The transfer of money to firms such as Copesa and SMU is under investigation as part of judicial wrangle between one of the richest men in Chile and CorpGroup Banking creditors.

The case being against businessman Álvaro Saieh in Chile adds new proceedings. On February 13, prosecutor Felipe Sepúlveda, head of the Las Condes Local Prosecutor's Office, instructed the Economic Crimes Brigade (BRIDEC) of the Investigative Police (PDI) to look for information at the offices of a series of companies linked to Saieh. 

Specifically, the prosecutor requested “to go to the offices of CorpGroup Interhold SpA., CG Financial Chile Dos SpA., SMU SA and Inversiones SAMS SpA. and Retail Holding III SpA.” so that financial information on these firms is provided on a voluntary basis.

The above points to the “financial statements for the years 2015 and 2016", the "balance sheet as of 12/31 for the years 2015 and 2016", the "ledgers and journals from 02/2015 to 07/2016", the "audits for the years 2015 and 2016" and the “bank account records from 02.2015 to 07.2016” of the aforementioned companies. But there is more. Prosecutor Sepúlveda also included Copesa SA, owner of the newspaper La Tercera, and CorpGroup Inversiones Limitada.

These latest proceedings take place after at the end of January two former bondholders of CorpGroup Banking (CGB) - sponsored by Carlos Cortés Guzmán, from the Cortés & Rodríguez studio - filed a complaint against Saieh, Jorge Andrés Saieh, María Catalina Saieh, Cristóbal Cerda -former CEO of CGB - and Pilar Dañobeitía - revealed by Diario Financiero - for the crime of “continued granting of a simulated contract.”

In the legal action, admitted for processing by the Fourth Guarantee Court of Santiago, section 34 details that between 2015 and 2020 "the defendants ordered" CorpGroup Banking to "execute" with related companies "a series of subscription contracts and purchase and sale of shares” of the firms Financial Chile Dos and Compañía Inmobiliaria y de Inversiones SAGA SpA., which, they accuse, “are simulated.”

This exposes an alleged libel since “the real intention of the controller was to withdraw liquidity (money) from CGR and in no case acquire the aforementioned shares. Later, said resources - once in SAGA's assets - were disposed of by the defendant for the benefit of one of his family's companies. It involved the execution of a series of share transfer contracts for a total amount of approximately $164,735,000,000."

In this context, the plaintiffs accuse that this “meant an emptying of CGB's assets carried out in detriment of the bondholders. That is, from the creditors of the CGB 13/23 bond. In conclusion, the issuer of the bond was divesting itself of all its cash.” And they add: "as a result of these transactions, CGB emptied its cash, suffering financial damage derived from the acquisition of shares at a purchase price higher than the economic value that said investment represented."

THE BONUS

One of the points that motivated the escalation of legal actions, many of them now dismissed, such as that of Indumotora - linked to the Avayú family - was the issuance of a bond - called “13/23 bond” - for US $500,000,000 with an interest of 6.750% and maturing in March 2023. This was launched in May 2013 and the last two plaintiffs invested US $1,570,000. in the financial instrument.

The legal action describes that “the operations (or the mechanism) involve a set of companies, all of them related to CorpGroup Holding, such as CorpGroup Banking SA (CGB), Compañía Inmobiliaria de Inversiones SAGA SpA. (SAGA), Inversiones GASA Limitada (GASA), CorpGroup Inversiones Limitada (Inversiones), CG Financial Chile Dos SpA. (Financial Dos) and CorpGroup Interhold SpA. (Interhold).”

Relationships between companies are no small detail. This is where what the plaintiffs call the “mechanism” lies. For example, the legal text reveals that during the “period from 2015 to 2020, the company CorpGroup Banking SA subscribed a total of 49,700,647,691 shares of the related company Compañía Inmobiliaria y de Inversiones Saga SpA., for a total of $122,799,302,981.”

In summary, the plaintiffs question a series of operations that even executives of companies linked to Saieh have spoken about in the statements they have given during the case proceedings. “The recognition of the executives Messrs. Zavala Destefani and Salinas Díaz is effective, in that thirty-seven (37) operations were carried out from the issuance of the bond and until the year 2020, whose “objective was to dispose of almost all of CGB’s money,” the document states.

And adds: “According to the background information in the investigation folder, operations were carried out between related companies in 2015 to 2020 (which) amounted to a total of $291,745,501,383. (…) Said operations were aimed at the acquisition of Financial Chile Dos and SAGA by CGG.” From these companies, the resources reached another series of companies linked to Saieh.

In the accompanying list, Carlos Cortés Guzmán, representative of the last two plaintiffs, points out that money would have gone to SMU ($37,000,000,000), Copesa - newspaper La Tercera - ($1,250,000,000), investments ($87,382,450,000), and to related companies ($22,959,647,011), among others, an issue that caused “harm to investors.”

“In this sense (…) the generation of damage (…) has as a precedent precisely in the transactions carried out by CGB (…) whose purpose was to transfer the company's cash to its related parties, in detriment of the bond holders," describes the legal action. It adds: "Thus, the aforementioned criminal plan began in 2015 with the execution of the simulated contracts, all of this consistently until the year 2020, emptying CGB's assets" (see complaint).

NOTHING NEW

As a result of this new legal action, Saieh's lawyers, Samuel Donoso and Gonzalo Cisternas, explained to Radio Bío Bío that “there are no new facts, they are the same. Operations that had previously been referred to in general and associated with a period of time are detailed. Thus, our position remains the same. There is no crime of simulated contract, since each of the operations are real and effective, carried out for the benefit of the group and the bondholders.”

Along the same lines, they added that “if these operations had not been carried out, the default would have hit the company and the bondholders themselves sooner. All this has been settled in the Delaware Bankruptcy Court in the United States, where the bond was issued and where the jurisdiction for it was established. It is interesting to note that the default occurs after, in negotiations prior to Chapter 11, MBI rejected a proposed agreement that allowed bondholders to recover an amount greater than 70% of their credits.”

Regarding the particular instruction of the prosecutor Felipe Sepúlveda, on the accounting information of companies linked to the businessman, the professionals explain that this “has not been requested from us yet, but both the prosecutor's office and the PDI know that our willingness is to always collaborate in everything that is required by the Public Ministry.” Together with the above, they also pointed out that they maintain the statements that the complaints “lack any legal basis.”

“We maintain this assertion, which is now endorsed by what the Federal Bankruptcy Court of Delaware stated in its resolution, based on this same argument and forcing MBI to withdraw its complaint and pay costs of almost one million dollars. So much so that 72 of the 73 original complainants have withdrawn. The procedures ordered are normal and typical of an investigation like this. In any case, there are many others decreed, the majority requested by us regarding actions of some plaintiffs since the default was announced.”

What happened in the Delaware Bankruptcy Court marks a significant milestone for Saieh's defense. This is because, in the opinion of experts, the milestone puts an end to the struggle between their client and the bondholders. “CorpGroup Banking SA's plan was approved and confirmed in the agreement signed within the framework of Chapter 11, granting releases and waivers of shares, extinguishing those associated with the bond.”

Finally, when asked why - from their side - they believe that a series of plaintiffs have given up their legal action, the well-known criminal lawyers affirm that "practically all the plaintiffs, upon knowing the foundations of the Delaware resolution and the costs that MBI had to pay, especially when it was reported that these same facts had already been widely reviewed and resolved in said jurisdiction, they have decided to withdraw. Additionally, they have evaluated MBI's performance and adverse outcome in the Delaware Bankruptcy Court and have preferred to avoid the same outcome.”

DEFENSE OF BONDHOLDERS

Sergio Rodríguez Oro -partner of Cortés & Rodríguez Abogados-, in conversation with Radio Bío Bío, regarding the instructions of prosecutor Sepúlveda, maintains that “there is a constant delay in the investigative process by the defendants, late and partially complying with the instructions of the Public Ministry.  (They are) very active in foreign courts with bankruptcy jurisdiction and to threaten victims with actions in Delaware, United States, the truth is that here in Chile we can only classify the actions of the accused as reluctant to collaborate.

Along the same lines, Rodríguez stated that "it seems to me that his defense strategy was limited to the threat to the victims, which in no case will serve to prove their innocence or the non-existence of the asset depletion." Regarding the investigation by the Public Ministry, it explains that "these are complex events, a long execution over time - at least between 2014 and 2020 - and with an amount of damages exceeding US $500 million."

“The Public Ministry has acted objectively, carrying out those procedures that have been deemed useful. He is fully aware that this is a case of white collar crime that is rarely seen in the country at this level, as serious as the banking crimes in the 80s and the subsequent intervention of the system. The defendant Saieh was a successful businessman, a modern patron, with activities even for people with special needs, very remarkable,” says Rodríguez.

The professional also provides information: “He even built a building at the University of Chicago, Saieh Hall for Economics, which cost him millions of dollars. On the other hand, we have dozens of victims, in one of the largest cases of economic crime in the history of the country. By transferring your bankruptcy to a jurisdiction with procedural institutions unprecedented for the national reality, such as, for example, approving a reorganization plan with the creditors voting against.”

Saieh's lawyers, in their defense, maintain that this entire situation subject of the criminal investigation has already been heard by the Delaware Court within the framework of Chapter 11 to which CorpGroup Banking applied. How do you see it?

"That is not right. In the District of Delaware, a bankruptcy process was processed and not a criminal investigation. There was no action by a criminal court, or by the equivalent of the Public Ministry. What they call an investigation did not go beyond a mere exhibition of documents in an adversarial process of a commercial nature. No criminal sentence was handed down, there is no criminal res judicata. The proof of this is that we have been carrying out the investigation for more than a year and the defendants have not been able to accompany any criminal sentence to the case.”