A Colombian congressman on Thursday claimed that government financial regulators failed to adequately monitor InterBolsa, which used to be the country’s largest brokerage firm until its recent liquidation, because several of the financial overseers were former InterBolsa employees.
Liberal Party Chairman Simon Gaviria said that Colombia’s Financial Superintendence knew last year about InterBolsa’s precarious financial state and questionable business practices, “but failed to investigate and intervene at the time because many government officials…had conflicts of interest.”
According to Gaviria, Former Minister of Finance Juan Carlos Echeverry, current Vice Minister of Finance German Arce, and Diego Mauricio Herrera, the Deputy Superintendent of Market Oversight, all come from InterBolsa.
“Compelling documents…prove that the authorities responsible for supervising the securities industry knew what was going [at] InterBolsa,” said the congressman.
The Liberal Party Chairman claimed that last February market alerts were given to Herrera regarding the manipulation of Fabricato repo transactions. These risky, potentially criminal actions, eventually caused InterBolsa to miss a payment on an $11 million loan in early November that lead to their liquidation and ensuing criminal investigations. Despite the warnings, Herrera “unfortunately did nothing,” as Gaviria put it.
Gaviria’s statements before Congress on Wednesday also included the purported ties between Victor Maldonado, the biggest InterBolsa shareholder, and the jailed former Minister of Agriculture, Andres Felipe Arias. The ex-Minister of Agriculture allegedly embezzled $25 million in government funds and awarded subsidies intended for struggling farmers to wealthy families, including the Maldonado family. According to Gaviria, the Maldonado’s received $1.3 million in AIS subsidies.
These developments come on the heels of reports that the InterBolsa scandal actually goes back years, not months, since the investment giant was sanctioned in 2003 for misallocation of public funds.
What originally seemed like just a case of poor investment choices and excessive ambition has evolved into one of the biggest financial scandals in recent Colombian history and could end up with several people being sentenced to prison.