On the last Friday afternoon in March, then-minister of health Dr. Ana Carmen Orellana Bendek issued a prescient warning about a possible pandemic corruption case that would turn into a saga spanning four countries, stoking tensions between Salvadoran prosecutors and law enforcement, and further revealing how the government’s carelessness in contract procurement and aversion to oversight have allowed public graft and fraud to proliferate during the pandemic.
At 2:30pm, she and five other colleagues on the board of the Solidarity Fund for Health (Fosalud) — a government agency under the purview of the Ministry of Health tasked in part with managing emergency medical response — issued a signed governmental fraud warning regarding the purchase of millions of disposable sanitary masks from Shanghai Beyond Import and Export, a Chinese company recommended by the National Directorate for Medicine (DNM). The DNM is the federal agency tasked with regulating the quality of imported medical supplies.
According to online catalogues, the company primarily distributes vending machines of candy, condoms, and trinkets, and has no experience in manufacturing, selling, or shipping medical supplies. In consulting with the supplier and reviewing the product online, they noted in an internal memorandum, “we have failed to certify the legal existence of the company.” Shanghai Beyond, they continued, demanded half of the money up-front and offered no guarantees of delivery in return, which “leaves us in doubt due to the threat of potential fraud.”
The warning, though, would be short-lived. That same afternoon, Minister Orellana Bendek threw caution to the wind.
Just four hours after issuing the memorandum, Orellana Bendek, who at the time also served as board president of Fosalud, discarded her own warning about the Ministry of Health signing off on the purchase from that very company . At least ten government institutions followed the DNM’s recommendation in directly contracting the exporter.
In time, the minister’s initial trepidations would come to fruition: half of the masks shipped by the company failed to meet medical-grade standards; the other half never arrived.
This investigation hinges on official documents, correspondence, and information from Fosalud, the Ministries of Health, Education, Infrastructure, and Governance, the Salvadoran Social Security Institute, the Salvadoran Institute for Comprehensive Rehabilitation (ISRI), the Salvadoran Institute for Magistral Wellbeing (ISBM), and the DNM. El Faro obtained these documents through in-person visits, freedom-of-information requests, and publicly-available filings submitted to the Legislative Assembly and the online government transparency portal. In its in-person visits, El Faro obtained copies of the original documents in accordance with El Salvador’s Freedom of Information Act.
The documents obtained for this investigation, which include official certificates, memoranda, letters, purchase authorizations, bank records, and Ministry of Health email correspondence, attest to a sprawling transaction in which the DNM instructed ten governmental institutions to participate in the purchase of more than 7.8 million surgical masks from Shanghai Beyond.
El Faro requested interviews and comment via email and phone from every individual and institution identified in this investigation. At press time none responded.
Fosalud, which had investigated and issued the initial warning about Shanghai Beyond, did not itself purchase masks from the company. Instead, Fosalud bought a half-million surgical masks from a Nicaraguan company headquartered in El Salvador. The proposals of Shanghai Beyond and the Nicaraguan company rang in at $165,000 and $175,000, respectively. Fosalud was willing to pay two cents more per mask, then, because the information on Shanghai Beyond, as the Fosalud board itself noted, was suspect or hard to verify.
Then, events took an even stranger turn. While Orellana Bendek and her fellow board members refused to let Fosalud purchase masks from Shanghai Beyond, Orellana Bendek signed off on the purchase of masks from the same company on behalf of the Ministry of Health itself. The same day that Fosalud issued its fraud warning, March 27, a Ministry of Health technician sent Yang Xiao Lei, legal representative of Shanghai Beyond, an order for 3 million masks for $990,000. The order, signed by Orellana Bendek, would supply masks to 30 hospitals and 752 clinics and quarantine facilities.
When consulted via WhatsApp about the double standard on January 7, she responded: “I’m not giving interviews on any topic to news media. Unfortunately, I cannot. I’m swamped with work.”
Despite the DNM’s duty to control the quality of medical supply imports, the agency propped up a company whose product, surgical masks, it could not certify as medical grade, according to its own statement included in Ministry of Health reports. As a result, Shanghai Beyond sold a combined 7.8 million masks for $2.6 million through contracts with ten agencies of the Salvadoran government.
Just like the Ministry of Health, the ISSS purchased 3 million masks for $990,000 from the company. The Ministry of Education, meanwhile, purchased 400,000 masks for $132,000. The ISBM purchased one million for $330,000. All other contracting institutions — including the Ministries of Infrastructure, Governance, and Foreign Relations, the ISRI, the autonomous port authority known as CEPA, and the Agricultural Development Bank (BFA) — purchased a combined 455,000 masks to the tune of $150,150. The company also included in its ledger the Customs Directorate, which purchased masks at an unspecified quantity and price, according to records in the possession of the ISSS and Ministry of Health.
A Global Web of Incompetence
One of the key figures in this investigation is Jana Nemcova, a woman from the Czech Republic who identified herself in correspondence with the Salvadoran government as the official representative of Shanghai Beyond in El Salvador. In her correspondence with government specialists, she specified how to send payments and request alterations to the delivery schedule. Because of how she presented herself, the government recognized her as a Shanghai Beyond representative and followed her instructions. Nemcova also prepared and signed Shanghai Beyond’s contracts with the ISSS and the Ministries of Health and Education.
Banking documents obtained by El Faro show that the Ministries of Health and Education and the ISSS wired Shanghai Beyond the required up-front payment of 50 percent to an account with China Merchants Bank in the name of Yang Xiao Lei between March 27 and 30. The contracts specified that, depending on the government institution, the company had either seven or 15 days to deliver the goods.
Problems quickly emerged, and just as Fosalud and Orellana Bendek had warned, Shanghai Beyond failed to meet its contractual obligations with various governmental institutions, including the Ministry of Health. Nemcova told the ISSS and Ministry of Health on April 13 that Shanghai Beyond could only supply half of their respective orders, which had been manufactured by the Chinese company Zhejiang Heng Dong Li Biotechnology, for a total of 3 million masks of the 7.8 million total masks in the contracts with the ten agencies.
Shanghai Beyond’s first batch, containing 1.5 million masks, arrived at the Ministry of Health on June 3. The company’s second shipment, also containing 1.5 million masks, arrived at the ISSS on July 15. The Salvadoran government, said Nemcova, should contract a separate company in the United States to make up the difference.
Prior to shipment, Nemcova told Salvadoran officials that the company would change the labeling in order to avoid problems during Chinese customs inspection but promised that the masks would be medical grade. DNM officials who reviewed the shipments upon arrival to Salvadoran customs, though, noted in official reports that they could not certify that the supplies met medical-grade standards.
Shanghai Beyond’s shortcomings prompted DNM to seek masks from a separate company also represented by Nemcova: Lasca Design, a Miami-based ceramics and porcelain manufacturer. The ISSS order names Nemcova as legal representative of Lasca Design, though Nemcova fails to appear in any of Lasca’s public records in the State of Florida.
In separate emails to the ISSS and Ministries of Health and Education, Nemcova named Mónica Ayala, director of the DNM, as the Salvadoran official who had worked out the new arrangement with Lasca. Under the new arrangement, the Miami-based company would take on more than half of Shanghai Beyond’s order in exchange for $1.5 million. But not only did the shipment arrive later than specified in the contract, but the masks shipped to El Salvador were marked as “non-medical,” a problem given that many of the masks were intended for frontline Salvadoran health workers.
Nemcova also laid out plans to triangulate the contractual value of the unfinished goods, some $322,575, from the Chinese account of Shanghai Beyond to the account of Lasca Design in the United States. “Lasca Design will finish manufacturing the remaining 977,500 units. This money, which is now in China, will be sent directly to the United States,” she wrote.
The Ministry of Education helped look for the money. $66,000 in public funds, which it had originally wired from the privately-owned “Banco Agrícola” — not to be confused with the public Agricultural Development Bank — to the China Merchants Bank, ended up in a Wells Fargo account owned by Lasca Design in California. Lasca received a total $132,000 from the Ministry of Education for 400,000 surgical masks, which arrived on August 19. It is unclear if Lasca has shipped the rest of the orders.
Lasca Design received the payments from the government of El Salvador and Shanghai Beyond between April 13 and 20. The CEO of Lasca Design, Ariel Lasca, wrote the ISSS and Ministry of Health in two letters dated May 20 and 29, informing the government of problems in fulfilling the order that was due on May 4. Wells Fargo, he explained, had flagged the transfers as “suspicious,” closing the account and freezing the funds for 30 days.
Not only had the Lasca Design masks arrived late, but by September the precise location of the supplies was unknown and ISSS records showed that neither Shanghai Beyond nor Lasca had met their contractual obligations in terms of quantity and quality of masks; nor had they fulfilled their proposed delivery timeline.
As the debacle was still unfolding, Ayala approached the Legislative Assembly on May 26 with a request: that the legislature grant the DNM, the agency she then ran, even more free rein—a work-around allowing pandemic-related imports from companies deemed trustworthy by the DNM to avoid typical scrutiny by customs monitors. The Assembly rejected Ayala’s proposal.
Creeping Investigations into Corruption
On November 8, Salvadoran Attorney General, Raúl Melara, included the contracts with Shanghai Beyond and Lasca Design in an investigation into illicit business dealings and corruption in pandemic-related public contracts. None of the Salvadoran officials involved in the dealings with Shanghai Beyond, though, were included in the investigation. Mónica Ayala, who in the past year worked as executive director of the DNM until August when Bukele appointed her director of the ISSS, argued for and coordinated the joint contracting of Shanghai Beyond across the different government agencies and later the transfer of contractual obligations to Lasca. She likewise did not appear in the attorney general’s investigation.
Orellana Bendek, on the other hand, would not emerge from the dealings unscathed. Due to the double standard in vetting the contracts of the Ministry of Health and Fosalud, President Bukele dismissed her from her role as Minister of Health on March 27, the very same day the purchases were approved. In her place, Bukele appointed Francisco José Alabí Montoya, a key player in official emergency spending during the pandemic and, moreover, in the attorney general’s ongoing investigation.
Following his appointment, Alabí approved more than $19.8 million in spending which is now under investigation by the attorney general. 20 percent of the contracts in question, which involve KN95 surgical-grade masks and thermometers, and total some $4 million, involve Shanghai Beyond and Lasca Design.
In November, the attorney general’s investigation culminated in a raid of the Ministry of Health. When the lead attorney arrived to the scene to supervise the seizure of ministry documents, a heavily armed squad from the Unit for the Maintenance of Public Order (UMO) of the National Civil Police (PNC) openly obstructed the raid by attempting to bar his entry to the ministry offices.
These events became a flash-point in the escalating conflict between PNC director Mauricio Arriaza Chicas, under whose watch the PNC obstructed the raid, and Attorney General Raúl Melara, as well as a symbol of Bukele’s increasingly strong influence on the leadership of the PNC and the Armed Forces.
As for the woman at the center of the negotiations, her current whereabouts and relationship to Shanghai Beyond and Lasca are unknown. On August 28, in an interview with Czech media outlet investigace.cz, Nemcova denied ever having done business with the Salvadoran government despite extensive documentation — from email correspondence to invoices and contracts — that say otherwise.
In April, as each contractual deadline for product delivery would round the corner, technicians from the different offices that had contracted Shanghai Beyond — and, later, Lasca — would reach out to her with exasperated inquiries into the status and overall timeline of deliveries. She would increasingly refer the technicians to “Dr. Ayala,” in reference to then-DNM director Mónica Ayala, with whom she had interfaced directly.
El Salvador’s Law of Acquisitions stipulates that government agencies must keep an updated record of contractors who fail to satisfy terms of service, thereby barring them from future bidding processes. Thus, in August, ISSS specialists submitted to Ayala documentation showing Shanghai Beyond’s failure to meet its terms. While Ayala delegated the task of reviewing the documentation to the ISSS legal director and noted that the contractor had a right to a fair hearing, there is no evidence that the ISSS blacklisted Shanghai Beyond in accordance with the law.
In the fallout of the Shanghai Beyond and Lasca Design saga, several other details remain unclear. Some lingering questions are procedural in nature: what steps other Salvadoran government agencies, besides ISSS, have taken in reviewing Shanghai Beyond’s failure; and whether Lasca Design’s failure to satisfy its contractual obligations was registered by the Salvadoran government. It is also unclear what has become of the missing public funds expended by the ten agencies involved, as well as the masks corresponding to those funds.
*Zuzana Sotova, reporter from Czech news outlet investigace.cz, contributed reporting.
Editor’s Note: This investigation has been abridged from its original version, which you can read in its entirety in Spanish here. Adapted for El Faro English by Roman Gressier.