Congressional Corruption Part 1

Lest we think that all is well in the Honduran Congress as a deliberative body, recent news reports in Honduras document widespread corruption in the Honduran Congress; everything from the way money ends up back in Congressperson's pockets to the way laws as published in the official newspaper, are completely different than what was voted on in Congress.  Corruption here is widespread, and deep.

The OAS mission to support the fight against corruption and impunity in Honduras (MACCIH for its acronym in Spanish) found out this week that the problem in Honduras with impunity and corruption isn't that they don't know how to follow the internationally recommended ways to combat corruption and write a legal framework that combats corruption.  Since the 2009 coup numerous panels have made legislative suggestions that have been totally ignored. Honduran legislators, the Judicial and Executive branches have have deliberately ignored them for a reason.

The problem in Honduras continues to be that the government at all levels, from the legislative, to the Judicial, and the Executive branches, is rife with corruption.   They actively choose to write legislation that facilitates corruption and impunity.  No amount of MACCIH investigating crimes and suggesting model legislation will fix that.  But only now is MACCIH waking up to the reality of Honduras.

This week the Honduran Supreme Court dismissed the first  corruption case that MACCIH brought to trial.  This was the case of the five Congresspeople who were paid off by the Executive branch for changing their allegiances to the National Party.  In return they were paid using funds Congress allocated to an NGO for social programs.  The money, some $300-$400,000 ended up in the private bank accounts of these five Congressmen.

It was a well documented case that should have easily resulted in a conviction.  Instead, the Honduran Supreme Court threw one roadblock after another at the prosecution.  First, they refused the request to have the Congressmen arrested to await trial in jail.  Next they scheduled the first trial date to be the Dia de Innocentes (Innocents’ Day).  The Supreme Couirt judge postponed hearings time after time.

Then Congress acted, or maybe the corrupt leaders of Congress acted would be more precise.  All those leaders were, at the time, members of the National Party.  The lame duck Congress came back after New Years and passed a series of laws, among then on January 18th a new "Ley Organica de Presupuesto"(decreto 117-2017)  with some interesting clauses.  The new law, as written, takes away from the Public Prosecutor's office the right to pursue crimes related to the budget of Honduras, instead giving it to the Tribunal Superior de Cuentas (TSC).  The law particularly states that while the TSC is auditing any budget item, the judicial branch cannot act.  To rub MACCIH's face in it, they made the law retroactive.

Given the new law, the Supreme Court judge dismissed the case against the five Congresspersons because the Public Prosecutor's office had no standing to bring the case.  MACCIH works with the Public Prosecutor's office, not the Tribunal Superior de Cuentas.  Not only does this destroy MACCIH's ability to investigate and prosecute the crimes it was set up to pursue, but it also closes investigations it had open on over 60 Congresspeople, including the President of the Congress, Mauricio Oliva.

Article 16 of the law gave Congresspeople the right to request, administer, and spend public funds from any source (government, NGOs, etc) that are for community development, social aid, and the improvement of law and democracy.  This change in the law legitimates the transfer of funds to the five charged Congresspersons.

Article 131 of the new law authorized the Tribunal Superior de Cuentas (TSC) to audit the use of these funds, specifically funds from 2006-2018, retroactively.  It gives the TSE 3 years to perform the audit of those years and only when it is done, and publishes its report, will changes be adduced and filed against anyone.  No criminal charges can be filed against anyone on these grounds while the TSC is investigating and writing its report.  Nor can civil charges be filed.

These changes passed with 69 votes for, and only 2 against, with 11 abstentions.  The changes shut down MACCIH's investigations and ability to bring charges against this kind of financial corruption.

Nasralla Denied Entry to Congress

Mauricio Oliva rules the Honduran Congress with an iron hand.  His armed guards are omnipresent, and free access to Congressional proceedings is practically non-existent, even if you are an accredited reporter.  During voting sessions for the Supreme Court, his armed guards stand between the ballot box and the seated Congress members as they come up to cast their ballots.

Today his security guards detained the leader of the Partido Anticorrupción (PAC), Salvador Nasralla, from entering.  He sought to go in to find out if there would be a vote today on Supreme Court nominees (there wasn't).  He isn't a member of Congress, but he is the head of a political party that currently won't vote for the suite of candidates being put forward by the National and Liberal parties.

When Nasralla arrived this morning, as he has on many previous occasions, the guards prevented him entering while they checked with their supervisor to see whether or not to let him in.  Their supervisor, via walkie-talkie, told them he was not authorized to enter, so they detained him and questioned him as to his purpose for wanting to go in.

He had to call one of his party members who was a member of Congress, who then had to negotiate permission for Nasralla to come in.  To quote one of the articles, Virgilio Padilla, Congressman for the Department of Francisco Morazan and a member of PAC, literally "had to convince the head of security that the engineer (Nasralla) did not represent any danger."

Nasralla proposed today that PAC would accept the imposition of Rolando Argueta, currently the chief prosecutor, as Chief Justice, if Oliva would open up the voting to at least six of the candidates favored by PAC.

"We need 7 (justices) more, they want to place one who they say is Mr. Argueta because he will do what they want on extradition, but the other 6 should be from the list agreed to by PAC.  We've knocked around the list of 15 candidates that at least among them should be six that go there to defend the people."

Remember that the Nominating Committee submitted a list of 45 candidates that was split evenly between National and Liberal party affiliated candidates, plus one independent who was elected in the first round of voting.  Four of the six candidates that Nasralla proposes be voted on are National Party members.

But that deal isn't likely to go through.  So far Mauricio Oliva, the head of Congress, will only allow votes on the National Party's proposed slate of 7 candidates, because being rejected in three separate ballots isn't enough shame.

The next vote for Supreme Court nominees is currently scheduled for Tuesday, February 9.

Electing a Supreme Court, Badly.

The Honduran Congress is responsible for electing a new Supreme Court every 7 years under the Honduran Constitution.  Yesterday the National and Liberal parties tried to carry on as they have for the last 34 years, nominating a suite of 8 National Party members, and 7 Liberal Party members.  Mauricio Oliva, the president of Congress and a National Party member, then forced the procedure of voting on the entire slate, rather than approving each justice individually.  He was certain he had the votes because of the alliance between the crumbling Liberal Party and the ruling National Party.  He needed 86 votes.  He got 82 (or 84 depending on which Honduran newspaper you read).  Congress failed to appoint a new Supreme Court.

But that's only the tip of the iceberg of corruption around the election of this Supreme Court in Honduras. Lets turn to the candidates themselves.  Last October,  American Bar Association joined the Centro por la Justica y el Derecho Internacional (CEJIL), the Fundacion para el Debido Proceso (DPLF), and Impunity Watch to form an international oversight committee reviewing the election of justices in Honduras.  They met with the nominating committee and held workshops for them on international standards and best practices for selecting justices.  It mostly seems to have been in vain.

The master slate of some 200 candidates was formed by the Nominating committee in a procedure that privileged some institutions, such as the business community, labor unions, and civil society, with making their own nominations.  Others candidates self-nominated.  The list of 200 candidates filled out questionaires, underwent drug testing, answered questions about affiliation or participation in drug trafficking with a polygraph.  Each candidate received a numerical score, and all of this information was supposedly used to winnow the list down to the 45 "best" candidates, if by "best" you include 12 who failed the polygraph test, and some whose legal qualifications are suspect.  During the process, the US Embassy in Tegucigalpa twice submitted lists of candidates that it said required more investigation or that should be eliminated outright, supposedly based on an FBI evaluation of candidates. 

In the end, the Nominating committee submitted a list of 45 candidates to the Honduran Congress, including candidates that failed the polygraph portion of the test, and those that had numeric scores less than 50%.  These are the ones the Nominating Committee said were the "best" candidates, but they refused to make public the selection criteria. 

On January 21, the Human Rights Center of the ABA issued a 9 page report on the work of the Nominating committee, saying that it failed to meet international standards for transparency and follow the best practices for the selection of justices.  So much for those workshops in October.  The ABA said the Nominating committee had made an effort, but had not gone far enough to investigate the candidates, and that the whole process lacked transparency.  They pointed out that the "election" of the Nominating committee itself was problematic.  They made a long list of suggested improvements to the process. 

Once Congress had the list, Mauricio Oliva appointed a review committee of 10 Congress people to review the nominations and recommend a slate of candidates.  The committee was composed of members of the 5 political parties which have Congresspeople, with a majority of the positions going to the National and Liberal parties and the supporting Christian Democrats.  All committee members were selected by Oliva, not their parties.

Monday started badly for transparency when Congress blocked most of the press corp in Honduras from entering to cover the election of the Supreme Court. Blocked press included Padre Melo of Radio Progreso.

The vote failed because Oliva did nothing to court the opposition party members into supporting the slate of hand picked candidates.  He did get 9 votes from opposition party members, but clearly expected more.  After the vote, Salvador Nasralla said that only 5 of the 15 candidates were qualified in his opinion.  PAC, Libre, and PINU have together called for an open, public vote for the Supreme Court candidates, but Mauricio Oliva has instead imposed a secret vote, using paper ballots rather than the electronic voting system in Congress.  Its far easier to manipulate the results of paper ballots, as both the Liberal and National parties have done in the general elections for the last 34 years.

Congress meets again at 4 pm to reportedly reconsider electing the same slate of 15 candidates again, only this time with a secret vote instead of a public one, using paper ballots instead of the electronic voting system installed in Congress.

"Central American Spring"?

The Economist published an article  that provocatively asks in the headline if the 12 weeks of torchlight marches in Honduras is "A Central American Spring".

The paper quickly repudiates that idea in the body of the article. The Arab Spring was rapid and violent.  Rather than a violent uprising, the Economist quotes Central American Business Intelligence as expecting slow, gradual change in Central America.

Slow, gradual change is not what the people protesting want: they are asking for the current president to resign.

For 14 weeks in Honduras the indignados, those upset with corruption and impunity in Honduras, have taken to the streets in all the major cities, carrying bamboo torches (not unlike the patio torches one can buy here in the US), seeking a Honduran International Commission against Impunity (CICIH in Spanish) and the removal of Juan Orlando Hernandez. 

While there are no official crowd estimates, the marches clearly mobilize tens of thousands of people in both Tegucigalpa and San Pedro Sula alone. Also remarkable is the range of cities and towns where marches are taking place. They are substantial and peaceful.

In an attempt to defuse the crowds, Hernandez has called for facilitators and mediators from the Organization of American States and the UN to oversee what he calls "dialogue".  This is in lieu of asking for a CICIH, which would be appointed by the UN to independently investigate corruption and impunity in Honduras. 

Hernandez alleges his government's efforts to reform the government are sufficient if people just give the institutions a chance to operate.

But the institutions he wants the Honduran people to trust aren't operating.

A snail's pace would be fast compared to the Public Prosecutor's office, for example. 

A trail of checks document the movement of money from the Instituto Hondureño de Seguridad Social (IHSS) through at least three front companies in Honduras into the National Party bank accounts including those of the Hernandez Presidential Campaign. When journalists made this public in May, they used copies of the checks from the actual prosecutorial case file shared with them.  Despite this financial trail, no one has been charged, and no one even questioned, about these checks, checks that implicate the leadership of the National Party in corruption. 

There are actually indications that the Assistant Public Prosecutor, Rigoberto Cuellar, may himself be linked to an influence-pedaling scandal, but he is not as yet the target of any investigation.

This is the face of impunity in Honduras. It is why the indignados are marching. And they are marching for a specific remedy that exists in action in their neighbor to the north, Guatemala.

In Guatemala, people are also marching weekly. Here, there is already an International Commission against Corruption and Impunity (CICIG in Spanish), sponsored by the UN at Guatemala's request, and funded by voluntary contributions from a number of different countries. 

This unit, as noted in the Economist article, has been instrumental in uncovering and prosecuting corruption in the Guatemalan governments past and present. The transparency of these investigations served to mobilize the populace of Guatemala tired of corruption. 

The CICIG has in fact, sought to bring charges against the President and Vice President of Guatemala for corruption. Over 100,000 people gathered last week in central Guatemala City to call for the President to resign. Their demands have now been endorsed by the country's Roman Catholic bishops.

In Honduras, at least for now, President Hernandez is not only rejecting the idea of an independent CICIH, he's actively working to discredit the idea through the public pronouncements of his advisor Ebal Diaz, who has made up "facts" to discredit the CICIG.  Officially the National Party Congressional delegation is against the proposal as well.  Mauricio Oliva, President of Congress, called it "foreign intervention".

Almost every other political party in Honduras supports the call for the CICIH. LIBRE supports it; the AntitCorruption Party (PAC) does too. 

The Liberal Party recently held a "unification" meeting to align its congressional delegation with the thinking of its directorate. The idea of a CICIH was a key source of difference. The Liberals in Congress recently voted against legislation that would have put the call for a CICIH to a public referendum, legislation sponsored by LIBRE.  At the time they said they voted against it because they thought it would delay prosecution, particularly of former Zelaya government officials. The directorate of the Liberal Party was in favor of a referendum, making the defection of its Congressional delegation a major issue. In the unification meeting, the party members agreed to vote for a CICIH if it comes up again.  But it is unclear that the Congressional leadership will allow another vote.

Last Wednesday, the indignados held a national strike, calling for businesses to shut down and main traffic arteries in the country to be blocked. Roads were blocked for a time until the police broke up the protests, and some businesses shut down, but not most. 

Last Friday's march ended at the Consejo Hondureño de Empresa Privada (COHEP) building where marchers met with business leaders. Whether this will result in businessmen supporting the marchers' goals is an open question, but the fact that talks were entertained is significant. COHEP  supports the government; any change in support here would likely destabilize it.

Slow change indeed.

Selling the Wind, or How Honduras Will Finance Its Debt

The government of Honduras wants to sell you the wind. Literally.

The proposal is for a new kind of investment instrument.

On July 20, the Honduran Congress passed a law called the Ley de promocón del desarrollo y reconversion de deuda publica, which can be read here in its entirety. 

The newly passed law, proposed by the Executive Branch, creates a special commission of trustees sited in the Central Bank of Honduras.  That commission, which includes the Minister of Natural Resources, will identify "idle" assets.  It will also create a technical committee to analyze the financial potential and return on such assets, and oversee the concession of assets to private parties.

So what are these "idle resources" that Honduras proposes selling?  The wind, for wind power; the rivers and the land for hydroelectric power; and mineral rights - gold, silver, and iron in particular, though it also just sold petroleum exploration rights. They can be pretty much anything not already under the control of the Comisión para la Promoción de la Alianza Público-Privada (COALIANZA).

Once the resource is identified as idle, the government will seek to lease it in concession to a third party. The lease process will involve estimating the income-producing potential of the asset, both for the party leasing it, and for the government.

The lease will produce, among other things, a future income stream for the government for the length of the lease. The leasing part of the law merely makes references to the processes used by COALIANZA for its concessions.  The same rules will apply.

Normally income from a lease would trickle in to the government coffers over the length of a lease, producing income for both the present and future governments of Honduras. 

But the new law empowers the Central Bank, or someone delegated by it, to securitize this future income stream and sell it to others, based on the discounted present value of that future income stream. 

This discounted present value of the future income stream will come to the government in a lump sum, rather than as several smaller payments over the lease duration.

The law specifies that it must be used to pay down the Honduran government's debt.

The Financial Minister, Wilfredo Cerrato, argued that the state would be getting the future income that this resource would generate over longer periods, like 20 years, but getting it all now instead of year by year over the 20 years, and that the money would then be used to pay down the national debt, because at least for now, the law prohibits it to be used to pay current expenses. 

Cerrato added:

What we want is to pay the internal debt, which is short term at high interest rates, to achieve what the law's title says, "reconversion of the debt".

Cerrato characterized the "idle resources" that are covered by the new law as not generating wealth but rather producing poverty.  He suggested that Honduran pension plans would be likely purchasers of the assets.

The law, which originated with Lobo Sosa's executive branch, was introduced and passed during a Congressional session held in Lempira rather than the capital of Tegucigalpa. 

The bill had not previously been disclosed or put through committee.  Its content was unknown to most at the start of this Congressional session.

Because the session was held outside the capital, fewer members attended, and those who did attend were primarily National Party members.

During the Congressional session, Congress voted to suspend the requirement for three debates and to hold only one debate on this law.  It then passed the law in a single debate. This has brought about much grousing from almost all sectors.

The law, by not going through the committee review, passed pretty much as it was submitted by the Executive Branch.  It was not publicly disclosed, so there was no discussion about what Congress was enacting. That seems to have been by design.

As Ralph Flores, an executive of the Foro Social de la Deuda Externa y Desarrollo de Honduras (FOSDEH) stated, the people should have been consulted.  FOSDEH is one place where the Honduran public gets to comment on proposed government policy.

Flores said that he thought the law probably was a good financial move, but that the government of Honduras shouldn't be managed like a private company.  As these are resources belonging to all the citizens, he said, probably they should have been consulted before the law was approved:

Unfortunately here they only talk about this type of activity as beneficial.  There needs to be an objective balance.  There are methodologies to analyze if an investment is positive or negative for the economy or for a society.  Here we only look at the financial stream as a positive element.

Mauricio Oliva, the new head of Congress, says that such lease arrangements are nothing new, that the approach has been used successfully by many other countries, and points to Costa Rica and Colombia. 

Cerrato vehemently defends the law, claiming that without it Honduras won't make payroll for government employees in November.  That in turn suggests they already have assets identified and potential buyers of concessions lined up and presume they can bring securities on these assets to market before November.

Hugo Noé Pino, who represents the  Instituto Centroamericano de Estudios Fiscales (ICEFI) in Honduras, told La Prensa that the law was suspicious because not only of the rapidity with which it was proposed and passed, but for the lateness in Lobo Sosa's term.  This made him suspect that there were some ulterior motives.  He said the law sells Honduras in pieces:

"The most worrying part of this affair, given that the government has not shown itself to be trustworthy, is that  through this hurried law, just as with the model cities, [it has] committed all the resources of the state of Honduras without leaving to the next government any possibility of structuring its own recovery and investment plan for the country.  The next government will have its hands tied by these decisions."

Lobo Sosa says the law helps, not hinders, future governments.  Lobo Sosa goes on to claim this will not benefit his government one bit, a statement seemly contradicted by his Finance Minister's statement that without this law the government will not be able to meet the November payroll, implying income to this government, surely a benefit.

By using the processes specific to COALIANZA, the government avoids its own contracting law which would impose a greater transparency on the process.  It was this process that resulted in COALIANZA signing an MOU with Michael Strong for a model city somewhere other than where Congress had stated it wanted model cities (eg, San Pedro Sula instead of Puerto Cortes). 

COALIANZA's processes are not transparent nor do they always work towards the same goals as the government, as the model cities bungle demonstrated.  Civil society has no input into what the new commission decides to license. 

All resource-based projects involve expropriation (with long delays in payment in cases like the Patuca III dam project now underway). They may involve the dislocation of populations living on the concession, without any compensation.

There are no controls on either the number of employees, or the budget of the oversight commission set up in the new law.  It is unconstrained, and at this time, unfunded. Future governments will have to allocate it a budget for salaries and operations.
 
Civil society should pause at the statements of the Finance Minister that employee pension funds should invest in these financial instruments, which are effectively unsecured bets where a payment to the government up front gives the lease holder the "right" to profits from exploitation of a resources that may or may not be successful.

It has been an expressed goal of Honduran governments since at least 2009 to use the large government employee pension funds to improve the liquidity of the central government. It sounds like Cerrato sees this as one such mechanism.

This is just the latest of a series of laws passed by this administration that takes control of national assets and turns them over to private parties. 

These include the original model cities law, and the COALIANZA law that has sold concessions to airports, roadways, and railways. It includes the ZEDE law (aka model cities 2) which creates private economic development zones that can have their own laws, as well as the new mining law, which pretty much gives mining companies permission to do what they want on their concession.

There apparently is nothing that the Lobo Sosa government won't privatize.

Even the wind.