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State Department Audit Found Abuse Of AID Funds

February 12, 1988

WASHINGTON (AP) _ Millions of U.S. foreign aid dollars for Costa Rica have been used to enrich local politicians and businessmen, and to send children of prominent Costa Rican citizens to college in the United States, a State Department audit has found.

″All systems of checks and balances seem to have failed,″ concluded the report by Herbert L. Beckington, a department inspector general. He said oversight from higher-ups in Washington ″was non-existent.″

He said the misdeeds of U.S. Embassy officials in San Jose and the wealthy and influential Costa Ricans with whom they associated ″closely approach criminal conduct.″

The report to Alan Woods, administrator of the department’s Agency for International Development, was dated Oct. 9, 1987, and declassified this week.

Reps. David Obey, D-Wis., and Mickey Edwards, R-Okla., chairman and ranking minority member of the House Appropriations foreign operations subcommittee, immediately called on Woods to restore financial controls on AID programs in Costa Rica. They scheduled a March hearing on the agency’s operations.

Tom Blank, an AID spokesman, said Woods is personally looking into the charges and met this week in Costa Rica with President Oscar Arias and officials of the institutions involved.

″He is in the midst of reviewing and analyzing whether anything ought to be done,″ Blank said Thursday.

Most of the alleged improper activities, Obey and Edwards noted, took place before Arias was elected in 1986 and before Woods became AID director. Arias is the author of a peace plan for Central America now being pursued by the five countries in the region.

The director of AID programs in Costa Rica, Daniel Chaij, was returned to Washington last year during the department’s investigation and now works in AID headquarters. He is named in the report as having personally approved many of the loans and grants that benefited some of the country’s most prominent business and political figures.

Attempts to reach Chaij for comment Thursday evening were unsuccessful. Telephone calls to a residential listing in suburban Virginia for a Daniel Chaij went unanswered.

The report found that Chaij allowed $558,415 in AID scholarships to be given to 17 students who were not qualified to receive them, but who were related to influential Costa Ricans.

In addition, it said Chaij funneled scholarships and other aid money to the Adventist Center of Higher Education, a religious school that lacked full academic accreditation. The report said Chaij’s father had been one of the school’s founders, Chaij graduated from high school there and remained a member of the Seventh-day Adventist Church with jurisdiction over the school.

Some $33.8 million in U.S. aid money was used to establish the Costa Rican Coalition of Development Initiatives in 1982, which ″appears to have been utilized by a few prominent Costa Ricans to advance their own personal and political interests,″ the report said.

The Costa Rican ambassador to Washington, Guido Fernandez, issued a statement dismissing the audit’s conclusions as ″incompetent and wrong″ and ″irresponsible.″ He said programs criticized by the report - including the development organization, whose Spanish acronym is CINDE - were in fact successful.

CINDE also set up a salary payment scheme that enabled its top officials to avoid high Costa Rican taxes by diverting some of their salaries to consulting companies they owned but which performed no services, according to the audit.

Fernando Naranjo, one of the alleged participants in the scheme, is now Costa Rica’s finance minister. Another is ambassador Fernandez.

At least eight of the 14 directors of the Costa Rican Industrial Finance Corporation have taken personal or corporate loans from a $10 million loan that AID made it in 1982, the report said. The corporation is a private financing institution for development.

The Agricultural Industrial Export Bank received a similar loan in 1981 which also was used in part to finance companies associated with bank board members, it said.

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