a contract in April with INVEST-H to deliver 474,000 N95 masks. The audit found that this contract alone was worth five times more than all of the 75 previous contracts GyT had signed with the government. Grupo GyT canceled the contract but withheld its advance, according to a May 21 El Heraldo report. Grupo GyT has since provided evidence to InSight Crime that the company paid back the contract to INVEST-H on May 25.*

In response to the findings, INVEST-H blamed the waste on the pandemic, arguing that ASJ was punishing the entity “for being the only ones brave enough to be ready to buy” in urgent circumstances.

On July 2, authorities raided the residence of INVEST-H’s director Bográn Corrales, seizing documents. Five days later, he appeared before the Special Prosecutor’s Office against Public Corruption. Then, on July 12, authorities raided his mother’s residence to collect further evidence.

Bográn Corrales maintains that he is innocent. So far, two other INVEST-H employees have testified to prosecutors.

InSight Crime Analysis

Though graft has characterized pandemic relief responses across Latin America, the pattern of price-gouging and waste uncovered by ASJ fits the long history of corruption seen within Honduras’ government health agencies.

During the mid-2000s, around $330 million was embezzled from the Honduran Social Security Institute (Instituto Hondureño de Seguridad Social – IHSS) through a network of sham companies in a graft scheme that saw patients die after being given tainted medicine and improper treatment. Two million in bribes went to IHSS’s director, and embezzled funds even made it into the campaign coffers of President Juan Orlando Hernández.

With INVEST-H, there were many red flags. The Honduran government hand-picked the agency to handle coronavirus procurement, giving it authority over the health ministry. INVEST-H also pushed through the dubious purchase of the mobile hospitals less than 48 hours after the health minister asked it simply for isolation units, according to the ASJ audit.

ASJ Executive Director Carlos Hernández called for an investigation into whether the purchase was done by previous arrangement.

“It is impossible that in a day and a half one could make a purchase of this nature,” Hernández said during ASJ’s June 24 presentation of its audit.

SEE ALSO: Coronavirus and Organized Crime

In June, InSight Crime reported on how the pandemic has facilitated widespread contract fraud in nearly every Latin American country, undermining efforts to combat the crisis.

Moreover, INVEST-H's severe waste and its mobile hospitals debacle come when health care workers can least afford it: as coronavirus cases continue to mount.

*A previous version of this article stated that Grupo GyT had not paid back money to INVEST-H. The company reached out with evidence to the contrary. The story has been rectified accordingly.

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