Lima, Thursday 29 de February del 2024
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The truth about the persecution of the Levy Family
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SBS’s Unlawful Involvement

SBS performs very important roles: “It is the organization charged with regulating and overseeing the financial, insurance and private pension systems..."

Its mission is “to protect the public interest, overseeing the stability, solvency and transparency of the systems it oversees…” Such definitions appear on the SBS webpage but, in this particular case, it seems logical to wonder what role it actually plays, and whether it indeed has preserved or protected the public interest by creating stability, solvency and transparency.

To understand its role in this process, we must learn about the Bank and Insurance Superintendent, who appointed him and what interests may have been behind his behavior.

Luis Cortavarría was appointed by Carlos Boloña as soon as the latter took office in July 2000 in his second term as Minister of State for Economy. His appointment lasted from the end of Alberto Fujimori’s administration through Alejandro Toledo’s government with a term under the Valentín Paniagua caretaker administration inbetween. He worked directly under the orders of Ministers Boloña, Silva Ruete and Kuczynsky. His appointment by Congress where the majority had been elected or “bought” by Fujimori and Montesinos was not objected despite a three member shortlist to choose from, as appropriate for an appointment of this type. Boloña ordered and Congress approved. That’s when Cortavarría joined the operation.

Cortavarría certainly was one of the most important pieces in the BNM process. He ordered, as we mentioned in the previous chapter, a second and unusual inspection visit that lasted 63 days. Information leaked during the intervention created a perception of weakness at BNM that spread throughout the system, and which was further aggravated by a wave of rumors and a campaign of electronic mails of unknown origin that was never investigated and about which the Ministry of Economy did absolutely nothing.

False information and tendentious rumors created a perception of insecurity among saviors and had as a consequence a run against the Bank’s funds. Its worthwhile remembering that public opinion was absorbed by the broadcasting of the “vladivideos” that had started to reveal the size of corruption under Montesinos and the government to which Boloña and Cortavarría had pledged their allegiance.

As if that were not enough, SBS blocked the acquisition of Banco Financiero, although the transaction was backed by Bank of America and demonstrated BNM’s true strength.

In one of his last directives as Finance Minister, Boloña ordered to withdraw a total 850 million soles of State money from the financial system.

On November 24th, 2000, Boloña left the Ministry in the midst of a serious political crisis and accusations against Montesinos. After President Fujimori sent his resignation by fax, Boloña left behind a road map that was carefully followed by the Minister of Economy of the incoming administration.

Javier Silva Ruete, the brand new Minister of Economy in President Valentín Paniagua’s caretaker administration, suddenly signed, on the same day he was sworn in, Emergency Decree 108-2000/EF authorizing a non-reimbursable bond issuance worth 400 million dollars. How could he sign such an important legal provision only a few hours after he was sworn in, without taking the time for a serious review? Why should certain reports, if any, be taken seriously to support the Emergency Decree enacted in the midst of an unusual government transition? How can such a transcendent Emergency Decree be drafted, and its authorship be claimed, only a few hours after accepting a Minister position? In truth, this decree just followed orders to separate “good” banks from bad, and thus undervalue a portion of BNM’s patrimony through the guise of a presumed lack of provisioning reaching 217 million dollars that was decided through arbitrary valuations. At worst, they could have been covered by a bond issue.

How did the undervaluation happen?

In its second inspection visit, SBS reclassified the Bank’s portfolio and determined an 18.8 million dollars provisioning deficit. If that had been true, SBS could have proposed, as is usual in these cases, to allow some time to correct the presumed deficit or, at most, order it to reduce its shareholders’ equity, which at any rate would have remained much larger than at other banks that were never touched. At the time of the intervention, BNM’s capital exceeded 72 million dollars.

A few after the Bank was intervened because of the liquidity shortfall created by financial panic, Silva Ruete appointed, in March 2001, his own party member Aurelio Loret de Mola from SODE, so he would, in addition to his position as Chairman of COFIDE, also to chair the Special Commission for Corporate Reorganization (CEPRE, in Spanish), charged with Banco Nuevo Mundo and NBK Bank’s transfer to other banks in the financial system. The CEPRE decided to “transfer” a block of shares to Banco Interamericano de Finanzas (BIF). They retained Arthur Andersen and Price Waterhouse to assess BNM’s portfolio. Years later a court reported the assessments were never made and, instead, the transfer followed arbitrary instructions from the seller (SBS, the intervened Bank’s receiver) and the buyer (Banco Interamericano de Finanzas).

SBS concealed the assessments during four years of court proceedings, until the Constitutional Court ordered to hand over the information through an Habeas Data ruling favoring Nuevo Mundo Holding S.A., thus uncovering this act of the farce.

The Habeas Data decision disclosed the liquidation resolution from October 2001. It denied that “according to Pricewaterhouse and Arthur Andersen’s valuation, a 217 million dollar deficit existed”.

In fact, the valuation never took place and there never was a 217 million dollar provisioning shortfall. The reports were used to warrant the urgency of injecting 200 million dollars of State bonds to an already valuable BNM portfolio. The bounty was BNM’s portfolio plus bonds worth 200 million dollars.

BNM’s portfolio was degraded against all international accounting standards by increasing the provisioning shortfall deficit from a questionable 18.8 million dollars to a staggering 217 million. In 25 days after the December 5th, 2000 intervention, the Bank’s patrimony dropped from 72 million dollars to zero. Without capital, we were no longer shareholders. The theft had been perpetrated.

These accounting machinations were compounded by other equally illicit maneuverings. Rodrigo Elías & Medrano Law Firm suspiciously offered us their “assistance” for us to “adapt” to the Emergency Decree. We were immensely surprised their client BIF was also pressuring us to sell. To us, the conflict of interest was obvious. To them, there was none. We know today SBS had retained Rodrigo Elías & Medrano Law Firm to protect them against my sister’s filing before ICSID. Moreover, José Javier Tam Pérez, a member of that law firm, is Felipe Tam Fox’s son. Since March 2007, Tam Fox has been the Banking and Insurance Companies Superintendent. However, the relationship does not seem to pose a conflict of interest to anyone, nor is it regarded as an ethical or moral impediment.

SBS broke procedures, laws and norms, because:
  • The intervention was arbitrary (a report by economists Carlos Adrianzén and Iván Alonso showed there were several banks whose liquidity ratios were lower than ours).
  • Emergency Decrees created temporary regimes, in violation of the Banking Law.
  • Risk rating rules were broken because the SBS’s internal risk classification did not match the ratings they awarded other banks.
  • International accounting standards were violated.
  • The liquidation resolution was enacted without previously calling a creditor’s meeting, as mandated by the Law and without previously having assessed the entire liquidation mass.
  • Precedence of payment was broken because foreign banks were paid first (although they ranked fourth in precedence).
  • Information was hidden, violating the right to information and the transparency law, among others. SBS holds the details of such liquidation are “Secrets of State” and “Banking Secret”.
  • SBS was in permanent contempt of the Judiciary because:
    • It failed to comply with a Supreme Court injunction ordering to stop the liquidation.
    • It failed to comply with a Superior Court decision that reinstated us as shareholders.
    • It did not follow a mandate from a first instance judge ordering, in line with the Constitutional Court ruling to deliver liquidation information.
SBS’s strategy was always the same: to disobey court orders while they challenging them in another courtroom.

What this shows is the weakness of the institutions with total disregard for technical criteria and that some powerful individuals can command or prevail by the mere fact they hold political power.

It is also important to underscore that during the Fujimori, Paniagua, Toledo and García administrations, the assault against BNM, rather than being corrected, was actually aggravated. During the past 11 years, the ministers of economy have acted in complicity, in some cases, or with leniency, in others. Carlos Boloña, Javier Silva Ruete, Pedro Pablo Kuczynski, Fernando Zavala, Luis Carranza, Luis Valdivieso and Ismael Benavides have been actors who, with various degrees of responsibility, acted to consolidate the attack.

During the key period from December 5th, 2000 to June 23rd, 2001, that is, from intervention to liquidation and through three administrations, Cortavarría mastered the stage. He remained in his key political position through three successive administrations. Marthans and Tam, his successors, did not correct the assault but rather pushed it further by retaining law firms that for millions of dollars’ fees concocted new arguments and legal tricks to slow down, confuse and hide evidence from the scene of this financial crime.

As if that were not enough, two General Comptrollers, Gerardo Matute and Fuad Khoury, never explicitly supported the Government, which because it already held funds in the liquidated portfolios, was dramatically hurt. Each of them was sent notices explaining the details and existing documentary evidence but no response came back from either.

As was only logical, we also resorted to our trade association. However, several meetings with senior members of Peru’s Bank Association (ASBANC) at various stages, proved useless.

Such arrangement of powers is not only undignified but shameful. Authorities appointed to enforce the law mock the rule of law and share in a manner of acting that is clearly inappropriate.

Although SBS is an independent agency, in practice it reports to the Ministry of Economy for policy enforcement. Therefore, it is impossible not to attribute direct responsibility to ministers Silva Ruete, during whose term the intervention took place and to Kuczyncski, who placed BNM under liquidation. Both had to know what Cortavarría was doing, and most of all the illegal nature of his acts, which they nevertheless validated.

Not less important is what happened, for instance, a few months later, also regarding the liquidation and the liquidators. Interbank took over the liquidation of BNM’s lease portfolio. At that time, Ismael Benavides was Interbank’s General Manager and Fuad Khoury, who worked at BNM signing the balance sheets during the intervention and liquidation, was appointed to a position of trust also at Interbank.

However, Khoury’s resumé published in the General Comptroller’s Office website, does not record his professional passage through BNM. Is this a simple mistake? Did they forget to mention it or is there a wish to conceal a revealing and uncomfortable link? Under the García administration, Khoury and Benavides once again joined the same team.