Banco Intercontinental
Encyclopedia
Banco Intercontinental was the second largest privately held commercial bank
in the Dominican Republic
before collapsing in 2003 in a spectacular fraud
tied to political corruption
. The resulting deficit of more than US$2.2 billion was equal to 12% to 15% of the Dominican national gross domestic product
.
. His oldest son, Ramón Báez Figueroa
, took over the small bank and helped build it into the country's number two private commercial bank
. BANINTER grew quickly into a typical family-run conglomerate, buying up companies or controlling interests in firms that touched on nearly every aspect of Dominican life.
In the process, Báez Figueroa amassed an empire of varied businesses. Through BANINTER Group, he managed to control the country's largest media group, including Listín Diario, the oldest and leading newspaper; four television stations, a cable television company, and more than 70 radio stations.
Báez Figueroa became a man of great influence and power. At his lavish wedding, former Presidents Joaquín Balaguer
and Leonel Fernandez signed the marriage document as witnesses. In late 2000, Báez even proposed a "national economic program", which earned him much praise from President Mejía.
"Risk, and I'm talking about calculated risk, is proper of all business and of any human activity. "Whoever doesn't understand this can't triumph" Báez said in a 2001 interview in a Dominican business magazine Mercado.
His more than generous gifts to friends, business partners, journalists, commentators, models, beauty queens, military personnel, judges, and politicians over the years became legendary, as were his patronage
for many events. former president Mejía got a bulletproof Lexus sports utility vehicle; so did his successor, Leonel Fernández. Colonel Pedro Julio Goico Guerrero (a.k.a. Pepe Goico), who served as Mejía's Head of Security and who guarded former U.S. president Bill Clinton
on visits to the United States
, got ten solid-gold President Rolex
watches worth US$15,000 each and use of a credit card
that the bank would pay off.
Later on, Báez himself would denounce that he called a US$2.4 million credit-card fraud on the part of Colonel Pepe Goico. Although the credit card was issued in Goico's name, it was meant solely to finance presidential trips. Instead, Báez charged, Goico and his cronies used the card for personal purchases, including planes and helicopters, luxury housing and jewelry. The "Pepe-Gate" may have been the spark, but a mountain of kindling had been piling up for years around BANINTER.
Speculation about the source of Báez's fortune ran wild, but nobody considered the explanation being given nowadays by the Dominican authority, that Báez was robbing his own bank.
Rumors that BANINTER might've been in trouble began circulating during the fall of 2002, and depositors started to withdraw their savings. The Dominican Central Bank stepped in to support the bank by providing new lines of credit. Anxious for a permanent solution, the government announced in early 2003 that Banco del Progreso, run by Pedro Castillo Lefeld, the brother of Mejía's son-in-law, would acquire BANINTER. But Banco del Progreso abruptly withdrew from the deal. Government officials and Castillo said that two-thirds of the money that customers had deposited in BANINTER was kept off its official books by a custom-designed software system.
On April 7, 2003, the government took control of BANINTER. Báez Figueroa's family owned more than the 80% of the bank, and soon after, a deeper examination supported by the International Monetary Fund and the Inter-American Development Bank, revealed the scale of the meltdown.
Báez Figueroa was arrested on May 15, 2003 along with BANINTER vice presidents Marcos Báez Cocco and Vivian Lubrano de Castillo, the secretary of the Board of Directors, Jesús M. Troncoso, and wealthy financier
Luis Alvarez Renta, on charges of bank fraud
, money laundering
and concealing information from the government as part of a massive fraud scheme of more than RD
$ 55 billion (USD $2.2 billion). This sum would be big anywhere, but it was overwhelming for the Dominican economy, equivalent to two-thirds of its national budget.
The resulting central bank bailout spurred a 30% annual inflation and a large increase in poverty. The government was forced to devalue the peso, triggering the collapse of two other banks, and prompting a US$600 million (euro$420 million) loan package from the International Monetary Fund.
Though required by the country's Monetary Laws to only guarantee individual deposits of up to RD$500,000 Dominican Pesos
(about US$21,000 at the time) placed within the country, the Dominican Central Bank (Banco Central Dominicano) opted to guarantee all $2.2B in unbacked BANINTER deposits, regardless of the amount, or whether deposits were in Dominican Pesos or American Dollars and without apparent knowledge whether the deposits were held in the Dominican Republic or in BANINTER's branches in the Cayman Islands
and Panama
. The subsequent fiscal shortfall resulted in massive inflation (42%) and the devaluation of the DOP by over 100%.
Former president Mejía and the Central Bank (Banco Central) stated that the unlimited payouts to depositors were to protect the Dominican banking system from a crisis of confidence and potential chain reaction. However, the overall consequence of the bailout was to reimburse the wealthiest of Domincan depositors, some of whom had received rates of interest as high as 27% annually, at the expense of the majority of poor Dominicans—the latter of whom would be required to pay the cost of the bailout through inflation, currency devaluation, government austerity plans and higher taxes over the coming years.
Dominicana, had said that in the BANINTER scandal "there has been much complicity at every level of society: the government, the media, the church, the military.".
In November 2005, Alvarez Renta was found liable by a federal jury in Miami of civil racketeering and illegal money transfers in a conspiracy to loot BANINTER during its final months of existence. Alvarez Renta was ordered to pay $177 Million to the Dominican state. To this date, he still hasn't paid that sum.
The main executives of BANINTER, Báez Figueroa, his cousin Marcos Báez Cocco, Vivian Lubrano, Jesús Troncoso Ferrúa, as well as the aforementioned Alvarez Renta, were prosecuted by the Dominican state for fraud and money laundering, among other criminal charges. Báez Figueroa's main attorney is Marino Vinicio Castillo
, who at the present time holds the position of President Fernandez's Drugs Consultant.
With 350 prosecutions and defense witnesses slated to testify, ex- president Hipólito Mejía among them, the criminal proceedings against Báez Figueroa began on April 2, 2006. However, the Court decided to postpone the first hearing for May 19, 2006, accepting a motion by the defense lawyers. It was prompted, as detailed at length in the trial by a scandal involving debt writeoffs and sweetheart loans or other financial deals suspected of having favored leading politicians and others.
What remains most curious was that the fraud went undetected for 14 years by the country's supposed financial gatekeepers—the Central Bank, the Superintendent of Banks and U. S. accounting company PricewaterhouseCoopers
. How Báez Figueroa and his cronies were accused and some convicted of pulling it off provided a glimpse into the gift-giving and favor-swapping common between private business and top government officials in the Dominican Republic.
The first trial ended in September 2007.
The accusations against two other defendants, former BANINTER executive Vivian Lubrano, as well as the secretary of BANINTER Board of Directors Jesús M. Troncoso, were dismissed for lack of evidence.
The sentence has been widely criticized for its severe contradictions, but more specially because it's been alleged that the judges were pressed by "the powers that be". Noted journalist Miguel Guerrero wrote in his column of the daily El Caribe that the defrauders of BANINTER have been protected "by a dark combination of political, economic, mediatic and ecclesiastical powers" and that the sentence was a mamotreto". In fact, Guerrero went to the extent of saying that everything was fixed beforehand, and the defendants and their lawyers knew it, as did those representing the Central Bank.
In July 2008, the Dominican Supreme Court confirmed the decision against the defendants.
Nevertheless, Lubrano allegedly fell into a "deep depression" and suffered from "panic attacks", and she never went to prison. After much debate, President Leonel Fernández gave her full pardon, on December 22, 2008.
Commercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...
in the Dominican Republic
Dominican Republic
The Dominican Republic is a nation on the island of La Hispaniola, part of the Greater Antilles archipelago in the Caribbean region. The western third of the island is occupied by the nation of Haiti, making Hispaniola one of two Caribbean islands that are shared by two countries...
before collapsing in 2003 in a spectacular fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
tied to political corruption
Political corruption
Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...
. The resulting deficit of more than US$2.2 billion was equal to 12% to 15% of the Dominican national gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
.
Ramón Báez Figueroa and expansion of BANINTER
Banco Intercontinental was created in 1986 by Ramón Báez Romano, a businessman and former Industry MinisterMinister (government)
A minister is a politician who holds significant public office in a national or regional government. Senior ministers are members of the cabinet....
. His oldest son, Ramón Báez Figueroa
Ramón Báez Figueroa
Ramón Báez Figueroa is the former president of Banco Intercontinental from the Dominican Republic, accused in 2003 of masterminding the country's most spectacular banking fraud scandal, amounting to more than USD$ 2.2 billion....
, took over the small bank and helped build it into the country's number two private commercial bank
Commercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...
. BANINTER grew quickly into a typical family-run conglomerate, buying up companies or controlling interests in firms that touched on nearly every aspect of Dominican life.
In the process, Báez Figueroa amassed an empire of varied businesses. Through BANINTER Group, he managed to control the country's largest media group, including Listín Diario, the oldest and leading newspaper; four television stations, a cable television company, and more than 70 radio stations.
Báez Figueroa became a man of great influence and power. At his lavish wedding, former Presidents Joaquín Balaguer
Joaquín Balaguer
Joaquín Antonio Balaguer Ricardo was the President of the Dominican Republic from 1960 to 1962, from 1966 to 1978, and again from 1986 to 1996.-Early life and introduction to politics:...
and Leonel Fernandez signed the marriage document as witnesses. In late 2000, Báez even proposed a "national economic program", which earned him much praise from President Mejía.
"Risk, and I'm talking about calculated risk, is proper of all business and of any human activity. "Whoever doesn't understand this can't triumph" Báez said in a 2001 interview in a Dominican business magazine Mercado.
His more than generous gifts to friends, business partners, journalists, commentators, models, beauty queens, military personnel, judges, and politicians over the years became legendary, as were his patronage
Patronage
Patronage is the support, encouragement, privilege, or financial aid that an organization or individual bestows to another. In the history of art, arts patronage refers to the support that kings or popes have provided to musicians, painters, and sculptors...
for many events. former president Mejía got a bulletproof Lexus sports utility vehicle; so did his successor, Leonel Fernández. Colonel Pedro Julio Goico Guerrero (a.k.a. Pepe Goico), who served as Mejía's Head of Security and who guarded former U.S. president Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
on visits to the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, got ten solid-gold President Rolex
Rolex
Rolex SA is a Swiss watchmaking manufacturer of high-quality, luxury wristwatches. Rolex watches are popularly regarded as status symbols and BusinessWeek magazine ranks Rolex No.71 on its 2007 annual list of the 100 most valuable global brands...
watches worth US$15,000 each and use of a credit card
Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...
that the bank would pay off.
Later on, Báez himself would denounce that he called a US$2.4 million credit-card fraud on the part of Colonel Pepe Goico. Although the credit card was issued in Goico's name, it was meant solely to finance presidential trips. Instead, Báez charged, Goico and his cronies used the card for personal purchases, including planes and helicopters, luxury housing and jewelry. The "Pepe-Gate" may have been the spark, but a mountain of kindling had been piling up for years around BANINTER.
Bank crisis
BANINTER's octopus-like acquisitiveness raised some eyebrows, as did Báez's luxurious tastes. In 2002 he bought a US$14,600,000 yacht, the Patricia. Moreover, Báez had personal expenses of more than US$1,000,000 monthly. .Speculation about the source of Báez's fortune ran wild, but nobody considered the explanation being given nowadays by the Dominican authority, that Báez was robbing his own bank.
Rumors that BANINTER might've been in trouble began circulating during the fall of 2002, and depositors started to withdraw their savings. The Dominican Central Bank stepped in to support the bank by providing new lines of credit. Anxious for a permanent solution, the government announced in early 2003 that Banco del Progreso, run by Pedro Castillo Lefeld, the brother of Mejía's son-in-law, would acquire BANINTER. But Banco del Progreso abruptly withdrew from the deal. Government officials and Castillo said that two-thirds of the money that customers had deposited in BANINTER was kept off its official books by a custom-designed software system.
On April 7, 2003, the government took control of BANINTER. Báez Figueroa's family owned more than the 80% of the bank, and soon after, a deeper examination supported by the International Monetary Fund and the Inter-American Development Bank, revealed the scale of the meltdown.
Báez Figueroa was arrested on May 15, 2003 along with BANINTER vice presidents Marcos Báez Cocco and Vivian Lubrano de Castillo, the secretary of the Board of Directors, Jesús M. Troncoso, and wealthy financier
Financier
Financier is a term for a person who handles typically large sums of money, usually involving money lending, financing projects, large-scale investing, or large-scale money management. The term is French, and derives from finance or payment...
Luis Alvarez Renta, on charges of bank fraud
Bank fraud
Bank fraud is the use of fraudulent means to obtain money, assets, or other property owned or held by a financial institution, or to obtain money from depositors by fraudulently representing to be a bank or financial institution. In many instances, bank fraud is a criminal offense...
, money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
and concealing information from the government as part of a massive fraud scheme of more than RD
RD
Rd or RD may refer to:-Media and entertainment:* Radiant Dawn, a tactics, turn based strategy RPG for the Wii* Radical Dreamers, a text-based role playing game on the Satellaview made in 1996...
$ 55 billion (USD $2.2 billion). This sum would be big anywhere, but it was overwhelming for the Dominican economy, equivalent to two-thirds of its national budget.
The resulting central bank bailout spurred a 30% annual inflation and a large increase in poverty. The government was forced to devalue the peso, triggering the collapse of two other banks, and prompting a US$600 million (euro$420 million) loan package from the International Monetary Fund.
Though required by the country's Monetary Laws to only guarantee individual deposits of up to RD$500,000 Dominican Pesos
Dominican peso
The Dominican peso, also called peso oro is the currency of the Dominican Republic. Its symbol is "$", with "RD$" used when distinction from other pesos is required; its ISO 4217 code is "DOP". Each peso is divided into 100 centavos , for which the ¢ symbol is used...
(about US$21,000 at the time) placed within the country, the Dominican Central Bank (Banco Central Dominicano) opted to guarantee all $2.2B in unbacked BANINTER deposits, regardless of the amount, or whether deposits were in Dominican Pesos or American Dollars and without apparent knowledge whether the deposits were held in the Dominican Republic or in BANINTER's branches in the Cayman Islands
Cayman Islands
The Cayman Islands is a British Overseas Territory and overseas territory of the European Union located in the western Caribbean Sea. The territory comprises the three islands of Grand Cayman, Cayman Brac, and Little Cayman, located south of Cuba and northwest of Jamaica...
and Panama
Panama
Panama , officially the Republic of Panama , is the southernmost country of Central America. Situated on the isthmus connecting North and South America, it is bordered by Costa Rica to the northwest, Colombia to the southeast, the Caribbean Sea to the north and the Pacific Ocean to the south. The...
. The subsequent fiscal shortfall resulted in massive inflation (42%) and the devaluation of the DOP by over 100%.
Former president Mejía and the Central Bank (Banco Central) stated that the unlimited payouts to depositors were to protect the Dominican banking system from a crisis of confidence and potential chain reaction. However, the overall consequence of the bailout was to reimburse the wealthiest of Domincan depositors, some of whom had received rates of interest as high as 27% annually, at the expense of the majority of poor Dominicans—the latter of whom would be required to pay the cost of the bailout through inflation, currency devaluation, government austerity plans and higher taxes over the coming years.
Aftermath and trial
The banking crisis ignited harsh fights over BANINTER group's media outlets, including the prominent newspaper Listín Diario, which was temporarily seized and run by the Mejía administration following the bank collapse. In 2003, TV commentator Rafael Acevedo, president of the opinion polling firm GallupThe Gallup Organization
The Gallup Organization, is primarily a research-based performance-management consulting company. Some of Gallup's key practice areas are - Employee Engagement, Customer Engagement and Well-Being. Gallup has over 40 offices in 27 countries. World headquarters are in Washington, D.C. Operational...
Dominicana, had said that in the BANINTER scandal "there has been much complicity at every level of society: the government, the media, the church, the military.".
In November 2005, Alvarez Renta was found liable by a federal jury in Miami of civil racketeering and illegal money transfers in a conspiracy to loot BANINTER during its final months of existence. Alvarez Renta was ordered to pay $177 Million to the Dominican state. To this date, he still hasn't paid that sum.
The main executives of BANINTER, Báez Figueroa, his cousin Marcos Báez Cocco, Vivian Lubrano, Jesús Troncoso Ferrúa, as well as the aforementioned Alvarez Renta, were prosecuted by the Dominican state for fraud and money laundering, among other criminal charges. Báez Figueroa's main attorney is Marino Vinicio Castillo
Marino Vinicio Castillo
Marino Vinicio Castillo Rodríguez, better known as Vincho, is a prominent Dominican lawyer, and controversial figure in Dominican politics...
, who at the present time holds the position of President Fernandez's Drugs Consultant.
With 350 prosecutions and defense witnesses slated to testify, ex- president Hipólito Mejía among them, the criminal proceedings against Báez Figueroa began on April 2, 2006. However, the Court decided to postpone the first hearing for May 19, 2006, accepting a motion by the defense lawyers. It was prompted, as detailed at length in the trial by a scandal involving debt writeoffs and sweetheart loans or other financial deals suspected of having favored leading politicians and others.
What remains most curious was that the fraud went undetected for 14 years by the country's supposed financial gatekeepers—the Central Bank, the Superintendent of Banks and U. S. accounting company PricewaterhouseCoopers
PricewaterhouseCoopers
PricewaterhouseCoopers is a global professional services firm headquartered in London, United Kingdom. It is the world's largest professional services firm measured by revenues and one of the "Big Four" accountancy firms....
. How Báez Figueroa and his cronies were accused and some convicted of pulling it off provided a glimpse into the gift-giving and favor-swapping common between private business and top government officials in the Dominican Republic.
The first trial ended in September 2007.
Sentence and criticism
On October 21, 2007, Báez Figueroa was sentenced by a three-judge panel to 10 years in prison. Additionally, he was ordered to pay restitution and damages totalling RD$63 billion. The laundering charges were excluded, but the other suspected mastermind of the fraud, Luis Alvarez Renta, was convicted and sentenced to 10 years in prison for money laundering. Marcos Báez Cocco, ex-vicepresident of the Bank, was also found guilty, and sentenced to 8 years.The accusations against two other defendants, former BANINTER executive Vivian Lubrano, as well as the secretary of BANINTER Board of Directors Jesús M. Troncoso, were dismissed for lack of evidence.
The sentence has been widely criticized for its severe contradictions, but more specially because it's been alleged that the judges were pressed by "the powers that be". Noted journalist Miguel Guerrero wrote in his column of the daily El Caribe that the defrauders of BANINTER have been protected "by a dark combination of political, economic, mediatic and ecclesiastical powers" and that the sentence was a mamotreto". In fact, Guerrero went to the extent of saying that everything was fixed beforehand, and the defendants and their lawyers knew it, as did those representing the Central Bank.
Court of Appeals and Supreme Court decisions
In February 2008, the case went to the Court of Appeals of Santo Domingo and the Court upheld the sentence against Báez Figueroa, Báez Cocco and Alvarez Renta. The decision that had favored Vivian Lubrano was reverted, and she was sentenced to five years in prison and RD$18 billion in damages. Charges against Troncoso Ferrua were definitely dropped.In July 2008, the Dominican Supreme Court confirmed the decision against the defendants.
Nevertheless, Lubrano allegedly fell into a "deep depression" and suffered from "panic attacks", and she never went to prison. After much debate, President Leonel Fernández gave her full pardon, on December 22, 2008.