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Caja Scandal Grows

A series of irregularities surrounding nearly $40 million worth of Finnish hospital equipment purchased by Costa Rica’s Social Security System (Caja) has led to full-scale investigations by several government agencies.The purchase of 3,037 items – including equipment for administering anesthesia, beds for intensive-care patients and X-ray machines – came after the Legislative Assembly in 2001 approved a plan called the Finland Project, brought forward by then-legislative deputy Eliseo Vargas, later appointed president of the Caja.The Finland Project entailed obtaining a $32 million loan from the Finnish government that the Caja would use to update the nation’s public hospital equipment.THE total purchase amount ended up being $39.5 million, $7.5 million of which the Caja paid from its expense account. The remaining $32 million was financed through Sampo Bank of Finland, using a special no-interest credit account the government of that country uses to promote the sale of Finnish products while assisting developing countries.The requirements that the Costa Rican government set for the company that would receive the contract excluded all potential competitors except one: Instrumentarium Medko Medical Corporation, represented in Costa Rica by Corporación Fischel.According to a release from the Caja Board of Directors, “the pieces of hospital equipment purchased from Instrumentarium Medko Medical Corporation were not those outlined as priority needs by the directors of clinics and hospitals in the country.”At least seven high-cost machines purchased in the deal are not even being used, the daily La Nación reported last week.VARGAS was appointed executive president of the Caja in 2002, and came under scrutiny last month when La Nación revealed an apparently sketchy deal between the Caja head and a Fischel executive named Olman Valverde.Valverde purchased a luxury home in an upscale San José neighborhood for $735,000, the paper reported, and then rented it to Vargas for just $2,500 a month – less than half of similar homes around it rent for. Just hours after publication of the report, Vargas resigned. Valverde later followed suit (TT, April 23).The Caja board then requested that the possibility of a private contract between Vargas and Valverde be investigated, along with the possibility that Caja leaders worked to “unduly benefit” Corporación Fischel.VARGAS’ successor, Caja medical manager Horacio Solano, requested a complete report of all transactions between the Caja and Fischel during his first day on the job. The Prosecutor’s Office requested the Comptroller General’s inventory of Vargas’ belongings, and a prosecutor specializing in financial crimes was assigned to the case.Shortly after stepping down, Vargas testified before the Social Affairs Commission of the Legislative Assembly to explain his resignation. He told the commission he had previously attempted to buy the house but was rejected, and the money he was going to use had been registered with the Comptroller General’s inventory of his belongings. He said the deal was well within the limits of the law and called La Nación’s report a journalistic novel.”HOWEVER, Judicial Investigative Police (OIJ) agents, along with personnel from the Prosecutor’s Office and the Comptroller General’s Office, conducted five nearly simultaneous raids last Friday morning of Caja offices, Fischel’s offices, and the residences of Vargas, Valverde and Fischel’s lawyer, Randall Vargas.Additionally, President Abel Pacheco this week assembled an investigative commission of “notables” who will have three months to come up with a report about the inconsistencies.“We don’t know what happened,” Pacheco told The Tico Times on Tuesday during a visit to Limón to assess the flood damage there (see separate story). “We are looking into it. It’s hard to take action based on rumors.”“FOUR citizens of the highest caliber are intervening. They are honest and intelligent and they will get to the bottom of this,” the President said.The four citizens Pacheco was referring to included former Supreme Court magistrate Hugo Picado, Industry Chamber president Rafael Carrillo, former Caja executive president Alvaro Fernández and former Finance Minister Federico Vargas.The day after accepting the appointment, Picado announced his resignation from the commission because of a potential conflict of interest. He said he had worked as a consultant for a prestigious law firm that had provided “assessment services” for the Finland Project.During this week’s Cabinet meeting on Wednesday, Pacheco said he had received numerous denouncements for not having included a woman on the committee.The President said the oversight was his fault, and announced that Dunia Chacón, former president of the Superior Penal Court, would take the place of Picado on the investigative commission.PACHECO said he wanted a four-person rather than a five-person commission so that in the event they were evenly divided on an issue he could “mediate” and offer his advice.The commission will not only investigate the Finland Project, he said, but also the Spanish Project, a similar arrangement between the Caja and the Spanish government involving $60 million worth of equipment.The Comptroller General’s office also announced it will install a team at the Caja headquarters to investigate the loan from Finland.Another resignation related to the scandal was that of former Chamber of Commerce president Emilio Bruce, also the president of the Board of Directors for Fischel. Bruce resigned from his position at the chamber last week.“Life has unsuspected turns,” Bruce said during his resignation speech. “Today I live one of those turns.”Bruce insists that Fischel did not pay for Vargas’ luxury home and that it must have been the result of a private transaction between him and Valverde.THE Legislative Assembly announced this week that deputies would further discussion on a law proposal designed to prevent “corruption and illicit enrichment of public functionaries.” The current law governing corruption of public officials was passed in 1983.According to a statement from the assembly, its revision is now necessary because of “the impact of technology on financial information systems.”During his weekly radio address on Sunday, Pacheco said, “Know this, corrupt gentlemen and corrupt ladies: If you put your hand out, I will cut it.”Meanwhile, current Caja director Solano insists his agency is not in a state of crisis and will continue functioning normally.THE Tico Times asked for comments from Fischel about the government investigations and whether the company was conducting an investigation of its own.Lauren Carvajal, a spokeswoman for Corporación Fischel, told The Tico Times via e-mail that “the position of the business for the time being is to not further discuss the themes mentioned out of respect for the commissions chosen for the investigation of this case.”(Robert Goodier contributed to this article.)


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