El Salvador / Corruption

Salvadoran AG Buried Evidence of Corruption in Covid-19 Food Contracts Worth $22.7 Million

El Faro
El Faro

Tuesday, August 23, 2022
Jimmy Alvarado

Leer en español

In May 2020, El Salvador's Attorney General’s Office opened an investigation into $22.7 million in pandemic-relief food purchases made by the Ministry of Agriculture and Livestock (MAG) after finding evidence of favoritism and overcharging in the granting of government contracts. The beneficiary was the company Negocios y Servicios Bursátiles (NSB), a company majority-owned by Salvadoran businessman Munir Miguel Bendeck who, in 2015, was briefly a mayoral candidate with the FMLN. In the first months of the pandemic, Bendeck’s business became the largest provider of food bundles for the Bukele administration’s emergency relief program.

Documents from the Attorney General's Office (FGR) obtained by El Faro confirm that Bendeck and several government officials were the subjects of a criminal investigation. A former prosecutor who worked the case and spoke to El Faro on condition of anonymity called Bendeck “a key player” in a sweeping corruption network that received preferential treatment and inflated or falsified contracts amid the government’s pandemic response. Following the illegal removal of Attorney General Raúl Melara on May 1, 2021, ruling party Nuevas Ideas illegally instated Rodolfo Delgado in his place. The new attorney general then dissolved the team of prosecutors in charge of the case and closed the investigation.

The ministry was responsible for executing the government’s Emergency Health Program (PES), aimed at delivering millions of food relief bundles to families across the country during the first months of the Covid-19 emergency. The PES was the Bukele administration’s flagship relief program and played a major role in the resounding success of the president’s party in the country’s 2021 mayoral and congressional elections. The program received $236 million in government allocations and awarded direct contracts to 55 suppliers between March 23 and July 10, 2020. The FGR had already discovered other alleged acts of corruption linked to the PES as part of Operation Cathedral.

Cathedral investigations began in November 2019. Melara assigned the casework to a prosecutors’ unit he created known as the Special Anti-Mafia Group (GEA), designed to investigate the Bukele administration's secret negotiations with gangs and other high-stakes corruption cases. In wiretaps and other surveillance conducted as part of Operation Cathedral, for example, the FGR found evidence that Bukele’s Vice Minister of Justice and Bureau of Prisons director, Osiris Luna, had stolen and sold $1.6 million in PES food relief bundles intended for Salvadoran families in need. In December the U.S. Treasury blacklisted Luna and his mother for their alleged roles in the scheme.

Operation Cathedral exposed a complex network of corruption that, according to investigators, responded to Bukele’s three brothers Karim, Ibrajim, and Yusef. They asserted that the scheme also involved his cousin and head of Nuevas Ideas, Xavier Zablah; his chief of cabinet Carolina Recinos; a group of Venezuelan advisors; and several other government officials. Ex-prosecutor Germán Arriaza, who led the GEA until it was dissolved, told Reuters that before his exile he presented the investigation’s findings to Delgado.

Flow chart of evidence of corruption in the pandemic food relief program PES, drawn by the Special Anti-Mafia Group of the Attorney General
Flow chart of evidence of corruption in the pandemic food relief program PES, drawn by the Special Anti-Mafia Group of the Attorney General's Office before its dissolution in 2021. Photo from the Cathedral file.

Of a dozen irregularities in the awarding of PES contracts collectively worth $71 million, three of the concessions were awarded to Bendeck’s company, NSB: one for $9.5 million, the second for $10 million, and the third for $3.2 million.

A former Cathedral prosecutor told El Faro that Bendeck became a suspect of the investigations following raids on the offices of the MAG on November 9, 2020. “Bendeck’s company was handpicked by officials operating under the direction of the former Minister of Agriculture [Pablo Anliker],” the source said. “[Bendeck] benefited from his close relationships with officials, and because he’s a trusted friend of two of President Bukele's brothers.”

In July 2021, the State Department also placed Anliker, who by then had already left his position at the MAG, on their list of corrupt Central American officials, known as the Engel List, for “misappropriating public funds for his personal benefit.” Anliker was not the only official the GEA had suspected of profiting from corrupt government contracts. “We were in the process of documenting that evidence,” the former prosecutor told El Faro.

El Faro requested comment from the press offices of the Ministry of Agriculture and the Attorney General’s Office and from President Bukele’s press secretary Ernesto Sanabria. At publication time none of them had responded

In a letter from its attorney, the NSB executive board asserted that the MAG sought out their services, and attributed the move to the fact that they had previously acquired contracts with the Ministry of Education. “We’ve been purveyors of the school nutrition and health program since 2014,” they wrote to El Faro. The public contracts portal Comprasal lists four contracts with the latter ministry starting in 2018: two for fortified beverages in 2018 and April 2019, totalling $412,000; and another two for raw sugar, in May and December 2019, totalling $518,000.

The company warned: 'We reserve the right to take any necessary legal action to protect the privacy and honor of NSB partners, shareholders, and personnel damaged in the future due to negligence.”

Record Profits

NSB’s reported net value from the first year of the pandemic was 25 times greater than its reported value in 2019 —an increase of 2,373 percent— according to data from El Salvador’s Registry of Commerce. In 2019, the company had declared a net worth of $398,720. One year later, that number had skyrocketed to $9.8 million, thanks to lucrative new state contracts.

In the span of just two years, 2020 and 2021, NSB reported over $1.9 million in profits, while in the six-year period prior to the pandemic, from 2013 to 2019, the company’s reported profits totalled $107,170, according to financial statements that NSB submitted to the registry. The company’s contracts with MAG improved its credit rating, allowing the business to incur over $3 million in debt in 2020 — loans it then paid off in less than a year. It received one of them, worth $1 million, from the state-owned Banco Hipotecario. The NSB board insisted to El Faro that the debt was obtained “in keeping with all legal and financial requirements.”

When the Attorney General’s Office began looking into Bendeck, they noted a significant change in his standard of living, which “was out of keeping with his previous lifestyle” and involved “luxury real estate purchases in Miami,” according to the former prosecutor who spoke with El Faro. Florida real estate records show that on September 9, 2021, he purchased a 2,188 square-foot apartment in the Paramount Miami Worldcenter building, an exclusive condo complex built in 2019 and featuring a panoramic view of the ocean and skyline. According to the Miami-Dade real estate registry, the apartment is worth $1,177,000.

The NSB executive board told El Faro that the personal finances of its partners are not within the purview of the business and that it has not paid dividends to shareholders for 2020 and 2021. “Any acquisition by the partners is not directly related to NSB income,” they wrote. When NSB was founded in 2013, Bendeck owned 90 percent of shares and his mother, Gracia Miguel, the remaining 10, per commercial records. Prosecutors found that they remained the only two shareholders through at least 2020.

The former Cathedral investigator says that Bendeck was crucial to the importation of food products purchased in Mexico for the PES program. Among NSB's purveyors for the food it sold to the Salvadoran government is the Brazilian company Tdx Trading, awarded a contract worth $10 million by the Salvadoran government to supply spaghetti for the PES. Mexican customs records show that another is the Mexican company Comercializadora Columbia, which in 2020 received $16 million in PES funds for parboiled rice and non-GMO white corn.

El Faro consulted financial reports included in the FinCEN Files — a leak of documents from the U.S. Treasury’s financial crimes bureau tasked with analyzing bank transactions and issuing alerts for suspicious or possibly illicit activity. In a 2016 report prepared in coordination with the DEA, FinCEN mentioned Comercializadora Columbia as a recipient of payments from Molinos San Juan, a Salvadoran company under investigation at the time for laundering money for José Adán Salazar — also known as Chepe Diablo, the head of the Texis Cartel. Molinos San Juan also received a MAG contract worth $2.9 million in April 2020 to provide food to the PES.

MAG documents obtained by El Faro show a pattern of direct, no-bid contracts to specific companies, signed and endorsed by Anliker, without the ex-minister providing any explanation as to why no other suppliers were invited to submit offers. On April 7, 2021, Anliker resigned as minister and was appointed vice minister, a position he held for two months.

Bendeck was a candidate in the FMLN primaries for the 2015 elections for mayor of Antiguo Cuscatlán, a municipality governed for decades by the Arena party, but withdrew from the race over internal party conflicts. His candidacy, according to a former member of the party’s leadership, did not emerge from within the FMLN, but was orchestrated by the family of Nayib Bukele, then the party’s candidate for San Salvador mayor.

One of Bendeck's campaign proposals was to conduct all purchases made by the mayor’s office through a stock exchange mechanism known as Bolsa de Productos (BolPros). Two years earlier, in June 2013, Bendeck founded a company that operated as an intermediary on the BolPros exchange: NSB.

In 2017, El Salvador’s financial oversight agency, the SSF, sanctioned NSB —90 percent of whose shares are owned by Bendeck— and revoked the company’s BolPros permit. The reasons behind the sanction were kept confidential. Salvadoran commodities exchange law stipulates that a company will lose its permit to operate on the stock exchange for serious misconduct like fraudulent exchanges, providing misleading information, non-payment of market fees, regulatory non-compliance, or changing owners or shareholders without authorization.

NSB’s purchase order records also indicate significant price unit differences in its MAG contracts. In the first concession, the government paid $10 for each food bundle; in the second, they paid around $25; and in the last, NSB charged $32.32 per bundle. When asked about this inconsistency, the former prosecutor told El Faro that the FGR had indeed found evidence of inflated pricing: “We suspect that the government purchased overpriced products from companies that did not have the capacity to provide these services.”

Before the ouster of top prosecutor Melara, the Special Anti-Mafia Group had also been investigating the MAG for falsifying documents to justify its private contracting decisions.

Fast Track

Operation Cathedral records identify four MAG employees as suspects in the commission of two crimes: breach of duty and aggravated document falsification. Another employee, accused of failing to inspect the purchases, and was also investigated for breach of duty.

Ex-minister Anliker, along with the director of the Office of Government Purchases (OACI), Lorenzo Corpeño, had also been investigated for breach of duty following indications that they had awarded preferential, no-bid contracts to NSB and seven other companies. “Anliker instructed the OACI to invite both natural and juridical persons to participate directly, without conducting an open bidding process,” documents from the Attorney General’s Office read.

According to the findings of Cathedral, in two contracts from May 2020 —one for $9.5 million and the other for $3.2 million— MAG administrators “inserted false data into the contracts’ technical records,” so that the offer from NSB registered in the official record was different than the amount the government actually received.

In one contract, NSB reported to the ministry that it was capable of delivering 750,000 food bundles, but in order to justify the awarding of the contract, MAG administrators stated that the company could deliver 950,000. Prosecutors also note that while NSB itself failed to describe the details of products offered, MAG administrators recorded claims that each bundle purchased would contain “2 liters of milk, 2 pounds of white rice, 2 cans of sardines, 2 packs of refried beans, 2 cans of tuna, 1 tub of margarine, 1 package of XL Best cookies and one packet of Pinito powdered milk.”.

MAG administrators also failed to keep a detailed record of products actually received from NSB. The Attorney General's Office concluded that the company failed to supply much of the contractually stipulated food: “They never delivered the 1 kilogram packages of pasta, the Shaka Lakamilk cartons, or the fruit drinks.” the FGR report reads. “Instead, they provided four cans of sardines, without specifying any brand or other product details.”

According to prosecutors, in the third contract, “administrators failed to detail the products received, simply describing them as ‘food bundles’.”

NSB denies any knowledge of a criminal investigation into their business practices and asserted to El Faro that, in a special audit into the Ministry of Agriculture’s food relief program conducted by the Court of Accounts, “there was no finding related to NSB, indicating that there were no anomalies in the contracts that our business signed with the MAG.”

In March 2020, the Ministry of Agriculture classified all information related to PES purchases as state secrets under the argument that the program was undergoing a Court of Accounts audit. Investigators reported irregularities in PES government spending including purchases of food that did not undergo sanitary inspection and the importation of food unfit for consumption, which was subsequently destroyed in warehouses operated by other government agencies. 

To this day, the Ministry of Agriculture has not released any purchase records. In the audit report, investigators redacted the names of businesses and people suspected of corruption.

*Translated by Max Granger

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