Petroecuador corruption scandal reaches high levels of the Correa administration

Nov 9, 2016 | 3 comments

Allegations of bribery and money laundering have spread to top officers of the Ecuadorian government, with Vice President Jorge Glas the latest to be implicated.

Carlos Pareja

Jorge Pareja

On November 3, the International police agency Interpol issued a capture order for former Ecuadorian energy minister and head of its state oil company Jorge Pareja, who fled the country for Spain in September in a case that echoes Brazil‘s “Car Wash” scandal.

News sources in Ecuador and Panama say the web of corruption may involve a number of government officials, including Glas, who is a candidate for another term with former Vice President Lenin Moreno.

Vice President Jorge Glas

Vice President Jorge Glas

President Rafael Correa admits that the scandal probably involves a number of government employees, but says charges against Glas are a smear campaign.

Pareja, who was the energy minister for hydrocarbons between November 2015 and April 2016 and had previously headed state oil company Petroecuador, is subject to a preventative detention order alongside eight others, all of whom are accused of bribery, first reported by the Quito newspaper La Hora.

Pareja and his associates stand accused of taking bribes in exchange for Petroecuador state contracts and then concealing the money in offshore accounts in Panama. According to prosecutors, $1 million in suspect funds were deposited in Pareja’s accounts during his time as minister.

President Rafael Correa denounced the case as “the most serious act of corruption” during his time in office. “It is very sad situation and I regret it has happened during my term,” Correa said. “We will get to the bottom on this.”

While the bribery charges levied against Pareja and his associates are serious enough, there is evidence they are little more than the tip of the iceberg when it comes to corruption in Petroecuador. The complex web of offshore accounts linked to those investigated imply a far more sophisticated criminal operation dedicated to illegally profiting from the company in numerous ways.

The investigations of online magazine Focus Ecuador, which helped expose the scandal, suggest that at the crux of this is the overcharging for contracts and the siphoning off of extra money. According to Focus, the renovation of a Petroecuador refinery in Esmeraldas raises the most suspicions. Construction went $1 billion over budget, with Pareja responsible for over half of the contracting that resulted in the overspend.

The allegations are reminiscent of those heard in  the “Car Wash” (Lavo Jato) investigation into Brazilian state oil company Petrobras. Car Wash began with allegations of personal corruption among politically connected elites, but branched off into numerous different areas of investigation that have helped reveal the endemic corruption at the heart of the Brazilian political system.

The investigation in Ecuador has the potential to follow a similar path. Pareja, although now disowned by President Correa, was once one of his inner circle and his go-to man for issues related to the oil sector and it seems unlikely such high-level corruption would stop with him.

The suggestion that Glas has been involved in money laundering activities was made by Panamanian newspaper La Estrella earlier this week, has been met with denials not only from Correa, but from presidential candidate Moreno. Moreno insists that Glas will remain his vice-presidential running mate unless the charges can be factually verified.

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