El Salvador / Politics

Company Owned by Key Bukele Officials Received $500K from President Funes’ Black Budget

Asamblea Legislativa
Asamblea Legislativa

Friday, February 24, 2023
Jimmy Alvarado

Leer en español.

A private company owned by Ernesto Castro —president of the Legislative Assembly and one of the closest advisors to President Nayib Bukele— and his wife Michelle Sol —El Salvador’s minister of Housing— received a total of $504,000 from the black budget of the then President Mauricio Funes, between 2010 and 2011. The company never reported officially the contract in its accounting and it is unclear if Castro and Sol paid taxes for the income.

The payment responds to a secret contract for cooking and kitchen management at the Presidential House, awarded without following the procedures of the Purchases Law, which required a call for tenders. They were “handpicked”, according to Funes himself, who fled El Salvador in Sep. 2016, evading five cases of corruption and was granted Nicaraguan citizenship by Daniel Ortega’s dictatorship in July 2019.

The company Sociedad Castro Sol S.A. de C.V. (Casol) received payments between Sep. 2010 and Aug. 2011, in checks and direct deposits that originated in Banco Hipotecario accounts —the oldest of Salvadoran State banks— destined to manage the millionaire black budget, known as “54315 Reserved Expenses” or “discretionary expenses,” a secret budget line the Presidency handles since at least the early 90s. The payments appear in court records for a case known as “Public looting”, where the Attorney General’s office accuses Funes and 30 subordinates of the misappropriation of $351 million.

Casol, a company owned by Ernesto Castro and Michelle Sol, was mentioned by the Attorney General
Casol, a company owned by Ernesto Castro and Michelle Sol, was mentioned by the Attorney General's Office as a recipient of public funds from Mauricio Funes' dark budget, according to the request in the 'Saqueo Público' case. Photo: El Faro archive.

These funds financed a lavish lifestyle for Funes and his family between 2009 and 2014, which included jet trips, jewelry, and luxury shopping in 29 different cities around the world. But it was also used to pay for popularity polls, off-the-books bonuses to public officials, bribes, and political favors.

In all, Funes’ Presidency wrote 5,582 checks on that budget. 18 of them ended up in Castro and Sol’s company.

According to the prosecutors, those payments were “against national interest”. Casol is listed among 46 service providers that received checks. The list also includes another company of the Castro-Sol couple: Grupo Tres y Punto, which cashed out $12,000.

In 2016, prosecutors inquired Castro regarding the payments and asked Michelle Sol about the payment that Tres y Punto received from Funes’ Presidency. The AG files quote answers from both of them, where they acknowledge receiving the payments, but make no allusions to whether they knew the origin of the funds. But a protected witness in the case said that it was “Castro himself who collected the payments at the Private Secretary’s office.”

They cooked for Obama

Castro and Sol told the prosecutors that President Funes hired them as food providers. “During an entire year, Casol was tasked to cook for the whole Presidential Battalion, including security personnel for officers and other employees,” reads a document in the case. They did so at three locations: the presidential office, the president’s private residence, and the Presidential Battalion headquarters, at San Jacinto. They also catered for special events, such as U.S. President Barack Obama’s visit to San Salvador, in March 2011. The payment to the other company, Tres y Punto, was also for “food preparation.”

Funes confirmed the irregular contracts in a tweet on Jan. 28. “I have a document that shows a company owned by Ernesto Castro and Michelle Sol was illegally handed a no-contest contract of food supply services for Presidency employees,” he wrote. The former president blames his former private secretary, Francisco Cáceres, for the handling of the black budget, even against abundant evidence that he used it for personal gain.

Premises of Ernesto Castro and Michelle Sol
Premises of Ernesto Castro and Michelle Sol's company. Photo: El Faro.

Casol didn’t report the Presidency’s contract income. In 2010, the company reported assets of $2,000 but didn’t report the money it had in banks. The next year, it didn’t submit a statement of financial position, a legal obligation for every company at the Trade Registry. Their omissions open up the doubt if the company and the owners paid taxes for the half a million dollars they received.

On Feb. 21, El Faro delivered letters asking for interviews in the offices of Casol and Tres y Punto. The next day, the newspaper requested interviews with the office of the Legislative Assembly Presidency and the Housing Ministry. The request was also sent to both entities' press officers. Nobody answered, as it usually happens when El Faro asks for interviews or information to the current administration or Nuevas Ideas party officials.

Some of the questions included in the request are: how do you justify having received money from the black budget? How is this different from the cases that the current administration and Nuevas Ideas have publicly condemned? Why didn’t your companies report the payments in their financial statements? Did you report the payments for half a million dollars to the Finance Ministry as part of your tax return?

Michelle Sol, Minister of Housing, and Ernesto Castro, President of the Legislative Assembly, during the beatification ceremony of Father Rutilio Grande, Nelson Lemus, Manuel Solórzano and Fray Cosme Spessotto, held in San Salvador, on January 22, 2022. Photo: Legislative Assembly.
Michelle Sol, Minister of Housing, and Ernesto Castro, President of the Legislative Assembly, during the beatification ceremony of Father Rutilio Grande, Nelson Lemus, Manuel Solórzano and Fray Cosme Spessotto, held in San Salvador, on January 22, 2022. Photo: Legislative Assembly.

Previous presidents’ black budgets have been a common resort for Bukele to attack political opponents. Through televised legislative committees, Bukele’s - and Ernesto Castro’s- party have denounced as a form of corruption any secret bonus received for former public officials or even some grants awarded to charity organizations or universities critics of the current administration. Castro and Sol’s case has never been mentioned in those committee hearings.

Castro is a friend and a member of president Nayib Bukele’s inner circle since the start of his political career. He’s also a founding member of the Nuevas Ideas party. By the time he became a contractor for Funes, Castro was the private secretary of Bukele, who then was FMLN’s candidate for Nuevo Cuscatlán’s city hall. He was elected in May 2012. Six years later, when Bukele ran for San Salvador’s office, it was Sol who replaced him in Nuevo Cuscatlán, again under the cover of FMLN.

Before being elected to the Legislative Assembly, Castro became the President’s private secretary when Bukele took office from June 2019 to April 2021. In that capacity, he spent $2.1 million from the discretionary expenses account, the same Funes used, before the government declared secrecy upon the financial statements in Aug. 2019. On the campaign trail, Bukele promised to get rid of that secret appropriation.

Castro was elected president of the Legislative Assembly on May 1, 2021. On that first day, he oversaw the illegal dismissal and replacement of the five members of the Constitutional Chamber of the Supreme Court and the Attorney General. Four days later, he voted on an amnesty for corruption crimes that members of the Health Cabinet might have done on pandemic-related expenses. Just last January, Castro and his party approved a new Purchases Law that will allow President Bukele to hand out discretionary public contracts for up to $1,500 million, without calling for bids.

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