Penta case

The Penta case (also known as Pentagate, or Penta–SQM, since the two cases are related) is a criminal case and scandal in Chile involving Grupo Penta (also known as Empresas Penta), a Chilean holding company, and employees of the Chilean Internal Revenue Service (Servicio de Impuestos Internos, SII). Key employees of the firm were convicted of committing tax fraud by creating fake invoices within the SII. These funds were then directed to the political campaigns of mainly UDI politicians as illegal campaign contributions. Several Penta employees, as well as some of their family members, have been convicted of tax evasion, bribery, and money laundering.

Background

The FUT Fraud Case

The investigation began in mid-2013 with an inquiry into a scheme involving Iván Álvarez, an auditor at the SII, working in concert with accountant Sergio Díaz and more than a hundred taxpayers, to fraudulently inflate tax refunds issued by the agency. By March 2014, 122 taxpayers were identified as beneficiaries of the scheme, and the fraud against the Chilean treasury was estimated at over 20 billion Chilean pesos.

Dismissal of Hugo Bravo

In July 2014, Penta subsidiary Seguros Generales Penta Security announced the resignation of director Hugo Bravo López, who had been one of the principal collaborators of Penta's controlling shareholders, Carlos Eugenio Lavín and Carlos Alberto Délano, for decades. His departure came after he admitted in April of that year to having paid auctioneer Jorge Valdivia Rodríguez—himself implicated in the FUT fraud case—using funds from companies linked to Penta. In July 2014, the Prosecutor's Office began investigating Bravo's company Espartaco for fraud against the state. Bravo and accountant Marcos Castro were summoned before the Prosecutor's Office, where they admitted Penta's involvement in the FUT case. In October 2014, Bravo filed a labor lawsuit against Délano and Lavín seeking 2.3 billion pesos in compensation, which was dismissed in February 2015.

SII Complaints

In August 2014, the SII filed a complaint with the Prosecutor's Office against seven individuals linked to Empresas Penta—including controlling shareholders Carlos Alberto Délano and Carlos Eugenio Lavín—for tax fraud. The initial complaint estimated that the group had defrauded the state of between 260 and 660 million pesos.

In October 2014, the SII filed a further complaint against the legal representatives of several Penta-linked entities—including Empresas Penta S.A., Inversiones Penta III Ltda., and others—for the improper use of fee receipts and the issuance of ideologically false invoices to reduce their taxable income. A second complaint against Empresas Penta S.A. concerned the use of false invoices for advisory services never actually rendered. According to the SII, this allowed the company to improperly reduce its taxable income for tax years 2009 and 2010 by approximately 1.45 billion pesos and 608 million pesos, respectively.

In January 2015, the SII formally charged Délano, Lavín, and twelve other individuals—including five of Délano's children and his sister—in connection with the issuance of false invoices. Investigators also began examining payments allegedly received by Pablo Wagner from the group while he served as Undersecretary of Mining during the first government of Sebastián Piñera.

Investigation

Preliminary investigation

The Prosecutor's Office formally opened its investigation on June 30, 2014, under the direction of Carlos Gajardo, chief prosecutor for High Complexity Crimes of the Eastern Metropolitan Prosecutor's Office, based on evidence gathered in the FUT fraud case.

The case took on a political dimension in October 2014, when former Penta executive Hugo Bravo declared that the group had made irregular donations to politicians of the Independent Democratic Union (UDI) to finance their electoral campaigns. Among those alleged to have benefited were UDI members Jovino Novoa, Ena von Baer, Pablo Zalaquett, Iván Moreira, and Ernesto Silva Méndez, as well as independents Laurence Golborne—a former UDI presidential pre-candidate—and Andrés Velasco—a former pre-candidate of the Nueva Mayoría.

In late December 2014, the secrecy order covering the investigation file was lifted, and shortly afterward La Tercera published a series of emails between politicians—including Ena von Baer, Iván Moreira, and Felipe Kast—and Penta executives. Three days later, Moreira issued a public statement acknowledging irregularities and apologizing. Von Baer, who had initially denied soliciting support from Penta's owners, stated on January 12 that she had committed "an involuntary mistake."

On January 21, 2015, a new dimension of the case emerged when prosecutor Gajardo requested information from the police on nineteen individuals in connection with the issuance of apparently irregular fee receipts issued to Sociedad Química y Minera de Chile (SQM). This branch of the investigation was subsequently separated from the Penta case and became the SQM case, directed by a separate prosecutor. On February 24, 2015, National Prosecutor Sabas Chahuán took personal charge of the Penta investigation alongside the Eastern High Complexity team—making this the first case in Chilean judicial history in which the head of the Prosecutor's Office personally directed an investigation, invoking a prerogative established in Article 18 of the Organic Law of the Public Ministry.

Formalization and precautionary measures

Between March 4 and 7, 2015, hearings were held in which the Prosecutor's Office formally charged ten defendants. A 120-day investigation period was established, and precautionary measures were imposed, including pretrial detention for Carlos Alberto Délano, Carlos Eugenio Lavín, Pablo Wagner, Hugo Bravo, Marcos Castro, and Iván Álvarez, who began serving their detention on March 7 at the Capitán Yáber Prison Annex. Defense attorneys appealed, and the measure was subsequently revoked for Bravo and Castro, who were placed under house arrest instead.

The pretrial detention of Délano and Lavín was revoked on April 23 after 46 days at Capitán Yáber, and that of Wagner on April 28; all three were placed under full house arrest and a national travel ban.

On June 17, 2015, six defendants—Délano, Lavín, Wagner, Bravo, Tocornal, and Castro—were charged with an additional offense of causing over 2 billion pesos in fiscal harm through forward contracts.

On June 22, 2015, a further hearing formalized charges against three politicians: Senator Iván Moreira, Representative Felipe de Mussy, and former Mayor of Santiago Pablo Zalaquett, all UDI members. Zalaquett was placed under a national travel ban, nightly house arrest, and required to report monthly. Former Representative Alberto Cardemil (RN) and former Senator Jovino Novoa (UDI) were also to be charged at the same hearing, but their proceedings were postponed after Novoa suffered a gastrointestinal hemorrhage in court; both were subsequently formalized on July 6, 2015.

On October 1, 2015, thirteen additional individuals were formalized, several of them connected to Moreira and other politicians involved in the case.

Following the end of Sabas Chahuán's term as National Prosecutor on November 30, 2015, the investigation was reassigned to Regional Metropolitan East Prosecutor Manuel Guerra. His successor, Jorge Abbott, had previously announced he would recuse himself from the Penta case due to being a first cousin of Alfredo Moreno, then director of the Penta group.

In April 2016, Délano and Lavín were charged with additional counts of tax evasion, along with journalist Ignacio Ternicier. On June 29, 2016, former Minister of State Laurence Golborne was formally charged with facilitating ideologically false invoices totaling approximately 378 million pesos.

In January 2017, the Prosecutor's Office sought to charge the wives of Délano and Lavín—Verónica Méndez Ureta and María de la Luz Chadwick Hurtado, respectively—for tax offenses committed between 2008 and 2014. Their formalization proceeded on February 7, 2017.

On February 26, 2017, defendant Hugo Bravo died just hours before his abbreviated trial hearing was scheduled to take place.

In July 2017, the Court of Appeals of Santiago granted the prosecution's request to strip Senator Iván Moreira of his parliamentary immunity (desafuero), a ruling confirmed by the Supreme Court in November 2017. In January 2018, lead prosecutor Manuel Guerra reached an agreement with Moreira's defense providing for an alternative resolution in exchange for a fine of 35 million pesos. Prosecutors Carlos Gajardo and Pablo Norambuena, who opposed the decision, resigned from the Prosecutor's Office three days later.

In September 2019, Laurence Golborne accepted a conditional suspension of proceedings, subject to payment of approximately 11.4 million pesos and a one-year period of good conduct, after which the charges would be dropped.

Defendants

Penta executives

Name	Position	Sentence
Hugo Bravo	General manager	Charged with money laundering, bribery, and tax fraud; was under house arrest. Died February 26, 2017, before his abbreviated trial hearing.
Carlos Alberto Délano	Director	Charged March 7, 2015 with tax fraud and bribery; held in pretrial detention, then released. Convicted July 9, 2018: 4 years intensive supervised probation, fine of 857,084,267 pesos, and mandatory ethics training.
Carlos Eugenio Lavín	Director	Spent his 73rd birthday in detention at Capitán Yáber. Convicted July 9, 2018: 4 years intensive supervised probation, fine of 857,084,267 pesos, and mandatory ethics training.
Oscar Buzeta	Business development manager	Charged with tax offenses

SII employees

Name	Position	Sentence
Iván Álvarez	Auditor	On March 25, 2015, found guilty and sentenced to 5 years' imprisonment; a fine of 1.9 billion pesos; and confiscation of an apartment and a car.
Sergio Díaz	Accountant	4 years' imprisonment; fine of 700 million pesos; forfeiture of two houses and an apartment.
Juan Carlos Prieto	Accountant	5 years' probation; fine of 290 million pesos.
Mitzi Carrasco	Accountant	5 years' probation; fine of 246 million pesos.
Hernán Díaz	Accountant	Released.
Francisco Sivic	Accountant	Released.
Horacio Mayquel	Accountant	Released.
Orlando Carvajal	Accountant	5 years' probation; fine of 30 million pesos.

Politicians

Name	Party	Status
Pablo Zalaquett	UDI (former mayor of Santiago)	Released from house arrest.
Iván Moreira	UDI (senator)	No formal conviction; resolved via alternative proceeding with a fine of 35 million pesos.
Jovino Novoa	UDI (former senator)	Convicted November 27, 2015: 3 years' suspended sentence (pena remitida) and monthly reporting requirement, via abbreviated proceeding.
Laurence Golborne	Independent (former minister)	Conditional suspension of proceedings; paid approximately 11.4 million pesos (September 2019).

Other charged individuals

Name	Role	Status
Pablo Wagner	Mining undersecretary under President Piñera	Convicted July 11, 2018: 3 years' suspended sentence, fine of 42 million pesos, and disqualification from public office for 4 years (tax offenses); additionally, 1 year minimum imprisonment, fine of 40 UTA, and 1-year suspension from public office (illicit enrichment).

Convictions

The following individuals received convictions in the case:

Name	Offense	Sentence	Date
Jovino Novoa	Tax offenses	3 years' suspended sentence; monthly reporting; fine of 5 UTA	November 27, 2015
Carlos Eugenio Lavín	Tax offenses	4 years' intensive supervised probation; fine of 857,084,267 pesos; mandatory ethics training	July 9, 2018
Carlos Alberto Délano	Tax offenses	4 years' intensive supervised probation; fine of 857,084,267 pesos; mandatory ethics training	July 9, 2018
Pablo Wagner	Tax offenses	3 years' suspended sentence; fine of 42 million pesos; disqualification from public office (4 years)	July 11, 2018
	Illicit enrichment	1 year minimum imprisonment; fine of 40 UTA; suspension from public office (1 year)

Consequences

Resignations

The case prompted a series of resignations. Carlos Délano left the board of the Teletón Foundation in September 2014. Both Délano and Lavín subsequently resigned from the boards of four Penta group companies—Penta Vida, Penta Security, Banmédica, and Banco Penta—as well as from the governing council of Universidad del Desarrollo in December 2014. On January 9, 2015, Pablo Wagner resigned his membership in the UDI. On March 11, 2015, Ernesto Silva Méndez and Iván Moreira resigned from the UDI leadership as a result of the scandal.

Sale of Banco Penta

On July 10, 2015, as a result of the reputational damage and loss of clients caused by the case, the board of Empresas Penta agreed to sell all of the bank's business divisions to Banco de Chile and Banco Security for a combined sum of approximately USD 942 million, subject to regulatory approval. Banco de Chile acquired the lending division, while Banco Security took on the private banking division, including Penta Corredores de Bolsa and Penta Administradora General de Fondos. The transfer of the portfolio was scheduled for completion by September 15, 2015.

Legislative and institutional responses

In October 2014, the Chamber of Deputies of Chile approved the creation of an investigative commission on the Penta case, which began holding sessions in December of that year to examine the conduct of the SII and the Securities and Insurance Supervisor (SVS) in their oversight of the Penta group, as well as political contributions and the role of the Electoral Service (SERVEL). The commission concluded without presenting new evidence on April 2, 2015.

On February 23, 2015, President Michelle Bachelet announced the creation of the Presidential Advisory Council against Conflicts of Interest, Influence Peddling and Corruption in response to the Penta, Caval, and SQM cases. The council, composed of economists, lawyers, and civil society figures, presented a final report of 217 pages containing 234 proposals to strengthen transparency and probity in the public and private sectors. On April 29, 2015, Bachelet announced in a national address those recommendations that would be submitted as legislative bills.

See also

• SQM case
• Corruption in Chile