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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 ( (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 everything) 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).

2) 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.