February 7, 2005
Gen. Augusto Pinochet’s defense is seeking permission to use money from his notorious Riggs Bank accounts to repay US$5 million to the Chilean Tax Service (SII).
Fernando Barros, one of the ex-dictator’s defense lawyers, met with SII executives Thursday to discuss repayments of around US$5 million owed by the ex-senator in unpaid taxes, interest and fines, La Tercera reported.
SII sources, quoted by Radio Cooperativa, vigorously denied the claims, insisting that no deal had been struck.
A criminal complaint filed by the SII on Sept. 30 against Pinochet and his executor, Oscar Aitken, claimed they dodged around US$4 million in taxes from 1998 to 2003.
In July, following the discovery of Pinochet’s secret accounts held at Washington, D.C.-based bank Riggs, Pinochet’s defense, family and supporters unanimously denied that the ex-president had hidden the extent of his fortune from the SII to avoid tax payments.
But now it has been revealed that the money in his Riggs Bank accounts, which at one point amounted to around US$8 million, was never included in his annual tax declarations.
Judge Sergio Muñoz – who has temporarily relinquished his handling of the case to substitute Judge Dobra Lusic – is investigating the SII’s allegations. As part of the inquiry into the general’s private finances, Muñoz is also investigating charges of money laundering and misuse of public funds.
If Pinochet’s defense team comes to an agreement with the SII and successfully makes the payments, they will have effectively quashed Muñoz’s principal line of enquiry because the other allegations of money laundering and misuse of public funds are proving harder to substantiate.
Furthermore, if Pinochet repays the money he owes to the state in full, it would be viewed as a “goodwill gesture” and could result in a reduced sentence.
In repaying the tax, Pinochet would simply be exercising his legal rights. According to Chilean law, “every citizen can demand that their tax declarations be revised,” a statement confirmed recently by the SII.
“The SII filed a criminal complaint for tax evasion, and like any other person in Chile that this happens to, (Pinochet) can make a repayment whenever convenient,” one of Pinochet’s family members anonymously told La Tercera.
But the central issue in this investigation is that Pinochet does not have access to the US$6.5 million from his Riggs accounts. Before Pinochet can repay his taxes, Muñoz has to lift the embargo on the general’s funds that have been under judicial control since the case began.
A lawyer from the State Defense Council (CDE) told La Tercera it is unlikely that Muñoz will accept the agreement because the judge “can’t participate in the (repayment) negotiations, they don’t contribute anything to his investigation, and he would lose control of the money that he has been safeguarding.”
Muñoz would also have to investigate where the money came from to establish if it is the product of criminal activity. “While this is not clear, he can’t free up Pinochet’s funds,” the same source said.
Some have doubts that Pinochet’s savings will be sufficient to repay the SII. On top of the US$4 million owed in retroactive tax, Pinochet owes around US$300,000 in interest. In addition, fines could be anything “between 50 percent to 300 percent of the amount due,” according to the Tributary Code.
What’s more, if Muñoz lifts the embargo, Pinochet “would also be liable for further taxes due on new revenue,” said a source related to the case.
Nevertheless, Pinochet’s defense requested that Muñoz lift the embargo on the general’s funds in December. The petition was denied by the judge and is now being reconsidered by the Santiago Appeals Court.
Sources say that Pinochet’s lawyers are confident the Appeals Court will allow the retroactive tax payments. If this does not happen, the matter will be decided by the Supreme Court.
If Pinochet’s funds are made available to him so he can pay his tax debts, it will mark a first in Chilean legal history.
In a similar case in 1997, Mario Silva Leiva, or “Cabro Carrera” – the supposed head of Chile’s largest ever narcotics trafficking and money laundering ring – also sought to have his assets reinstated so he could pay back taxes. But his appeal was rejected by the Supreme Court.
While negotiations between Pinochet’s defense and the SII continue, Muñoz is also investigating whether Pinochet used his Banco de Chile accounts to transfer up to US$16 million when he closed his Riggs Bank accounts in 2002 (ST, Jan. 24).
The bank is being investigated in the U.S. for not having complied with the Patriot Act, which demands that banks keep a list of accounts held by politically exposed persons and report any suspicious activity.
Bank executives claim they were unaware that the accounts belonged to Pinochet because they were held under pseudonyms. Despite the closure of Pinochet’s accounts, both in the United States and Chile, the ex-generalissimo’s finances continue to cause problems at the bank (ST, Feb. 3).
Following the dismissal of Hernán Donoso Lira, the general manager of Banco de Chile’s New York branch, Segismundo Schulin-Zeuthen, the bank’s president, has announced he will not stand for another term.
The president, who will relinquish his role March 17, has been involved with the bank for nearly 20 years.
“It was always agreed that I would cease to be president in March 2005,” said Schulin-Zeuthen.
But some believe that he is leaving due to the recent scandal, as it is surprising that he should choose to step down after the bank obtained record results last year.
It is likely that Fernando Cañas, former general manager of Banco O’Higgins and Banco Santiago, will be elected as president in March.
Banco de Chile is awaiting the ruling of a U.S. regulatory board to see if it will be fined.