Guatemala’s probe into corrupt dealings by its customs authority has shaken the nation and arguably threatened the presidency. How did this corrupt network manage to steal millions of dollars in kickbacks, and how did investigators manage to take them down?
Guatemala’s customs authority, known as the SAT by its Spanish initials, was revealed to have robbed the state of millions in April. The ongoing scandal has so far triggered mass protests and led to resignation of Vice President Roxana Baldetti, who has been linked to the graft scheme and remains under investigation.
A recent three-part special by investigative website Plaza Publica (see part one, part two, and part three in Spanish) details how United Nations anti-impunity commission the CICIG and Guatemala’s Public Ministry detected and then dismantled the corruption racket. Based primarily on documents obtained from these investigative agencies, Plaza Publica’s report is a revealing look at how one of Guatemala’s most important state institutions essentially operated like a mafia group. Below, InSight Crime summarizes the key take-aways from Plaza Publica’s findings.
The Network
Dubbed “La Linea,” investigators believe this corrupt network was composed of two subgroups: those who worked within the SAT, and those outside of it. The first subgroup consisted of at least 28 SAT officials, including the head of the agency, its human resources director, the SAT union boss, numerous sub-directors, and low-level inspectors in charge of checking shipping containers. Non-SAT officials involved in the scam mainly consisted of importers, but also included lawyers and a former intelligence agent.
Only a select few served as go-betweens among these subgroups, in order to protect those involved. The total network consisted of at least 64 members, and was headed by Vice President Baldetti’s former private secretary Juan Carlos Monzon Rojas, according to the CICIG.
The Scam
La Linea charged importers fees in exchange for fraudulently lowering the taxes on goods they brought into Guatemala. Non-SAT officials — the importers, lawyers, and so on — were responsible for coordinating the imports and collecting the fees. Meanwhile, SAT officials would be notified which containers needed to be exempt from paying the required tax amount.
The SAT’s human resources director and various sub-directors ensured that corrupt container inspectors were responsible for examining these select containers. La Linea also bought off the SAT union boss, ensuring that customs officials outside of the corruption network could be placed elsewhere without complaints.
Importers who collaborated with La Linea would typically pay only around 40 percent of the mandated import taxes. The other 30 percent went to La Linea, while the importers pocketed the remaining 30 percent. Fraudulent importers typically claimed to be importing less quantity or products of less value than what was actually brought into Guatemala.
Investigators believe at least 500 shipping containers were brought in under this scheme between May 2014 and Feb 2015. The CICIG hypothesized that container inspectors received nearly $1,000 a week for participating in this scheme, while the entire La Linea network earned around $328,000 per week.
The Investigation
The probe ran from May 2014 to February 2015 and began with a separate inquiry into a Chinese importer named Miao Miao. Suspicions around Miao’s imports lead authorities to tap his phone and on May 8, 2014, investigators overheard Miao talking with another importer about what sounded like a scheme to dodge import taxes. The other importer on the phone line was Julio Cesar Aldana Sosa, who was later revealed to be a member of La Linea.
Investigators then tapped Aldana’s phone and later gained access to two e-mail accounts he used to coordinate La Linea business dealings. This led investigators to tap the phone lines of other La Linea members, as well as monitor the meeting places where the groups presumably exchanged payments.
On June 4, 2014, investigators observed a birthday party attended by La Linea members. There they spotted Salvador Estuardo Gonzalez Alvarez, a publishing magnate who owns two Guatemalan newspapers, Siglo 21 and Al Dia. Tracking Gonzalez led to Juan Carlos Monzon Rojas, La Linea’s alleged leader and the vice president’s secretary. He was seen meeting with Gonzalez and other La Linea members on August 11, 2014.
Afterwards, there were signs that members of La Linea were aware that they were under investigation. The network made several changes in personnel, and became more cautious when speaking by phone. Members started warning each other of “the five letters,” a code for the CICIG. Nevertheless, in October 2014 investigators located a high-end clothing store they believe functioned as La Linea’s central office. Authorities closely monitored the location and continued to collect e-mails and phone conversations. In February 2015, the first wave of arrests began.
The Aftermath
While the majority of La Linea’s alleged members have been captured by authorities, the network’s assumed leader Monzon remains at large and is sought by Guatemalan authorities and Interpol. Meanwhile, authorities have declined to print a “black list” of the importers accused of doing business with La Linea, and prosecutors say they will pursue each case on an individual basis.
La Linea was just one of several recent investigations into official corruption, spearheaded by the CICIG, that has revealed the degree to which Guatemala’s institutions have been compromised. Guatemala’s social security agency has also been charged of running a fraud ring, while the president’s son-in-law was arrested on accusations of influence peddling, on behalf of a giant energy company. As more details emerge on how these other investigations were conducted, the overall trend seems clear: Guatemala’s most notorious political and economic elites have arguably never been as threated by the justice system as they have been in the past six months.
Plaza Publica video report