Thursday, October 3, 2019

Tony Hernandez Trial Day 2 - Some basic math

Testimony at Tony Hernandez's trial today included testimony from El Rojo who said he helped Tony move 140 tons of cocaine through Honduras.  We don't know if those are metric tons or english tons but the math is about the same order of magnitude for both.

According to a website that tries to keep track of cocaine prices across the country, the price is lowest in cities along our southern border, where they report Laredo, TX, Las Cruces, NM, and San Diego, CA all have the cheapest cocaine, at about $14, 500 per kilogram.  At that price:

140 English tons is 127, 006 kilograms of cocaine.
Cocaine sells for a mean street price of $14, 500 per kilogram in San Diego, CA
127006 kg. of cocaine at $14, 500 per kilogram is more than $1.84 billion

140 metric tons is 140,000 kilograms of cocaine.
Cocaine sells for a mean street price of $14,500 per kilogram in San Diego, CA
140,000 kilograms at $14, 500 per kilogram is more than $2.03 billion.

The witness indicated that he helped Tony Hernandez traffic right around $2 billion worth of cocaine!

Trial of Tony Hernandez, Day 1

The trial of Juan Antonio Hernandez Alvarado, aka "Tony" Hernandez, former Honduran Congress person and brother of the sitting President, Juan Orlando Hernandez Alvarado began today in a Federal Courthouse in New York City.  Tony Hernandez is charged with two counts of murder of rival drug traffickers, one in 2011 and one in 2013.  He is also charged with importing large quantities of cocaine into the United States. The Jury was seated, and the Prosecutor, Jason Richman, gave his opening statement, which is causing quite a stir.

In his opening statement, Richman said that El Chapo Guzman gave $1 million to Tony Hernandez to give to his brother, Juan Orlando Hernandez.  Richman said:

The defendant was protected by and had access to his brother, the current sitting president of Honduras, a man who himself has received millions of dollars in drug money bribes -- bribes he received from some of the largest cocaine traffickers in the world, -- bribes he received from men like El Chapo and the Sinaloa cartel who personally delivered $1 million to the defendant for his brother."
Richman also said of Juan Orlando Hernandez that he took some $1.5 million in drug money to win his first presidential campaign in 2013 in exchange for protection for the drug traffickers.   He accepted a further $40,000 from traffickers for his 2017 re-election campaign, Richman alleged.

Prosecutors accused Juan Orlando Hernandez of working with his brother Tony and former president Porfirio Lobo Sosa to take advantage of the drug trafficking to consolidate power and control in Honduras.

Former President Porfirio  (Pepe) Lobo Sosa was also accused, but not charged, in the opening statement by Jason Richman.  Pepe Lobo is alleged to have accepted $2 million in drug money for his 2009 campaign

Wednesday, March 6, 2019

DESA: Fraud and Corruption

On the third anniversary of Berta Cáceres' murder, MACCIH and the UFECIC-MP (Unidad Fiscal Especial Contra la Corrupción y la Impunidad del Ministerio Publico) announced new legal cases against 16 individuals, brought as a result of studying the approval and license allocation processes for the Agua Zarca dam on the Gualcarque river in Honduras. 

So far in the Honduran press, only El Tiempo and Proceso Digital reported it, both digital publications.  The major Honduran print papers have ignored it.

The combined forces of MACCIH and UFECIC-MP chose to investigate the more than 40 complaints about irregularities in concessioning and licensing hydroelectric projects that affect the Lenca people, complaints lodged by Berta Cáceres before her murder, complaints about DESA and the Agua Zarca dam. Ana Maria Calderón, the Corruption coordinator in MACCIH, noted that the implications of their findings have a much larger application:

In light of today's findings, the Mission suggests that the [Government of Honduras] review the remaining active contracts and the norms that regulated them, because to continue with this energy strategy could produce an unbalance in the market and bring about the bankrupcy of ENEE;  its possible that all the contracts tied to renewable sources were let in the same way [as this one].

If all of the many contracts and licensing processes underwent the same irregularities as this contract, it has implications for the future viability of ENEE, the national electric company, which currently runs at a loss.  The Honduran government is due to tell the IMF how they plan to bring this entity to profitability sometime in the next three months.  With more contracts authorized like the DESA one, they probably cannot.

The investigation found that DESA was created in 2009 by two brothers (the Abate Ponces) and almost immediately Roberto David Castillo Mejia was its de-facto representative. 

But Castillo Mejia was also employed full time in ENEE, in the department that reviews and allocates contracts for hydroelectric projects. Very convenient for DESA.

He obtained shares in the firm through a front company formed in Panama, called PEMSA, which had just two shareholders, Castillo Mejia and Carolina Lizeth Castillo Argueta.  Castillo Argueta was the lawyer for the ENEE workers' union at the time, but became DESA's lawyer as well and signed the contract for DESA.  She signed instead of Castillo Mejia to cover up his conflict with his role in PEMSA.  DESA has another investor, Inversiones Jacaranda, owned by the Atala Zablah banking family.

Both David Castillo Mejia and Carolina Castillo Argueta worked directly for the head of ENEE, Roberto Anibal Martinez Lozano, who signed the contract with DESA on behalf of ENEE.  He signed the contract despite knowing DESA was not on the list of ENEE approved contractors (a prerequisite to any ENEE contract).  He signed without investigating how a front company with no technical or financial assets was going to carry out this somewhat tricky contract.  In short, it was an illegal contract, but he signed anyway, even over objections from his legal department.

Fraud happened in the approvals process at a number of government institutions.  SERNA, the environmental resources agency, for example, approved the feasibility study on December 16, 2009, without bothering to locate the land on which the project would take place, or determining who owned that land, or confirming approvals from the municipality where the dam would be located, all abnormalities that the legal department at SERNA noted.  Yet they too recommended approval of the project.

The feasibility study itself was improperly done.  It was submitted to SERNA on October 5, 2009, just 24 hours and 5 minutes after ENEE gave its permission.  Nevertheless, SERNA and Castillo Argueta signed a contract on January 22, 2010 that gave DESA the use of national water.  This contract was signed despite a negative recommendation from the National Energy Council, which noted that DESA did not meet the legal requirements for a contract.

SERNA issued a "Category 2" environmental license for the Agua Zarca project on March 24, 2011.  MACCIH and UFECIC-MP allege the project was miscategorized in favor of DESA, giving them cheaper license fees. The environmental license required a two-year study of the amount of water flowing in the river, and the law specifies that is two years after the water use contract is issued. The study was supposed to contain two years of data on the volume of water flowing in the Gualcarque river.  It was supposed to be current data.

Instead the study contained data from a 2003 proposal previously rejected by ENEE, that Carolina Castillo Argueta had access to because the union she represented was supposed to partially finance the rejected project.

Less than two years after the water use license was approved on January 22, 2010, SERNA issued an environmental approval for the Agua Zarca dam.  They had to know the data included were falsified.

The 2003 project DESA plagiarized asked to construct a 6 MW power plant, and DESA's original request was also to build a 6 MW project. 

In August of 2010, DESA received a concession for a 14.5 megawatt project. 

On May 14,  2011, DESA asked for, and received an increase to 21.5 megawatts

DESA said it would add a third turbine to generate this power, but MACCIH suggests that it's not clear the river actually has enough water to support a third turbine, or even fully support the second turbine. Without a constructed project producing power using the proposed model, it's difficult to judge the alleged improvements. 

An economic analysis suggested the proposed investment in a third turbine was intended to increase the total investment DESA had in the project, which would then increase the purchase price ENEE would have to pay for their electricity. 

Higher investment ==> higher purchase price in ENEE's pricing models.

All in all, not only does the project have the problems we knew with community consultation and approval; as an engineering project, its feasibility was uncertain. The record of approvals and contradictory roles of individuals involved is a clear indication of violation of law. And it seems the main purpose in setting the project up the way it finally was approved and was to be implemented might have had more to do with extracting more government money, than with any actual power production.

The sixteen individuals charged in this case are:  Francisco Rafael Rivas Bonilla, Julio Alberto Perdomo Rivera,  Catarino Alberto Cantor López, Luis Eduardo Espinoza Mejía, Anna Lourdes Martinez Cruz, Aixa Gabriela Zelaya Gomez, Dario Roberto Cardona Valle, Mauricio Fermin Reconco Flores, José Mario Carbajal Flores, Oscar Javier Velásquez Rivera, Roberto Anibal Martínez Lozano, Roberto David Castillo Mejia, Julio Ernesto Eguigure Aguilar, Raul Pineda Pineda, Carolina Lieth Castillo Argueta, and Saida Odilia Pinel. 

They now stand accused of Abuse of Authority, failing to fulfill the requirements of a public official, falsification of documents, negotiating in a way not compatible with holding public office, and fraud.