Latin America

Prosecutor wants two powerful Chilean businessmen held in custody

Penta Group owners accused of paying off politicians to avoid handing over millions in tax

Santiago de Chile -
Former tax auditor Iván Álvarez faces charges in the Pentagate case.
Former tax auditor Iván Álvarez faces charges in the Pentagate case.EFE

In one of the biggest corruption cases to hit Chile in recent years, a judge could decide on Thursday whether to place two powerful businessmen with ties to the right-wing Independent Democratic Union (UDI) party in preventive custody as they face charges related to a sophisticated tax-evasion scheme.

Carlos Alberto Délano and Carlos Eugenio Lavín, both owners of the influential Penta Group, allegedly conspired with others to bribe politicians and offer political donations to avoid paying millions in state taxes over the years, prosecutors said.

Former undersecretary for mining Pablo Wagner has also been accused of allegedly receiving $71,400 from the Penta Group while he worked at the ministry from 2010 to 2011 during President Sebastián Piñera’s administration (2010-2014).

The exact amount Penta Group avoided paying in taxes is not known, but is believed to be in the millions

The so-called Pentagate case has struck at the heart of Chile, which up until last year was considered the most transparent country in Latin America.

Prosecutors have also requested Iván Álvarez, the former chief auditor at Chile’s tax revenue service (SII), to be held in preventive custody.

Chief prosecutor Sabas Chahuán has said he found evidence that the Penta Group made large donations to various political campaigns – mostly to UDI candidates – that surpassed the legal limit on campaign contributions while at the same time receiving generous tax cuts for their gifts.

The exact amount the Penta Group avoided paying in taxes is not known, but investigators believe it could be millions.

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With $20 billion in assets, Penta Group is a major investor in real estate, insurance, the financial sector, public health and education. Délano and Lavín are closely tied to the right-wing conservative UDI, whose reputation has been badly damaged by the scandal.

The prosecution is also asking Judge Juan Manuel Escobar, who is overseeing the case, to place former Penta managers Marcos Castro and Manuel Antonio Tocornal under house arrest.

Another former manager, Hugo Bravo, was responsible for blowing the whistle on the conspiracy when he filed a labor complaint against the company’s comptrollers. He is also facing charges of tax evasion, bribery and money laundering.

On Wednesday, prosecutors produced emails between Penta officials and top politicians. According to the complaint, Penta helped illegally finance the campaigns of UDI lawmakers who are now serving in Congress.

The son of President Michelle Bachelet is embroiled in another scandal regarding a $10 million loan

Pentagate is not the only corruption scandal to rock Chile recently. Some weeks back, the son of President Michelle Bachelet, Sebastián Dávalos, resigned from his job at La Moneda presidential palace after it was revealed he and his wife received a $10 million bank loan during his mother’s campaign.

The case is still being investigated by the prosecutor’s office.

“As a mother and as president these have been painful moments,” said Bachelet on February 23 after learning about the case in the Chilean press.

According to an Adimark poll released this week, support for Bachelet dropped 39 percent last month.

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