On Pablo Celi, Ecuador’s super shady “Auditor General”

An interview with Andres Arauz about Pablo Celi, a hatchet man for Lenin Moreno’s government.

Lenin Moreno won Ecuador’s presidency in 2017 by running as a loyalist to former President Rafael Correa, a leftist. Moreno immediately shifted hard to the right within weeks of taking office as described in previous articles on Counterpunch (here , here and here).

Andres Arauz is an economist and former central bank official in Correa’s government. He has recently written about a case of financial corruption that strongly implicates Ecuador’s Auditor General, Pablo Celi, a key Moreno ally.

Joe Emersberger (JE): Before discussing the case you recently wrote about, could you please provide some background on Celi?

Andres Arauz (AA): Pablo Celi is the current Auditor General – surrogate Auditor General. He was not elected. He was designated by the former Auditor General, Carlos Polit, who fled to Miami.

Celi has been in many previous governments. He was the surrogate Auditor General for most of Polit’s ten year period. Before that, Celi used to work in the mayor’s office when Paco Moncayo was the mayor of Quito. Celi also worked in the government of [former President] Lucio Gutierrez. In the 1990s he was in [former President] Abdala Bucaram’s government as Undersecretary of Education. Early in his political career, Celi was a member of left wing parties, but now many people suspect that he had always been an infiltrator since that is a tactic the FBI and the CIA have used in Latin America.

Celi is now a key character in Moreno’s persecution of Correa’s former officials and supporters. He has weaponized audits against perceived allies of Correa. Celi has staged many audits that have no merit in terms of content. More importantly, he has used the audits to generate criminal referrals [“indicios de responsibilidad penal”] against his targets. In Correa’s case, “coincidentally”, all the audits have ended up being criminal referrals.

Nobody denies mistakes and errors that can happen in ten years of government. But when each and every one of the audits becomes a criminal case you have to spend much more time and money defending yourself. You have tougher time. There are four key moments that show Celi’s role.

First, early on in Moreno’s government when Carlos Polit [previous Auditor General] was found to be involved in the Odebrecht scandal (with plenty of evidence) Polit fled to Miami. Polit had replaced Celi as the surrogate but when Human Resources came to Celi’s office to serve the documents saying he was to be replaced, Celi took the documents and tore them up. He said “You can’t do that to me. Get out of my office.” The Human Resources staff videotaped this. Moreno sent the police to make sure Celi was not removed from his office. So there is actually legal uncertainty about who is the legitimate surrogate, but Celi had the state’s monopoly of violence on his side. He has no documents to prove he is the surrogate.

A second key moment with Celi happened last October when there were protests led by the indigenous movement. When there was televised dialogue between the movement leaders and the Moreno government, the person typing up the agreement was Pablo Celi. In Ecuador, the Auditor General is not part of the Executive branch. It didn’t make any sense for Celi to be acting as Moreno’s secretary. It showed his close proximity to Moreno.

A third key moment was a few months into Moreno’s government when Celi created an ad hoc watchdog group as part of the Auditor General’s office. This group was filled with representatives of private bankers (and their lawyers) and its function was to supposedly oversee an audit of Ecuador’s public debt. This was extremely worrisome. All these bankers had access to confidential information about the government’s debt management. Through public statements made by the watchdog group, it played around with the price of Ecuador’s foreign bonds in external markets. That created lots of speculative opportunities for those who had privileged information.

JE: So they handed these guys a way to profit from insider information.

AA: Absolutely. Insider trading definitely happened due to that watchdog group created by Celi. This is a very under-reported fact about Ecuador’s recent history – this relationship between government debt and powerful speculative bankers both foreign and domestic. I wrote a piece about it – “Las diez Razones de la Veeduría” – which was focused on Ramiro Crespo who is a known agent of foreign investment banks in Ecuador.

And a fourth key moment in Celi’s time as Auditor General involved [the late] Cesar Trujillo who ran the CPCCS-T:

JE: The CPCCS-T was created and handpicked by Moreno to overhaul the judiciary and other control authorities.

AA: The CPCCS-T sacked constitutional judges, electoral authorities, the Attorney General, prosecutors – everybody except Pablo Celi. They [the CPCCS-T] wrote up a special resolution saying that even though Celi was a surrogate, in this special case, he was forbidden from being replaced until 2022. It was a completely arbitrary measure.

JE: So Celi is obviously a key hatchet man for Moreno.

AA: Definitely a hatchet man. The weaponization of the government auditing system is serious because it damages its credibility. It becomes hard to say when real corruption is being addressed or not because they are so blatant with their political motives.

I would say Celi isn’t just a hatchet man because he isn’t only on the offensive. He has also been acting as a protector of Moreno and his government.

When Moreno’s offshore account transactions were revealed, Celi said it wasn’t a matter for the national auditing system. He said the same when Moreno’s personal secretary was found to have offshore accounts [which are illegal for Ecuadorean public officials to have].

More recently, Celi has not investigated a case where his own nephew – a former advisor to PetroEcuador [the state oil company] – was arrested in Miami carrying $250,000 in cash. The nephew pled guilty to corruption and money laundering, so Celi is a very cynical character.

JE: And now Pablo Celi, as you’ve just written, is implicated in another scam through his brother.

AA: Celi’s brother [Esteban] already had a reputation in Ecuador as a scammer. He was involved with scams during Ecuador’s 1999 financial crisis, lots of things anyone can easily look up online. But we can’t attribute Celi’s brother’s scams to Celi himself. However, in this latest case both Celi and his brother are implicated in the same swindle.

An insurance company had issued what is called a “warranty of goodwill” for a contractor the government had hired.

JE: What is that exactly?

AA: Good will insurance exists because if the government hires a private company to do a job then there is always risk. The company may run away with partial payment before it completes the job. The government therefore requires this insurance. The contractor has to get an insurance company to pledge that it will return the government’s money if the contractor flees with the cash. Then the insurance company chases down the contractor if that happens. We call it in Spanish “garantía de fiel cumplimiento”.

In this case involving Celi’s brother, this is exactly what happened. A shady contractor didn’t fulfill its contractual obligation with Ecuador’s state oil company (Petroecuador). The contractor had received partial payment. Then the owners ran way with the money, so Petroecuador went to the insurance company to get it back. The insurance company rejected the request which is something that has basically never happened. It should have been almost an automatic process.

JE: What was the insurance company’s pretext?

AA: I don’t know the exact excuse but basically the insurance company said it should not be responsible, but that’s exactly what this insurance was for.

What appears to have happened is collusion between the contractor and the insurance company. It was robbery. Petroecuador complained to the Auditor General and asked it to investigate. That was in 2009. The Auditor General found that the insurance company was in the wrong and was obliged to pay $1.5 million. In Ecuador, it is very hard to get out of that kind of ruling. You can fight it in court, but it is very difficult to win.

Five years later, in 2014, the Surrogate Auditor General made an “addendum” to the original report (signed by Pablo Celi) saying “Never mind. Only the contractor has to pay. The insurance company is not responsible.”

JE: So the insurance company isn’t obliged to actually insure.

AA: Yes and by then the contractor filed for bankruptcy and didn’t exist anymore. But the Auditor General absolved the insurance company that did exist and was very profitable.

Then, in 2017, the owner of the insurance company, Santiago Cardenas, sold an apartment worth about $400,000 to Celi’s brother for only $10. No doubt Cardenas hoped this would never show up because he set it all up through offshore accounts to hide it. There were 3 companies set up: one in the British Virgin Islands and two in Florida. Celi’s brother owns one of the Florida companies. On the surface, you wouldn’t know without investigating, that Cardenas was paying Celi’s brother.

JE: Jorge Glas (Correa’s Vice President during his last term, who remained loyal to Correa) was jailed 3 years ago for “illicit association” based on zero evidence compared to what you’ve described against Celi.

AA: This goes beyond illicit association which requires only an “intent” to commit a crime. Celi’s brother received a gift in exchange for a political favor by Celi. This is an actual Foreign Corrupt Practices Act violation.

There is suspicion that geopolitics plays a role. Hopefully, Celi’s proximity to US hardliners’ positions will not impede the FCPA case from going forward. Celi has just requested that Correa and his political party not be allowed to participate in the next elections, and that the electoral authorities be removed if they don’t obey him.

Celi may be trying to please someone in the US with this move to minimize the sentence against his nephew in Florida that is very soon to be announced. By the way, the nephew had off-duty police officers escorting him when he got caught with the $250,000 cash [mentioned above] in Miami. Supposedly the officers were on vacation while they escorted him. Moreno’s Interior Minister, Maria Paula Romo, put out a statement saying the officers were on vacation so Ecuador’s police force as an institution cannot be held responsible. She said there was nothing to investigate.

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Joe Emersberger is a writer based in Canada whose work has appeared in Telesur English, ZNet and CounterPunch.

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