Chile’s Growing Corruption Scandal Underscores Need for Whistleblower Protections

Former financial regulator Bill Black reports on a corruption scandal embroiling Chile’s conservative party and business executives


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Story Transcript

SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to The Real News Network. I’m Sharmini Peries, coming to you from Baltimore. And welcome to this edition of the Bill Black report.

Four executives of one of Chile’s largest financial groups, a tax auditor, and a former government official were taken into custody on Saturday after prosecutors filed charges of tax fraud, bribery, and money laundering against them. This is a scandal that has taken Chile by quite surprise, because usually this class of people are fairly secure.

Now to talk about all of this is Bill Black. And Bill is joining us from Quito, Ecuador, for his report. And Bill is, as you know, an associate professor of economics and law at the University of Missouri-Kansas City. He’s a white-collar criminologist and a former financial regulator and author of The Best Way to Rob a Bank Is to Own One.

Bill, thank you for joining us.

BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you and this institute for higher educational studies in Quito.

PERIES: So, Bill, what interests you the most about this particular case in Chile?

BLACK: So this is fascinating, because Chile, the idea has been this is supposedly where the Chicago school has had the greatest–Chicago school of economics had the greatest success. But most scholars think that Chile has had a lot of strengths long before the UChicago folks had, and that one of them was relatively less corruption. And, of course, the conservative regimes like to pride themselves as supposedly being immune from corruption, or at least having far less of a problem.

But this scandal in Chile is all about the conservative party. The scandal was (A) to evade taxes, (B) to evade taxes through bribery, and (C) to use part of the bribery proceeds to go to fund the conservative party. So that’s sort of like strike one, strike two, strike three, you’re out, in U.S. baseball terms. So it’s somewhat embarrassing to Chile, but it is extremely embarrassing to the Conservative Party.

And here’s the big thing that we should all be looking at very. It’s a real gut check for the Chilean judiciary and the prosecutors, because it turns out that when you look at it more, Chile hasn’t been quite so pure. What’s happened, though, is what happens in a number of places, and that is if you’re really, really rich and really, really powerful, you can steal and you can bribe with a great deal of impunity. So there are very few successful cases against this kind of corruption in Chile. This is a major effort by the government to prosecute elites, who are going to have very good lawyers, and they’ll be willing to spend money like water to defend. And we’ll see.

Can they actually get it done? I would note that Iceland had a similar reputation that it was very hard to get anyone elite convicted of white-collar crimes that country. But as we noted in an earlier report, all three of the CEOs of their largest banks that led the frauds because of the Icelandic crisis have now been convicted, and most recently the sentences upheld in the Icelandic Supreme Court.

So the fact that you have a bad history doesn’t mean that you can’t change and improve your nation. And President Bachelet in Chile is trying to do exactly that.

PERIES: What is it that led to these arrests, I mean, besides having the leadership of the president? Bachelet has been talking about doing this. But what is that actually turned the key here in terms of these charges?

BLACK: Well, that’s a particularly interesting question, because the answer is some very un-Chilean activity. There was a whistleblower, and whistleblowers are always retaliated against and are often despised even in countries like the United States, which is about as favorable to whistleblowers as you can find. But in general in Latin America, whistleblowers are considered a lower life form. And they proved their value in bringing this. I mean, they have not just a whistleblower now; they have confessions from some of the officials that were bribed and who told about how the proceeds were used. So from the outside it appears to be a particularly strong case for the prosecutors. And, again, that’s why we in this report keep saying you need to encourage whistleblowers. It’s one of the best ways possible to root out elite crimes.

PERIES: And is there a particular set of protections for these whistleblowers in Chile?

BLACK: [laughter] No.

PERIES: Alright. I thought there would be something we could learn from.

BLACK: No. The United States is one of the rare places that has any whistleblower protection. In the United Kingdom it’s hilarious. And there have been several cases recently where there’ve been parliamentary inquiries where they, the financial regulators, were asked, so what do you have in the way of protection? And they keep saying, you know, some phrase like, well, we stand ready to give the full measure of protection. Right? And no one in the United Kingdom in this entire crisis, no one has suffered any penalty for reprisals against whistleblowers.

So, no, these defenses exist almost exclusively in the United States. And that means that people like this in Chile are all braver and all more deserving our support.

PERIES: Right. Bill, I never thought that I would hear that from you–from down in Quito, U.S. looks pretty good, huh?

BLACK: Well, we’re not bad at everything.

PERIES: Alright. Thank you so much for joining us.

BLACK: Thank you.

PERIES: Thank you for joining us on The Real News Network.


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