Hidden treasure

NICARAGUA'S FLEDGLING democracy narrowly averted a constitutional crisis, but not before the nation's former president, Arnoldo Alem‡n, was placed under house arrest.

The ex-president, Nicaragua's second democratically elected head of state since the overthrow of the Marxist Sandinistas, has been under complete house arrest since early this year for embezzling perhaps as much as $100 million. Mr. Alem‡n surrendered his passport and all diplomatic privileges. He is allowed to live in only one room in his own home, where he is under 24-hour police guard. With a dozen officers on duty round-the-clock, all outside contact, including telephone, fax, and e-mail communication, is tightly restricted. Visitors must get permission from a judge in order to see him.

This is not how life in liberated, post-Sandinista Nicaragua was supposed to be. Mr. Alem‡n went to prison under the Sandinistas and long fought the dictatorship. For the United States, which played a key role in assisting Nicaragua's freedom fighters in the overthrow of the communists, corruption charges are a black eye on hard-won reforms. Mr. Alem‡n's is yet another cautionary tale in how long and twisted the road to democracy can be.

Government officials accuse Mr. Alem‡n of stealing millions of dollars from government coffers while in office from 1997 to 2002. Local press dub the case "Caso La Huaca," (Case of the Hidden Treasure), after the Nicaraguan Indians of old who were buried with their earthly possessions.

President Enrique Bola-os, who campaigned to clean up corrupt government-and holds a 92 percent public approval rating as a result-ordered Mr. Alem‡n's arrest, saying the move "beheads the clans of corruption and intimidation." But Mr. Alem‡n claims the allegations against him represent "a political witch hunt."

Francisco Fiallos, Nicaragua's attorney general, has filed at least two cases against Mr. Alem‡n. He told WORLD his administration is "engaged in a war on corruption."

President Bola-os gave the attorney general full authority to prosecute officials of the previous administration-including the president. But it took the work of Congress to carry out the mandate. As a result, Mr. Fiallos has filed over a dozen criminal charges in Tribunal Court against government officials, including the criminal charges against Mr. Alem‡n involving the theft of $30 million in government funds. In his Managua office, Mr. Fiallos pointed to a single stack of papers on his spacious mahogany desk to suggest more paperwork, and possible charges, against the ex-president. These could involve, he said, "the theft of an additional $51 million."

Mr. Fiallos said the case represents a "historical event" for Nicaragua. "It is the first time there has been an indictment of the former head of state," he said. It is also the first time Nicaragua has used money-laundering laws against government officials. Nicaragua's constitution places a one-term limit on the presidency. Former heads of state typically assume honored dignitary roles and receive comfortable retirement packages.

Instead of heading into retirement after his five-year term as president, Mr. Alem‡n used his political leverage to gain control of the legislative branch of government. He made what Mr. Fiallos called an "immoral political pact" with the former dictator, Daniel Ortega, now himself a member of Congress.

The pact provided enough legislative votes to create a new position for Mr. Alem‡n-as Congressman-At-Large. Thus Mr. Alem‡n in ceasing to be head of state became head of the legislature. He also engineered a full immunity for himself from possible criminal prosecution, seemingly insulating himself from criminal prosecution by providing financial kickbacks to Supreme Court judges.

"Alem‡n was attempting to run the country as de facto president from his nonelected position as chairman of Congress," said Mr. Fiallos.

But none of that kept Mr. Alem‡n from falling under the scrutiny of Nicaragua's independent press. Mr. Alem‡n's legal difficulties surfaced within 24 hours of his leaving the presidency over a year ago when a reporter from La Prensa, Nicaragua's largest newspaper, discovered hard evidence of money laundering, and followed a paper trail of $1.3 million. The money was supposed to go to a state-run television station but ended up in Panamanian bank accounts held by Alem‡n family members.

"As soon as we began to denounce the corruption and theft," said Luis Sanchez, general editor of La Prensa, "Alem‡n used his clout as head of the legislature in an attempt to silence us." Mr. Alem‡n claimed the newspaper was evading $6 million in taxes and his cronies tried to shut it down. "It was financial terrorism," said Mr. Sanchez.

The pressure only encouraged La Prensa. Eventually the newspaper uncovered evidence that over $97 million from various government offices was diverted to private offshore bank accounts-implicating not only Mr. Alem‡n but also family members and other associates in the illegal diversion of public money.

As the evidence of the cash theft mounted, Nicaraguans demanded action. To date, Mr. Alem‡n's only defense has been loud protestations that his political opponents are "out to get him" and threats to "sue the liars."

To Nicaraguans, it looks like the former head of state doth protest too much. Mr. Alem‡n published a half-page advertisement in the local newspapers, an open letter to the current president stating that government officials are making arrangements "to confiscate $5 million of mine held in U.S. banks as well as some of my property." In an appeal directly to Mr. Bola-os, the ad states, "I reject the lies of your administration. Nevertheless, I will sign a document to deliver the $5M cash and properties to you."

Legal observers believe Mr. Alem‡n's advertisement is an attempt to plea bargain. But the government-and the public-appears prepared to prosecute Alem‡n to the fullest extent.

"This is not a political struggle between conservatives and liberals," attorney general Fiallos told WORLD. "Our very system of checks and balances is under siege." Marching orders for the attorney general are simple: "Put the guilty in prison. Second, get the money back."

As part of the campaign against corruption, Mr. Fiallos also has arrested six former Alem‡n aides for money laundering. Nicaragua's former national treasurer is among those already in prison. The action came after Congress voted 47-45 late last year to strip Mr. Alem‡n of his immunity. At the same time, Mr. Fiallos ordered Mr. Alem‡n escorted home and placed under house arrest.

The case has made its way to the United States, where the FBI has assisted the Nicaraguan attorney general's office in locating illegal bank accounts. To date, the United States has frozen $300,000 in assets.

Despite the legislative turnaround and U.S. cooperation, Mr. Fiallos is unsure how much of the millions stolen will ever be recovered. "It was a sophisticated money-laundering scheme-a spider web of accounts."

Mr. Sanchez of La Prensa told WORLD, "The United States has invested a great deal of political capital and money in the process of Nicaragua securing freedom and building a free-enterprise democracy. The United States encouraged our freedom fighters to overthrow a communist government and assisted us in establishing democracy. Our people have prospered under free enterprise."

But in an economy of only $12.3 billion, the theft of $100 million has had a big effect. According to Mr. Sanchez, the loss "drained our economy of needed dollars" and "greatly slowed foreign investment."

It will also hold back domestic development. Caesar AvilŽs, government highway director, said, "There is no money in our budget for highway construction. Alem‡n's cronies squandered and plundered the government coffers." Mr. AvilŽs headed his department without a salary for the first eight months. "The corruption has slowed foreign aid. Nations like Japan and Canada that once helped us with cash to build bridges and roads are taking a wait-and-see attitude."

While most countries might view the arrest and imprisonment of their former head of state as an international embarrassment, many Nicaraguans believe they have to prove to the world that they are serious about rooting out corruption. The successful prosecution of Mr. Alem‡n is a test of the strength of the new democracy and proof to the world that Nicaragua will no longer tolerate wholesale corruption. According to national opinion polls, 85 percent of Nicaraguans want Mr. Alem‡n prosecuted, even though many of them once voted for him.

In Managua's streets, a retired carpenter named Abuelo is typical. Asked if he believes the ex-president stole money from the government, he says, "ÁClaro que s'!" "Clearly. Yes!"

He added, "In years past, I could not even tell my neighbor my political views for fear of being arrested. Now we are not only free to talk, but we can see it through to change our nation."