By Dario Montero
MONTEVIDEO, Oct 12 2004 (IPS)

Suicides and stress-related health problems strew the path of the tens of thousands of depositors in Argentina, Uruguay and Paraguay who are trying to recover at least part of the savings they lost two years ago in a flood of bank runs, fraudulent bank activity and financial collapse.

As one Uruguayan account-holder who lost her savings told IPS, the anguish of losing everything is aggravated by the exasperatingly slow pace of justice as the judiciary, with limited resources, seeks to unravel the complex tangle of years of financial machinations designed to cover up fraudulent operations carried out in Argentina, Paraguay, Uruguay, the Caribbean and the United States.

José Rohm, who along with his brother Carlos and three transnational financial institutions owns banks that are currently in liquidation in Argentina and Uruguay, is living comfortably in Miami while he waits for the United States to decide on an extradition request issued by Uruguayan Judge José Balcaldi.

Also calmly residing in the United States is Juan Peirano, "the brain" behind the Grupo Velox business group, which went under as well. Peirano faces international arrest warrants issued by courts in Uruguay and Paraguay.

His brothers José, Jorge and Dante have been prosecuted and are in remand custody in Montevideo, the Uruguayan capital, awaiting trial. Their father, Jorge Peirano, also spent time in prison, where he died in 2003.

The liquidators of the Trade & Commerce Bank (TCB) in the Cayman Islands, one of the main links in the Peirano family’s extensive financial network, admitted to furious account-holders in Montevideo that they met with Juan Peirano in a secret meeting in New York to try to obtain information that would facilitate the recovery of assets, to pay back the swindled savers.

Grupo Velox banks in the region offered depositors better terms if they agreed to place their money in the TCB.

In the meantime, the Peiranos and trusted employees withdrew huge sums of money from the TCB through unsecured loans to companies that they themselves ran.

According to those handling the liquidation proceedings, the Peirano family thus siphoned off 800 million dollars, just three million of which have been recovered. But only 170,000 dollars of that were left for account-holders after the liquidators’ expenses and fees were deducted.

The Paraguayan justice system appears to be making the fastest progress. A public, oral trial is set to open Oct. 27 against three Grupo Velox executives.

However, in the case of José and Juan Peirano, the Paraguayan courts will have to wait for the Uruguayan judiciary to act before they can be tried in Paraguay.

After Grupo Velox began to collapse in Paraguay, it dragged down with it the Banco de Montevideo and Caja Obrera banks in Uruguay, Banco Velox in Argentina, the TCB in the Cayman Islands, and an assortment of banks, supermarkets and companies in those three countries as well as Chile, Peru and southern Brazil.

A similar fate faced the Rohm brothers’ financial group which, along with JP Morgan, Dresdner Bank and Crédit Suisse, owned the Banco Comercial and Compañía General de Negocios in Uruguay, and the Banco General de Negocios and other banks in Buenos Aires.

Economist Luis Porto told IPS that Argentina’s late 2001 financial and political meltdown and the simultaneous flight of billions of dollars in capital from that country contributed to the failure of the biggest private banks in Uruguay and Paraguay and helped push both countries to the edge of the abyss.

Argentina’s debacle revealed a long chain of scams, diversion of funds and other illegal operations involving account-holders’ money, some of which were committed to cover up the effects of the crisis while others dated back months or even years.

When the Banco Alemán, one of the most trusted banks in Paraguay, went under in 2002, 400 million dollars were withdrawn in a run on the bank, and the local currency depreciated by 30 percent, Paraguayan business consultant Sergio Britos pointed out to IPS.

At the same time, Citibank in New York bailed out its Paraguayan subsidiary to the tune of 180 million dollars, to deal with a bank run and stave off a takeover by the Central Bank.

In Uruguay, meanwhile, "we will never exactly know" the cost of the Rohm-Peirano scandals, said economist Juan José Clavería in an interview with IPS.

But he added that "it is possible to get a rough idea if you consider that the public debt climbed in less than a year" from nine to 12 billion dollars – exceeding Uruguay’s gross domestic product (GDP) in 2003.

Clavería, an adviser to the Uruguayan bank employees’ union, said that sum includes the 1.5 billion dollar emergency loan granted Uruguay by the United States against an International Monetary Fund (IMF) credit, which enabled the government of President Jorge Batlle to ward off default, something neighbouring Argentina was unable to do.

But damages to the financial system are felt for years. Compounding the effects of the breakdown in the chain of payments that drove so many companies and families into bankruptcy, the impact of the liquidation of banks is long-lasting.

That was illustrated by the Banco Mercantil, also owned by the Peiranos. Although it went under in 1971, the repercussions were still being felt in Uruguay in the late 1990s.

The crisis of 2002 also had a tremendous impact on the Banco Hipotecario del Uruguay (the state-owned mortgage bank), and forced the state-owned Banco de la República, the country’s biggest bank, to freeze and reschedule bank deposits, in some cases for several years.

There is still a chance that the Inter-American Court on Human Rights will hand down a ruling against the Uruguayan state if a lawsuit for violation of property rights prospers.

The legal action was brought before the Inter-American Commission on Human Rights in 2003 by Alicia Barbani and accountant María del Huerto Breccia.

Barbani, a depositor who was bilked out of her money and has since become the spokesperson for many of the thousands of account-holders in a similar position, told IPS that losing their life savings led to serious health problems for many, and drove six to suicide.

"Not all of the depositors involved are wealthy, as some people like to say," she underlined.

While the savers take legal action to attempt to recuperate at least part of their money in reparations, and the lawsuits slowly wind their way through the courts, no government officials have been held accountable, despite the harsh verdicts of oversight bodies.

The economists consulted by IPS say there was a lack of effective and timely official oversight or, even worse, that government officials acted as accomplices, in Paraguay, Uruguay and Argentina.

They pointed to the close ties between the Rohm brothers and the governments of Argentina – especially former president Carlos Menem (1989-1999) – and Uruguay in the 1990s, as well as the long-standing collusion between the Peiranos and Uruguay’s traditional political elites.

The depositors who spoke to IPS believe the suspicions that government officials turned a blind eye or actively abetted the fraud will be confirmed when the cases come to trial.

But the slow pace of the legal investigations has already forced Argentine Judge María Servini de Cubría to release Carlos Rohm on 1.7-million-dollar bail. Rohm was arrested as he was boarding a plane to Switzerland in 2002, on charges of illicit association.

And because Carlos Rohm is being tried in Argentina, Judge Balcaldi in Uruguay cannot get his hands on him until he is either convicted or acquitted.

Balcaldi, who has already prosecuted seven people in connection with the Banco Comercial and the stripping of its assets, told IPS that there will be no new developments in the case, at least before year-end.

He described the U.S. delay in responding to his extradition request for José Rohm as "normal", saying the U.S. justice system "gets to the bottom of things before responding."

But the judge said he was confident that the United States would not block the extradition of José Rohm, who no longer faces an extradition request from Argentina.

In the case of the Peiranos, Uruguayan Judge Pablo Eguren is even further away from any decision, because the investigation and audit of the family’s accounts has not even been commissioned yet, due to the strain that the high cost of that essential part of the investigation will put on the limited budget of Uruguay’s justice system.

Nor has Interpol (the international police) located Juan Peirano, who is at large, although he met secretly in New York with the liquidators of the TCB, and according to unconfirmed reports published in the Uruguayan press, has returned to this country on several occasions.

The case, which was opened in November 2002, is still in the phase of presentation of evidence, lawyer Amadeo Ottati, who is defending Jorge, José and Dante Peirano, noted in a conversation with IPS.

Other former high-level executives of the banks involved have also been prosecuted and are in prison.

But due to the relation between the time they have already spent in remand and the possible sentences they are facing – between two to eight years, on fraud charges – the Peiranos’ defence attorneys have a chance of winning them early release.

That means the slow pace of justice runs in favour of the accused, but not of the tens of thousands of people who were swindled out of their savings, and in some cases were left completely broke.

* Additional reporting by Alejandro Sciscioli in Paraguay.

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