Take physic, pomp

The Talented Mister Pinto (from IKN 333)

Here’s a segment from IKN 333 out yesterday, giving a little background on the new non-executive chair of Minera IRL (IRL.to) (MIRL.L), Jaime Pinto. It formed part of a larger update on the comings and going at IRL in yesterday’s edition. I’ve left the end off this piece too, for secret reasons.
And Jaime, we’re just warming up round here.

In order to
get a handle on the new non-executive chairman of Minera IRL we need to travel
back in time nearly twenty years (seriously) to the time of the Fujimori
government, when dirty deals and institutional corruption were rife. If we do,
Jaime Pinto’s name pops up in the middle of one of the scandals. It’s a long
and complicated story (as are most multi-million dollar government corruption
scandals) but the essence is simple and the M.O.
is similar to the debt default fight we’ve seen in Argentina these last couple of
years. The skinny is as follows:
In the mid-1990’s Peru’s economy
was in trouble and its bonds were trading badly
In 1996, Elliot Associates (yes, the very same as the Argentina case, headed by Paul Singer and
) bought (face value) U$20.6m worth of Peru debt bonds for U$11.4m. The
seller was SBC (Swiss Bank).
In 1998, Elliot Associates sued the
government of Peru
for the full value plus interest plus damages of those bonds for U$66m. After a
couple of years of legal beagling Elliot Assoc won the case and the appeal.
In October 2000 Peru settled with Elliot Associates
For U$58m.
In other
words, Elliot Associates “did a vulture fund” on Peru. They bought up distressed
debt, the sued the country for the full amount and then managed to get a very
lucrative settlement out of the deal, all in the space of just four and a bit
years. So far so morally dubious, but the post-event uncovering of illegality
of the case is another matter and that’s where our nice Mr Jaime Pinto comes in
(3). Follow carefully and follow the dates, too:
1) In the
period 1994 to 1996, Jaime Pinto was working in the government at the Ministry
of Economy and Finances (MEF). Amongst other matters, he was in charge of
overseeing all transactions made by SBC (Swiss Bank).
According to Peruvian law,
SBC could NOT sell its Peru
sovereign debt holdings to a third party without first getting permission from
the government. SBC had to sell them to the National Bank (Banco de la Nación)
or at least offer them to the national bank first.
3) When SBC
sold its bonds to Elliot Associates, it told nobody. That’s naughty. However
Jaime Pinto would have seen the transaction go through and having the power to
do so he should have stopped it. He didn’t. And then he should have rung the
alarm bell on the deal to the government. He didn’t do that either. These are
gross derelictions of duty.
4) Then
Jaime Pinto left the MEF (according to the congressional committee report he
left on bad terms too) and after a brief sojourn in a different company was
hired as a lawyer for none other than… Elliot Associates! Yes, amazingly he
went to work for a Peru
studio that worked directly for the Paul Singer
company. There’s no doubt that Pinto had a significant amount of restricted
(inside) information about Peru’s
debt position, but went to work for a company that was trying to squeeze the
country on that very debt.
5) When the
judicial decision went with Elliot Associates and against the State of Peru, the eventual
payment was made (against the advice of Peru’s
own lawyers in the Fujimori government) because Singer was threatening to stop
new debt emissions and bring the country into default (notably the very same
strategy it’s used vs Argentina).
Pinto would have known about this weak spot in the Peru government’s defence.
6) The
U$58m payment was made by the government of Peru to Elliot Associates in
October 2000. Just one month
later, the government of Alberto Fujimori fell during the
“Vladivideo” scandal and light began to shine on the corruption
during his presidency.
As part of
the investigations into the Fujimori era corruptions, a congressional committee
was set up to look into cases of supposed fraud. The Elliot case was one of the
matters they looked at.
In July 2003, the congressional commission published its
report on the Elliot case and came to two main conclusions. Here’s the
screenshot of the relevant segment of the document (found on this link (4), it’s
a long one in Spanish but feel free to dive in, it’s fun

That second recommendation
translates as follows;
Press criminal charges against Dr. Jaime Pinto for having
advised Elliot Associates between January and February 1998 with privileged
(insider) information regarding the external debt of Peru. Currently, Dr. Pinto has been
named by the Ministry of Economy and Finance as representative of the
government of Peru at the Inter-American Development Bank.
In other
words, the congressional committee found enough evidence to recommend criminal
charges against Jaime Pinto for multi-million dollar corruption and use of
insider information. What happened then is that we don’t really know how, but
the case got “lost” in the hurly-burly of the transition government
and then the Toledo
government and all kind of forgotten about until quite recently.

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