ARGENTINA: IBM Caught in a Web of Scandal

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Jun 17 1996 (IPS) - The U.S. computer giant, IBM, is caught in a web of legal probes and scandal in Argentina, where it has allegedly made some shady deals with the State.

The centre-left Solidarity Front (FREPASO) has accused the State of paying 515 million dollars too many for a contract with IBM (International Business Matters) to computerise the general tax office (DGI).

“How is it possible for the State to spend nearly 900 million dollars on informatics,” and for Economy Minister Domingo Cavallo, “who boasts of having a team that reports everything to him, to know nothing about the contracts with IBM?” Deputy Carlos Alvarez wondered out loud last weekend.

According to FREPASO, Canada’s Systemhouse had offered a contract for 177 million dollars, while the Secretariat on Information Systems – later dissolved by presidential decree – objected to the contract with IBM and was ignored when it recommended other alternatives.

Last week, the office of the public prosecutor called for an investigation of whether the former director of the DGI, Ricardo Cossio, committed “fraud against the public administration” by contracting IBM without opening the offer to bidding.

The DGI case is the worst episode in the scandal over allegedly shady deals between the State and IBM, which has operated in Argentina since 1920.

This year the company was forced to replace the top-level executives at its Buenos Aires division, because they were being tried – not for the contract with the DGI but for a 250 million dollar contract and an additional 37 million in suspected bribes with another entity dependent on the Economy Ministry: the Bank of the Nation.

The president of the Bank, Aldo Dadone, and other high-level officials resigned and were put on trial. The judge presiding over the case is investigating whether the Bank officials and the executives of the local branch of IBM were guilty of fraud.

Last week Cavallo was called to testify whether or not he was aware of the Bank’s contract with IBM. While the Bank’s new board of directors negotiated the cancellation of the contract, Cavallo claimed to be unfamiliar with the details.

He later admitted that “without a doubt, the directorate of the Bank of the Nation committed errors, and perhaps also bribery…When the contract was negotiated, corruption seemed an impossibility, as the parties in question were a company like IBM and men in whom I had total confidence and trust.”

But the DGI and Bank of the Nation cases are not the only ones in which IBM is implicated. Another judge is investigating a 28 million dollar software deal with a State social services office.

And two former governors of the western province of Mendoza are under enquiry for a 30 million dollar contract with IBM. One of them is Jose Octavio Bordon, who stood as presidential candidate for FREPASO in 1995, with Alvarez as his running-mate.

A 28.7 million dollar deal for the computerisation of the Bank of the northeastern province of Santa Fe, in which 50 officials and executives are implicated, is also being investigated.

Finally, IBM contracts for 2.5 million dollars with the municipalities of Lomas de Zamora and Avellaneda in the province of Buenos Aires are also under probe.

Meanwhile, IBM, one of the top 10 firms in the United States, continues to advertise its equipment and services in the same newpapers that are reporting its allegedly shady deals with the State.

An individual close to the company told IPS that the idea underlying the publicity is that the firm’s executives are human and corruptible, but its equipment continues to be a leader in its field.