Caso Mirage

Introduction

During its protracted and delicate transition to democracy during the 1990s, Chile struggled to enforce new anti-corruption norms in an environment of lingering military prerogatives. The “Caso Mirage,” a kickbacks scandal involving the purchase in 1994 of twenty-five second-hand Mirage combat jets from Belgium, demonstrated the existence of cozy and lucrative relationships between arms dealers and senior air force officers that survived the end of the Pinochet era. Simultaneously, the Mirage scandal, which cost the Chilean state USD 15 million in commissions, cast a light on the transnational nature of arms corruption and the important role of intermediaries such as Lt. Gen. Jacques Lefebvre, a suspect figure in a separate Belgian political finance and arms sales scandal of the late 1980s, who enjoyed a second career as a sales agent for Belgium’s military equipment made redundant by the end of the Cold War. The tangled network of shell companies and secret bank accounts uncovered in the course of the Belgian and Chilean investigations also highlighted the importance of multi-jurisdictional prosecutorial cooperation in fighting international corruption schemes.

Key Facts

Buyer: Chile

Sellers: Belgium state, SABCA (Belgium)

Year of Deal: 1994

Equipment Sold: 25 Mirage-5M “Elkan” combat aircraft

Value of Deal: USD 114 million

Sum Involved in Corruption Allegations: USD 15 million

Dramatis Personae

Ramón Vega Hidalgo– head of the Chilean Air Force (1991-1995) and later an appointed senator (1998-2006); suspected of misappropriating USD 2.8 million in public funds. Arrested in 2009; released due to ill health and died in 2014.

Lt. Gen (retd.) Jacques Lefebvre – chief of staff of the Belgian Air Force (1985-1988) and founder of Europavia. Committed suicide in 1995.

Jaime Estay Viveros – former head of the logistics command of the Chilean Air Force. Convicted of embezzlement of public funds; received a 100-day suspended sentence and fined CLP 7.5 million.

Bernard Van Meer – son-in-law of Ramón Vega.

Carlos Honzik – Chilean arms dealer and key intermediary on the Mirage deal.

Patricio Rojas – Chilean defence minister at the time of the deal’s signing.

The Arms Deal

Chilean President Patricio Aylwin (L) at his inauguration on March 11, 1990. The outgoing president, Augusto Pinochet (R), looks on. Getty/AFP, Stringer.

During the early 1990s, the Chilean Air Force (Fuerza Aérea de Chile, or FACh) was searching for a replacement for its aging Hawker Hunter fighter aircraft. For nearly two decades, the FACh had limited options for arms imports due to unilateral embargoes imposed by the United States and France on the military regime led by General Augusto Pinochet. With the easing of foreign isolation following the referendum ending military rule in 1988 and the subsequent presidential election of 1989, the FACh’s options improved. Chile’s armed forces had long enjoyed autonomy over their budgets through the provisions of the Copper Law (Ley Reservada del Cobre), which in its last iteration turned over 10% of national copper export revenues to arms procurement. Before relinquishing power, however, the military further augmented its autonomy by demanding the Chilean congress pass a budget floor which prevented apportionments for the military from dropping below 1989 levels, with adjustments for inflation.

In 1994, after assessing offers from Israel, Sweden, the United Kingdom, and the United States, it settled for 25 second-hand Dassault Mirage-5 jets recently retired from the Belgian Air Force at the end of the Cold War. In May 1992, the Belgian defence minister, Leo Delcroix, had cancelled plans to modernize and extend the service life of the jets due to cost concerns. Since then, former Air Force chief Jacques Lefebvre had been working—in his personal capacity as an agent—to find a foreign buyer for the redundant jets, reaching out to Finland, Pakistan, the Philippines, and Chile. In July 1994, the FACh signed a USD 114 million contract for 20 jets modernized to the Mirage-5M “Elkan” standard, plus five additional jets for spare parts. The package would include the costs of modernization by a Dassault-affiliate in Belgium, Société Anonyme Belgique de Constructions Aéronautiques (SABCA), as well as the incorporation of additional avionics specifically requested by the FACh. The Belgian state would receive USD 70 million, the specialized avionics would cost USD 5 million, and the remainder would be paid to SABCA.

Corruption Allegations

Of the USD 39 million in modernization costs which Chile paid to SABCA, a large commission worth USD 15 million was in turn paid out to Lefebvre’s consultancy firm, Europavia. In March 1995, Lefebvre committed suicide after being implicated in a separate political controversy surrounding an arms procurement scandal in Belgium. Belgian investigators uncovered evidence of the USD 15 million commission associated with the Chilean deal among his papers. Lefebvre’s records revealed that the USD 15 million was divided up among several Belgian and Chilean agents involved in the deal. The general himself took a three percent cut of the commission, a SABCA representative in Chile named Francisco Smet d’Olbeck was assigned ten percent, a Paris-based aeronautics consultant received one percent, eight percent was sent to an anonymous account in Miami, and the remainder was transferred to a company with the name Berthier Investment Inc. The resulting investigations would firmly establish that the ultimate recipients of these funds were intermediaries and FACh officers, while several close associates of high-ranking civilian officials also benefited.

Investigations and Outcomes

In January 1999, Chilean deputy Nelson Ávila brought to light suspicions of kickbacks related to the deal based on Lefebvre’s documents seized by Belgian investigators. Ávila suspected that the key middleman in the deal was Chilean national Carlos Honzik, controller of the Berthier Investment accounts. Honzik, who died in 2001, had co-founded Berthier with a former lawyer of Gen. Pinochet, Oscar Aitken Lavanchy, and a former director of Chile’s state-owned firearms manufacturer FAMAE, Gen. Guillermo Letelier Skinner. The FACh responded with an internal investigation and 3,800-page report arguing that none of its officers had received bribes and it had played no part in the flow of funds. Further, the report argued that there were no defects in the planes and equipment received which would suggest a siphoning off of funds.

Ramón Vega Hidalgo, former head of the Chilean Air Force. Source: Biblioteca del Congreso Nacional del Chile.

In 2003, a Belgian investigating judge approached Chilean counterparts for legal assistance in determining the controllers of the accounts into which Europavia had transferred funds. The resulting investigations in Belgium and Chile found that the substantial proportion of the commissions handled by Berthier Investment Inc. were divided up among a number of Chilean military officers and their families, as well as other arms dealers closely associated with the military establishment in Chile. The largest portion of the bribes, worth around USD 2.8 million, had been paid to Gen. Ramón Vega Hidalgo, head of FACh between 1991 and 1995, or his close relatives. Vega’s son-in-law, Bernard Van Meer, a Belgian national, played a key role in introducing the two sides of the deal and distributed Vega’s portion of the bribes to his family. Jamie Estay Viveros, another FACh general who served as head of Logistics Command at the time of the deal, received USD 65,000 from Honzik. Gen. Florencio Dublé Pizarro, who also served as commander of Logistics Command, and Col. Luis Bolton Montalva, chief of the Logistics Command’s Division of Engineering and Weapons Systems Support, each received USD 60,000.

In addition to Honzik and Van Meer, three other intermediaries also took a percentage of the USD 15 million commission attached to the Mirage deal. Ten percent, or USD 1.5 million, went to Francisco Smet d’Olbeck, SABCA’s representative in Chile. USD 1.17 million, corresponding to the eight percent traced to a Miami bank account, went to Conrado (or Conrad) Ariztía O’Brien, an arms agent since the 1970s who has represented Racal, Oerlikon, Sikorsky, and Pilatus in Chilean procurement tenders. USD 3 million was transferred to Bartolomé Dezerega, a longtime Christian Democratic Party operative, former head of the state broadcaster TVN, and friend to both Conrad Ariztía and Patricio Rojas, the defence minister at the time of the Mirage deal. The remainder, around USD 6.29 million, was eventually traced to a bank account in Liechtenstein, which investigators believe to have been controlled by Honzik at the time of his death and intended for further payouts to FACh officers.

Ramón Vega was arrested in January 2009 and placed in detention pending trial. Before the prosecution could commence, however, he was released for health reasons and passed away in 2014. Jaime Estay, the former head of the Logistics Command of the FACh, was found guilty of misappropriation of public funds in February 2017 and given a suspended 100-day prison sentence. He was also fined CLP 7.5 million. Honzik’s widow, Henriette Bahna-Hamwi, was handed a 61-day suspended sentence and also fined CLP 7.5 million, while Dublé and Bolton were acquitted of being accomplices to the crime. While Dezerega and Rojas were questioned by Chilean officials, neither was charged; the lead Chilean investigator also claimed that Ariztía did not play a role in the Mirage negotiations. The relationship between Dezerega and Rojas has since come under close scrutiny, with investigative media outlets accusing Dezerega and his family of helping organize an effective pension for Rojas through inflated fees for think tank studies. Nonetheless, no clear evidence has ever directly implicated Rojas or any other political figure in the Mirage kickbacks.

A parliamentary commission investigated the Mirage deal and released its report in 2010. By a five-to-three vote, the commission held former presidents Eduardo Frei and Patricio Aylwin, as well as their defence ministers Patricio Rojas and Edmundo Pérez Yoma, respectively, responsible for failing to prevent the corruption associated with the deal. In 2014, the Milicogate scandal, involving embezzlement from the procurement budget, refocused Chilean societies’ attention on unchecked prerogatives. In late 2018, President Sebastián Piñera introduced a plan to phase out the Copper Law while maintaining a link between copper revenues and arms procurement over a twelve-year transition period.

Banner Image Credit

Image Caption: A Belgian Mirage-5, upgraded to the new Mirage System Improvement Program (MirSIP) standard, at Bierset Airport, Liege, in September 1993. This plane and 24 others were later sold to the Chilean Air Force as the Mirage-5M “Elkan.”
Image Source: Flickr/Creative Commons, Rob Schleiffert.

Sources (Click to Expand)

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