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Ecuador investigating more than 160 pandemic related cases of corruption

Published on August 23, 2021

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During the presidential term of Lenín Moreno, whose term ended in May, the Attorney General’s Office had to create a specialized Task Force to be able to process and carry out investigations into alleged illegal acts related to the acquisition of products for the health emergency. As part of the cross-border project ‘Watch the pandemic,’ the following report details several of the emblematic cases, involving officials, businessmen and even the children of former Ecuadorian President Abdalá Bucaram.

The health emergency due to Covid-19 has exposed with greater visibility the high levels of corruption in Ecuador, which has allocated $664.8 million to address the health crisis, according to official figures. In just three months, from March to May 2020, the Comptroller’s Office had begun 53 audits of public purchases of medical supplies. The first signs pointed to price premiums of up to 9,000% on contracts. In the Corruption Perception Index (CPI) of 2020 – in which 0 means high corruption and 100 without corruption – Ecuador obtained 39 out of 100.

During the first months of the Covid-19 pandemic, cases of alleged corruption in Ecuador increased to such an extent that the Attorney General’s Office had to create a specialized Task Force. By May 2021, the prosecution team had more than 160 open investigations for this type of cases. The most emblematic cases are explored below.

The overpriced kits

On May 11, 2020, Alexandra Ocles resigned her position as National Secretary for Risk Management, one of the institutions that led the State’s response to the pandemic. She did so four days after the reports denounced alleged surcharges in the purchase of 7,000 feeding kits to deliver to families at risk. According to a report by the Comptroller’s Office, the surcharge was 40.2%. In addition to Ocles, five other public officials would be involved.

Ocles tried to justify paying $150 per kit – which was valued at $86 – by saying that they included three packets of “a gluten-free noodle.” According to their version, this way they would avoid affecting the health of vulnerable families with allergies to this component. One day after Ocles’ resignation, the Prosecutor’s Office requested a hearing to formulate charges against her for alleged influence peddling.

At the preparatory hearing for the trial of November 6th of last year, Judge Daniella Camacho, of the Criminal Chamber of the National Court, declared herself compromised and ordered that the case be sent to another judge to continue with the process. Finally, in February 2021, a judge from the Samborondón Multicompetent Judicial Unit heard the case. More than a year later, there are still no answers on the case in which a contract of more than $1 million is being investigated.

Organized crime in hospitals

In the hospitals of the Comprehensive Public Health Network – which includes those managed by the Ministry of Health and the Social Security Institute (IESS) – investigations for alleged acts of corruption abound. Some started even long before the pandemic.

The largest is for alleged organized crime due to irregular purchases of medical supplies at Teodoro Maldonado Carbo, an IESS hospital in Guayaquil. The Prosecutor’s Office reported in 2020 that in this hospital there is a criminal organization that since 2017 has benefited from payment orders for “malicious acts” that in turn allowed third parties to improperly benefit from hospital funds.

Hospital officials such as coordinators, administrative directors, public procurement officers, and pharmacy staff are included in the process. The amount investigated in irregular purchases that lasted until 2020 is more than $11.9 million.

On March 1, 2021, the preparatory hearing for the trial of this case had to be held, but it was not done because one of the defendants took advantage of the abbreviated procedure (he admitted committing the crime and his sentence was reduced). A trial date for the other alleged parties has not yet been confirmed.

In addition to organized crime, Teodoro Maldonado Carbo also investigates the alleged crime of embezzlement in the unjustified purchase of medical supplies. In this case, the former manager and the former technical director of the hospital were linked. In addition, other officials from the public procurement area and the financial department were involved. According to the Prosecutor’s Office, due to an alleged shortage, five payment agreements were made that do not appear in the records of the Public Procurement Service and that were not duly justified. The amount investigated in this case is more than $3 million.

In the Basic Hospital of Durán, also of the IESS, a process was opened for alleged organized crime in the award of contracts for $3.6 million. According to the Prosecutor’s Office, in the health center there was a criminal structure that directed contracts with surcharges that total more than $782,000 dollars. The institution had 17 people involved. The complaint notes that contractors made transfers to hospital officials to secure contracts. Payments were even made to the brother of the hospital director. The case is in a preparatory hearing for the trial.

On May 8, 2020, the Tungurahua Provincial Prosecutor’s Office raided the Ambato Teaching Hospital for alleged acts of corruption. After these examinations, they opened an investigation for alteration of evidence and evidence in the purchase of coveralls and masks for more than $216,000. According to the Prosecutor’s Office, the physical documents of the purchase of these supplies (with an alleged surcharge) would have been taken from the building before the raid. This is one of the processes that has made the least progress, since it continues in a preliminary investigation, which is a pre-procedural stage.

Family ties

In Ecuador, there are cases in which corruption has its origin or connection with a family business. Brothers Daniel and Noé Salcedo Bonilla are part of several investigations associated with commercial operations during the pandemic.

In June 2020, businessman Daniel Salcedo and his girlfriend, Jocelyn Mieles, tried to escape the country in a plane, but crashed 30 kilometers from the Ecuadorian border in the Peruvian city of Tumbes. The accident left the pilot dead and Salcedo and Mieles injured. The then Minister of Government, María Paula Romo, said that before becoming a fugitive, Salcedo had already been linked “to the criminal investigation of providers and managers of public hospitals” during the health crisis due to Covid-19.

Since his capture, the acts of corruption in which Daniel Salcedo were involved have been piling up. He is currently serving a four-year prison sentence for procedural fraud and is one of the main suspects in the corruption scheme investigated by the Prosecutor’s Office in the hospitals of the Ecuadorian Social Security Institute (IESS), in Guayas.

After Daniel Salcedo’s accident, authorities detained his brother Noé on the border with Peru. In his possession they found $47,600 in cash. Noé Salcedo cannot justify the origin of that money. The Prosecutor’s Office opened an investigation for alleged money laundering in the illegal sale of medical supplies against the Salcedo brothers. In this case, six companies and other State providers are also being investigated. According to the Prosecutor’s Office, the amount laundered is $3 million. The trial hearing against those involved continues. The Prosecutor’s Office has requested the testimony of more than 100 people.

The list of investigations for alleged corruption in which the Salcedo Bonilla brothers are involved is extensive. Daniel Salcedo is one of those prosecuted for the alleged overprice of more than 1,000% in the purchase of 4,000 body bags at the IESS Hospital de Los Ceibos, in Guayaquil. According to the Prosecutor’s Office, the health center authorities awarded a contract to buy each bag for $148.50, despite the fact that the price per unit in the market is just $12. In August 2020, Salcedo’s lawyer, Luigi García, said in an interview that “Daniel Salcedo has never sold (supplies) to any hospital or to the Ministry of Public Health.”

Daniel and Noé Salcedo are also being prosecuted in an investigation for alleged organized crime in the sale of overpriced drugs in IESS hospitals. The Prosecutor’s Office says that “as part of a criminal organization,” several Social Security officials and businessmen have benefited from irregular payment agreements for the sale of inputs. The Prosecutor’s Office presumes that senior IESS officials were involved, including Paul Granda—former director of the IESS Board of Directors—and former managers and employees of hospitals. On May 17, a judge called them to trial for their involvement in this case.

In November 2020, shortly after being implicated in the investigation, Granda said in a video posted on his Twitter account that “thousands of people know that I have never committed a crime and that I have never lent myself to anything irregular.” He added that that is why he had to defend himself and demonstrate “with forcefulness that there are innocents in the country who unfortunately are prey to hatred, political calculation and hidden interests.”

The Salcedos are not the only family related to various processes. The Prosecutor’s Office also linked the brothers Jacobo, Michel and Abdalá Bucaram Pulley – sons of former President Abdalá Bucaram Ortiz. In addition, they included Gabriela Pazmiño, wife of Abdalá Bucaram Pulley, in the investigation. The Prosecutor’s Office says that they allegedly participated in a network that sold and distributed medical supplies with surcharges to hospitals in Guayaquil.

The case is currently being processed by the Northern Criminal Judicial Unit of Guayaquil. On May 13th, a judge issued a dismissal for Gabriela Pazmiño, and the brothers Michel and Abdalá Bucaram Pulley. With that decision, the precautionary measures against the defendants were revoked. The Prosecutor’s Office orally appealed the judge’s decision and the appellate judge ruled that the detention order was legal and remained in place.

The investigations against Michel and Abdalá Bucaram Pulley ended, but the processes continue for their brother Jacobo and for their father, former president Abdalá Bucaram Ortiz. The two were linked by the Prosecutor’s Office to an investigation for alleged organized crime in the illegal sale of Covid-19 tests and masks. According to the Prosecutor’s Office, the former president and three traffic officers would be part of a “structured group” that planned criminal activities that were committed between November 2019 and August 2020. The preparatory hearing for this trial in this case has already been postponed four times.

Municipal corruption

The Prosecutor’s Office is investigating corruption cases in two institutions in the Municipality of Quito, the capital of Ecuador. The first is for alleged embezzlement in the purchase of personal protective equipment for the Metropolitan Public Company of Drinking Water and Sanitation (EPMAPS) of the Municipality of the City. According to the Prosecutor’s Office, there would be a surcharge in a contract of more than $167,000 to buy protective equipment.

Even the highest authority in the City is being investigated for alleged corruption. On April 30, Jorge Yunda Machado, mayor of Quito, and 13 other people were called to trial for alleged embezzlement in the purchase of 100,000 tests for detection of Covid-19 in the Municipality’s Health Secretariat. According to the Presecutor’s Office, Yunda knew that the evidence provided by the supplier – the company Salumed SA – was not the evidence in the contract signed for more than $4.2 million.

The process is in the Provincial Court of Pichincha. Yunda has to comply with precautionary measures such as periodic presentation to an authority, prohibition of leaving the country and, since February 19, the mayor of Quito has been using an electronic shackle.

After learning about these cases, it should be noted that corruption also has a cost and social impact: hundreds or thousands of people were affected by overpricing, organized crime and the multiple crimes that the authorities continue to investigate.

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