CRIMINAL CAPITALI$M

Billionaire Sarmiento’s Companies to Pay $60 Million in US Graft Probe

Daniel Cancel
Fri, August 11, 2023 



(Bloomberg) -- Firms controlled by the billionaire Sarmiento family of Colombia agreed to pay fines of about $60 million to the US Securities and Exchange Commission and the Justice Department for bribes paid by one of its units for a highway project dating back nearly a decade.

Grupo Aval Acciones y Valores SA and its subsidiary Corporacion Financiera Colombiana SA, known as Corficolombiana, agreed to pay $40 million to the SEC to settle investigations and another $20 million to the DOJ to settle criminal charges, according to an SEC statement.

Aval’s American depositary receipts fell 3.79% in New York while Corficolombiana slid 0.645% in Bogota.

The probe is linked to wide-ranging corruption around disgraced Brazilian construction firm Odebrecht SA (now known as Novonor) which admitted to bribing officials across Latin America to obtain contracts for projects. Corficolombiana, which had a minority stake in a highway project known as Ruta del Sol II, was accused, along with its partner, of bribing Colombian officials between 2012 and 2015 with more than $23 million to secure a contract to extend the road, according to the DOJ.

“Illicit payments were paid with the knowledge, approval, and assistance of Corficolombiana’s former president,” the SEC said. “According to the SEC’s order, Corficolombiana caused Grupo Aval’s violations and provided Grupo Aval with an improper financial benefit totaling approximately $32 million.”

Credicorp Capital Research analysts expect the fine to negatively impact Aval’s third quarter financial results. “The news is negative, and we expect to see a negative reaction on both stocks,” analysts Steffanía Mosquera and Daniel Mora wrote on Friday.

Aval shares have slumped more than 45% since Dec. 2018 when the conglomerate said the US opened the investigation, compared to a 15% decline for the benchmark Colcap index. The company has a market capitalization of $3 billion.

Luis Carlos Sarmiento Angulo, the 90-year-old patriarch of the family, built the Aval empire which includes Banco de Bogota, the third-biggest bank in Colombia by assets; Porvenir, the largest pension fund manager; investment-holding company Corficolombiana and a brokerage. The group also has investments in soybean oil, cattle, fisheries, and rubber.

Sarmiento has a fortune of $6.7 billion, according to the Bloomberg Billionaires Index. His son, Luis Carlos Sarmiento Gutierrez, is chief executive officer at Aval and chairman of Corficolombiana.

“Today’s resolution – the first-ever coordinated with Colombian authorities in a foreign bribery case – reflects the Justice Department’s commitment to working shoulder-to-shoulder with our foreign partners to combat transnational corruption and hold accountable companies that brazenly pay bribes for economic gain,” the DOJ said.

The settlement is the most significant in Colombia linked to the Odebrecht scandal. In 2017, Odebrecht was ordered to pay a $2.6 billion fine in Brazil, the US and Switzerland to settle investigations and admitted to making secret payments of about $788 million to foreign government officials around the world. That was the biggest penalty levied by global authorities in a bribery case.

The scandal also affected Brazilian oil giant Petroleo Brasileiro SA as part of an investigation known as Operation Carwash. And the illicit payments hit firms — and politicians — from Peru to Mexico.

The DOJ said that Corficolombiana cooperated extensively with the probe, providing facts obtained through an internal company investigation, producing documents, providing sworn testimony from Colombian criminal and administrative proceedings of relevant witnesses, and identifying information previously unknown to the government.

“The DOJ and SEC recognized Corficolombiana’s and Grupo Aval’s extensive cooperation with the investigations,” Aval said in a statement. “Corficolombiana and Grupo Aval consider this painful chapter closed.”

Grupo Aval declined to comment beyond the statements.

Bloomberg Businessweek