Allegations of corruption endanger aid

BY GLENN GARVIN

 MANAGUA -- President Arnoldo Aleman's government could plunge into crisis
 this week when a report on a burgeoning corruption scandal involving one of his
 closest aides is made public just as foreign donors meet to discuss a
 multibillion-dollar package of aid for Nicaragua.

 Even if Aleman persuades the donors to keep on track about $6.3 billion in aid
 and debt relief, the scandal has already taken a deadly toll on his government's
 credibility, with one recent poll showing that 88 percent of Nicaraguans believe his
 administration is corrupt.

 The popular discontent has spread so far that even Aleman's own brother-in-law
 recently denounced the government and bolted the president's Liberal
 Constitutional Party.

 ``The government is facing a very serious situation, and I hope President Aleman
 understands that,'' said a European ambassador here. ``But I'm not sure he does.''

 Aleman survived countless accusations of corruption and malfeasance -- many of
 them based on little or no evidence -- with his popularity intact during his first
 three years in office.

 MOUNTING PRESSURE

 But the president has been unable to shake the newest allegations. And the task
 may grow more difficult this week when the Nicaragua comptroller's office
 releases two reports expected to level sharp criticism at one of his best friends
 and top advisors, chief tax collector Byron Jerez.

 Jerez, who during the 1980s was a financial kingpin in Miami's Nicaraguan exile
 community, is accused of issuing about $600,000 worth of tax credits under
 mysterious and largely undocumented circumstances -- including some to
 Panamanian companies he controls.

 The comptroller's office is also investigating whether he awarded government
 contracts to his own companies without legally required competitive bidding, as
 well as a report that he used funds donated for Hurricane Mitch to pay a company
 partly owned by Miami-Dade County Commissioner Pedro Reberedo for the
 construction of a beachfront mansion.

 The comptroller is expected to release its reports on the tax credits and the
 government contracts Monday or Tuesday. Meanwhile, the so-called Consultative
 Group -- the governments and multilateral lending institutions that have been
 keeping the Nicaraguan economy afloat for the past decade -- begin a two-day
 meeting in Washington on Tuesday.

 OPEN IMPATIENCE

 The donors, who have yet to release the lion's share of the $6.3 billion they
 approved for Nicaragua last year, have been making no secret of their disgust with
 the Aleman government.

 ``We can't keep pumping money in here without seeing some results,'' said Roy
 Osborne, British ambassador to Nicaragua.

 Diplomats say that unless Aleman agrees to fire Jerez, the donors will almost
 certainly reduce the flow of aid to a trickle until Nicaragua elects a new president
 late next year.

 ``Byron Jerez, had he been in any other country, certainly should have and
 probably would have resigned,'' a European envoy said. ``But he hasn't, and now
 this has become a litmus test of the government's willingness and intent to stamp
 out these practices.''

 Aleman and most of his senior aides were visiting the Far East in search of further
 aid last week and unavailable to comment. But since the allegations against
 Jerez began to surface two months ago, the president has refused all comment
 except to say he won't take any action before seeing the comptroller's report.

 LONGTIME FRIENDS

 Dismissing Jerez would certainly be one of the most difficult political steps that
 Aleman has ever had to take. The 37-year-old Jerez has been a key confidant
 ever since Aleman was elected mayor of Managua in 1990, one of the president's
 two or three closest advisors.

 Jerez has been instrumental in Aleman's political success. When Aleman was
 mayor of Managua, Jerez helped him obtain a steady supply of surplus equipment
 -- everything from school desks to traffic lights -- from Miami, a stream of
 donations that gave Aleman a reputation as a can-do politician that set up his
 1996 presidential run. Jerez was also a key fund-raiser for that campaign.

 Since Aleman took office in 1997, Jerez has held several senior positions,
 including head of the state oil company and vice minister of finance. But it has
 been in the role of chief tax collector that he has won the most praise and
 attracted the most searing criticism.

 Even his enemies admit Jerez has been the most effective tax man in Nicaraguan
 history, setting new records for collection every year. But he is also
 acknowledged as one of the most ruthless, his inspectors closing hundreds of
 businesses for tax delinquencies and subjecting countless others to long,
 harrowing audits.

 MOTIVES QUESTIONED

 The audits seem to fall with suspicious regularity on businessmen who criticize
 Aleman, critics say.

 Now it's Jerez who has had to submit to exhausting interrogations, from more
 than two dozen investigators from the comptroller's office as well as a
 congressional committee on corruption.

 Although all of the accusations against Jerez are serious and could potentially
 result in criminal prosecution, the biggest furor has arisen over 14 mysterious tax
 credit vouchers that his agency issued to Petronc, the state oil distributor that
 Jerez once ran.

 In each case, Petronic officials said, after Jerez sent them the vouchers, he
 asked them to issue checks for those amounts. Some of the checks were written
 to other Nicaraguan government entities, some to private companies controlled by
 Jerez that have government contracts.

 Even more puzzling, in most cases the checks were written to be payable to a
 private individual ``and/or'' a company. Some of the individuals have not been
 located. Others, like Juan Gomez, a former electrician at the tax collection
 agency, could not explain why their names were on the checks.

 ACTIONS DEFENDED

 Jerez -- who did not respond to Herald requests for an interview -- has insisted to
 investigators that the tax credit vouchers were payments for legitimate debts
 owed by the tax collection agency, although he hasn't explained the peculiarities
 in the way they were written.

 Jerez has denied most of the other charges outright and has produced
 photocopies of a canceled personal check for $60,000 that, he says, covered the
 work on his mansion that was allegedly billed to hurricane relief funds.

 But many investigators remain unconvinced, particularly over the tax credit
 vouchers.

 ``Those things just lend themselves to corruption, and they should be prohibited
 by law,'' said Adolfo Calero, a member of the congressional anti-corruption
 committee that has been probing the scandal.

 Calero, who has generally supported Aleman's government even though he is a
 member of the opposition Conservative Party, said the latest scandals have done
 ``terrible damage'' not only to the president but to all of Nicaragua.

 ``It gives an image of corruption to a country that is badly in need of debt relief, of
 donations, of support from the outside world,'' he said. ``It keeps people from
 investing here. It makes it look like Nicaraguans are a bunch of thieves.''