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Ecuador’s leader demands release of Panama Papers, and learns he’s in them

Ecuador's President Rafael Correa attends a conference organized by the Pontifical Academy of Social Sciences, at the Vatican Friday, April 15, 2016.
Ecuador's President Rafael Correa attends a conference organized by the Pontifical Academy of Social Sciences, at the Vatican Friday, April 15, 2016. AP

In the weeks after the release of the documents now known as the Panama Papers, Ecuadoran President Rafael Correa called out his country’s journalists and boasted that, unlike other countries, he and his government weren’t found in the leak.

However, the secret documents show that he and his estranged brother, Fabricio, caught the attention of anti-corruption authorities in Panama in 2012.

Panamanian prosecutors confirmed to McClatchy that investigators looked into an offshore company in Panama because of embezzlement concerns. And a secret email within the Panama Papers says Correa and his brother, Fabricio, were the focus of the inquiry.

One director of the offshore — who denied knowing the president's brother — has a direct tie to Fabricio Correa’s construction businesses.

“The president is a very honest person,” Omar Simon, the president’s top adviser, told McClatchy. “This is all absolutely false. And he’s not involved in any offshore company directly or indirectly.”

After the first reports from the Panama Papers were published April 3, Correa boasted that journalists “haven’t found anything” about his government. Correa’s legal adviser Alexis Mera was bolder.

“We’re happy with the Panama Papers,” Mera told the Ecuadoran daily El Universo in April 13 editions. “It has shown that the Ecuadoran government is one of the most honest in the world, there is no government functionary that has anything hidden.”

That’s not correct. Ecuadoran journalists published three names of officials connected to Correa’s government that appeared in the leak of the law firm’s documents. It was last week that McClatchy found the email mentioning President Correa.

The president berated the journalists who worked collaboratively to expose the Panama Papers — a leak of 11.5 million secret documents from the Panamanian law firm Mossack Fonseca. He has repeatedly demanded the full release of the massive archive.

First he took to Twitter to criticize the International Consortium of Investigative Journalists, or ICIJ, the umbrella organization that organized more than 300 global journalists, including several from McClatchy, which is the sole U.S. newspaper partner.

Then on April 11, he excoriated the findings, which have led to investigations and resignations across the globe.

“They spent almost a year looking for something against the Ecuadoran government and they haven’t found anything,” Correa tweeted from his presidential handle @MashiRafael.

A day later, he tweeted the names and handles of Ecuadoran journalists who participated, asking his citizens to “demand from them that they reveal ALL the truth.”

In fact, Ecuador is often mentioned in the documents. Just searching the word “Ecuador” yields more than 160,000 secret documents. Guayaquil, the wealthy coastal city, shows up in 109,000 documents.

When taking office in 2007, Correa promised a “revolution against corruption,” but it remains a problem. Last year, Transparency International ranked 168 countries and territories on its government corruption index. It found that 106 nations were less corrupt than Ecuador.

Ecuador adopted the U.S. dollar as its currency in 2000. Correa, who holds a Ph.D. in economics from the University of Illinois-Urbana, has adopted a populist style, tightened Ecuador’s ties with China and fiercely criticized the U.S. government.

Correa and older brother Fabricio have engaged in a long-running family drama that has played out in the pages of newspapers and on television screens. Accused of profiting from his brother via state contracts, Fabricio unsuccessfully launched a presidential bid to run against his brother in 2012 on an anti-corruption platform.

They appear together in the Panama Papers, in an email from Mossack Fonseca lawyers in Panama to a law firm in Guayaquil.

“My name is Sara Montenegro, lawyer for Mossack Fonseca & Co. and I'm writing to notify you of an investigation being undertaken by the office of the Anti-Corruption Prosecutor of Panama, in reference to Misters FABRICIO CORREA and RAFAEL CORREA DELGADO for the crime of embezzlement against the Ecuadoran state, an investigation which involves a Panamanian corporation that was sold to you in 2006 called ORLION GROUP S.A.,” said the May 4, 2012, email to a lawyer working for the Legalsa & Asociados firm, which opened the offshore on behalf of an unidentified customer.

Prosecutors asked Mossack Fonseca for shareholder information, “which we did not give since we don’t have it,” Montenegro added. She asked Legalsa & Asociados for information on the true owners of the Orlion Group S.A. because an official demand was likely.

In a May 10, 2012, internal email, Mossack Fonseca’s head of compliance, Sandra de Cornejo, recommends that her firm drop services to the Orlion Group S.A.

“Although we have not found anything that ties the Correas and the entity,” she cautions, “I suggest resigning … because of the scant cooperation received from the client.”

De Cornejo notes that Mossack Fonseca had been seeking the required know-your-customer documents about Orlion since April 2010 from Legalsa & Asociados. More than two years later, and only after a visit from a Panamanian anti-corruption team, Mossack Fonseca decided to resign as the service provider to Orlion Group.

McClatchy sent an email to the Legalsa lawyer who corresponded with Mossack Fonseca, but it bounced back. Requests for comment via its website were not returned, and the phone number on the website rings without answer or messaging service.

Mossack Fonseca employees said in the emails that they found no link to the Correas brothers. But they acknowledged that they lacked any specific information about the real owner or directors.

Mossack Fonseca resigned as Orlion Group's formation agent on July 10, 2012. There is no further internal correspondence about Orlion Group S.A. until June 27, 2014, when Mossack Fonseca's Guayaquil office emailed its headquarters saying Legalsa — on behalf of its unnamed customer — wanted to reactivate the shelf company.

"We won't accept this entity again. Tell Guayaquil that we have resigned as agents and we don't want to have relations with that entity," de Cornejo wrote back.

The Panama Papers include documents from the mid-1980s until December 2015. McClatchy and its partners do not know whether all of Mossack Fonseca’s files were captured in the unprecedented leak.

In a telephone interview, the president’s brother, Fabricio Correa, said he knew nothing of Orlion Group S.A. or its directors and that he’d never been contacted about it by Panamanian authorities.

Any investigation, he said, “will always end the same way — Fabricio Correa is a straight-up person. Everyone knows where I live. I appreciate the call and you can count on my cooperation.”

He said all past allegations of corruption were proved false, including an influence-peddling case in the U.S. state of Colorado. Relations with his younger brother remain strained.

“We aren’t fighting, but there is distance between us,” said Fabricio Correa. “I understand the drug that is power, and he’ll always be my brother.”

Mossack Fonseca’s documents show that the Orlion Group S.A. was a shelf company, one that was already active, just awaiting an owner. When someone needs a company fast, it’s more expensive but on the shelf, ready to go. And customers can buy vintages, similar to wine, with older companies costing more. Shelf companies are legal, and bear the appearance of an already established company.

Offshore corporations have one main purpose - to create anonymity. Recently leaked documents reveal that some of these shell companies, cloaked in secrecy, provide cover for dictators, politicians and tax evaders.

The true owner or owners of the Panama offshore were offered a choice between two shelf companies and selected Orlion Group S.A., which was registered for the new owners in spring 2006 with an authorized capital of $10,000, distributed as 100 shares, each worth $100.

Orlion Group S.A. used four bearer shares, among the most secretive forms of offshore company ownership, now banned in most of the world. They entitle a company’s ownership to anonymous holders of a share certificate. No names are recorded. The bearer of the shares is assumed the owner.

The Panama Papers shed no light on how or why the shell company was used.

This all happened in 2006, a year before Correa began the first of what is now three terms in office.

On some Orlion Group S.A. documents, Luisa Patricia Rojas Zambrano is listed as president of the board. She and her husband, Yovanny Villavicencio, are executives in the Guayaquil construction firm Avanticonstru.

Reached by phone, Rojas confirmed that the Orlion Group S.A. was established in Panama in 2006. Like many company directors or shareholders reached by McClatchy and its reporting partners, she insisted it never had a bank account or any activity linked to it.

“It is there for whatever eventuality that might happen, but thank God, there has been no need for it,” she said.

Ecuadoran incorporation documents list Rojas as a minor shareholder in Compañía Anónima Constructora del Sur. Known by its acronym CONSURCA, the construction company’s main shareholder is Megamaq, owned by Fabricio Correa.

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CONSURCA in 2011 was the subject of legal battles when Fabricio Correa sued his brother’s government seeking $37.8 million in damages for what he said was the public works ministry’s unilateral suspension of contracts with CONSURCA. Rojas also appears as a CONSURCA shareholder in numerous government audits.

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Asked if she knows Fabricio Correa, the line went silent for 10 seconds.

“Hold on, let me give you a number,” she said.

The number was for Norman Granda Castillo, who in some documents — dated after the 2012 Panamanian inquiry — is described as the ultimate beneficiary of Orlion Group S.A.

“All this information is confidential but I will give it to you because I have absolutely nothing to hide,” said Granda by telephone, clarifying that the offshore company was to hold title to land he and his three brothers have worked since 1978. “This company has no (bank) account, not a single dollar, no investments, nothing but a property where the family works.”

Granda describes himself as a humble, middle-class Ecuadoran, but his lawyers in email call him a “well-known” agro-businessman.

Granda offered few details about Rojas, saying only that she was a friend of a brother.

Prompted about bearer shares and earlier questions about the Correas, Granda grew angry.

“I don’t have any ties, not economic or personal, with the Correas,” he snapped. “I don’t know them!”

A spokeswoman for Panama’s anti-corruption unit, Sandra Sotillo, confirmed that the previous Panamanian government looked into Orlion Group S.A. and that embezzlement was the focus. By law, said Sotillo, Panama cannot discuss names of people involved in the investigation. She said it was unclear why the preceding government was looking at Orlion Group S.A. and embezzlement.

The Correas brothers aren’t the only prominent Ecuadorans in the leaked documents. The daughter of former President Rodrigo Borja Cevallos, whose brother Francisco is Ecuador’s current ambassador to the United States, is tied to multiple offshores.

The documents reveal how Maria del Carmen Borja and her husband, Juan Carlos Correa Bastelleros, who are not related to the current president, used a complicated web of offshore accounts and companies to, they say, manage their business interests in Ecuador. These include a group of sushi restaurants, a failed Chinese food chain in Ecuador and Peru, and a company that sells and installs sprinkler systems. Correa Bastelleros is a former top executive of the country's main Coca-Cola bottling company.

These ventures, some with Peruvian partners, were managed through offshore companies and bank accounts that passed through the British Virgin Islands, Panama and Peru, Correa Bastelleros confirmed to McClatchy in an email, adding that he had declared everything to Peruvian authorities.

Kevin G. Hall: 202-383-6038, @KevinGHall

Vera Bergengruen: 202-383-6036, @verambergen

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