May 19, 2024
Business Politics

EPM’s Biggest Union Unveils Shocking Report on Mayor Quintero’s Corruption, Lies, Financial Destruction

SINPRO – the biggest professional employees union of public utilities giant EPM – on October 20 publicly unveiled a stunning, 93-page report detailing immense financial, organizational and political damage to EPM and Medellin by outgoing Mayor Daniel Quintero.

Quintero — who took office in January 2020 — suddenly resigned September 30 in order to dedicate all his time to promoting political campaigns of his allies — not only here in Medellin but also nationally, as part of a strategy aiming to boost his presidential-bid ambitions in 2026.

Since his 2020 mayoral election, “in the last three-and-a-half years, Medellín and EPM have been the subject of the bloodiest attacks,” according to the staggering SINPRO report.

“The extreme ideology, the bad practices, the lack of respect for people, citizens and institutions, the moral, material and collective damage have been the shameful constant of the misgovernment of Mayor Daniel Quintero Calle — including his actions, his decisions, his resentments and his utter incompetence,” according to SINPRO.

As a result, EPM — 100% owned by the city of Medellin — faces a “reputational and financial crisis affecting the city and its citizens,” all arising from Quintero’s various schemes for political gain, according to the report.

The report – publicly revealed just a week ahead of Colombia’s national mayoral, departmental-governor and city-council elections on October 29 – aims to expose disastrous consequences of Mayor Quintero’s administration.

Rather than see Medellin repeat a shameful history, the report instead urges “abandonment of ideological disputes, establishment of a sincere dialogue to unite politicians, business leaders, unions and social leaders” — not only to reverse EPM’s fortunes but also to save the city of Medellin, which critically relies on EPM’s annual financial transfers, according to the report.

In the entire history of EPM, “there have only been two historical moments” when the autonomy and integrity of EPM have come under devastating attacks, the report notes.

“The first of them occurred during the administration of former mayor Luis Pérez Gutiérrez (2001-2003), who suggested during his tenure that he himself was going to be in charge of guiding the company,” the report notes.

This same Luis Pérez — currently running for Antioquia Governor — has earned him the sarcastic nickname of “Luis Quince” (Louis the 15th) for actions that allegedly resulted in corrupt diversion of 15% shares in government contracts in rewards to his political allies and similarly opaque dealings resulting in personal benefits, including massive, unexplained real-estate holdings.

“Let us remember that during (Luis Perez’s) mandate, EPM had three general managers and several scandals after which we began to see how fragile the organization (EPM) could be in the face of a political barrage coming from the Mayor’s office,” according to the SINPRO report.

“The current period of municipal government (2020-2023), during which (Mayor Quintero) has appointed four EPM general managers, has not only been harmful for EPM, but also for the city.

“The continuous changes in EPM general managers, as well as the resignation of the entire Board of Directors in August 2020 due to the [ethical] crisis between the members of the Board and the Mayor who chairs it, soured the views of previously great allies including multilateral banks and risk-rating agencies,” the report notes.

Weeks after Quintero triggered the first-ever mass resignation of EPM’s board more than three years ago, “Quintero decided to dispense with general manager Álvaro Guillermo Rendón López, whom he said he no longer trusted,” according to the report.

Faced with growing scandals provoked by Quintero, civic and business groups here including the Medellin Chamber of Commerce well as independent civic oversight-group “Todos Por Medellín” cited a “weakening of corporate governance and an immense loss of confidence in EPM, an unprecedented episode in the last 15 years,” the report notes.

That loss-of-confidence included a scandalous hiring and — one week later — a sudden departure of EPM general manager Alejandro Calderón Chatet, initially picked by an executive search company (Executive Connection S.A.S.) whose founding partner — Santiago Solís Arias — was a close friend of former Mayor Luis Pérez, a key Quintero ally, the report notes.

Even worse than the four general-manager hiring-and-firing merry-go-rounds was Mayor Quintero’s demagogic, unfounded accusations about the causes of a diversion-tunnel collapse at EPM’s US$5 billion “Hidroituango” hydroelectric project here in Antioquia, the report notes.

“The constant political interference of Mayor Daniel Quintero in everything concerning the Hidroituango project, his repeated claims of corruption in the works, which supposedly benefited groups of Antioquian businessmen — so therefore, according to the mayor, it was necessary to change the construction consortium. This reached the ears of the IDB (Interamerican Development Bank),” one of Hidroituango’s big financiers, the report notes.

The three prior, principal Hidroituango contractors – Coninsa Ramon H., Conconcreto and Camargo Correa – ultimately were told by a Quintero-appointed legal-affairs vice-president at EPM to assign the construction contracts to others, according to the report.

Because of the diversion-tunnel collapse, project insurer Mapfre initially paid US$633 million to EPM for an “All Risk Policy Construction” coverage as included in the policy contract. Months later, Mapfre paid an additional US$350 million for separate-but-related Hidroituango damage claims.

Following the initial Mapfre payment, “EPM prepaid the IDB a debt totaling US$450 million, with a TRM [Colombian peso-to-U.S.-dollar conversion rate] close to COP$4,000,” according to the SINPRO report.

But Quintero’s hasty decision to accelerate payoff of the IDB loan for the Hidroituango project came “in the midst of questions caused by the future of the Hidroituango project,” which could have caused negative financial consequences — even if EPM’s total financial liquidity at the time was relatively positive, the report notes.

On that financial front, it’s essential to note that EPM provides about 20% to 25% of the city of Medellin’s annual finances. During the Quintero administration, up to 55% of EPM’s net annual earnings have been transferred to the city of Medellin, up from a more traditional 30%, the report notes.

So, any action that could damage EPM’s liquidity could have immediate and long-term negative consequences for the city of Medellin as well, the report notes.

Because of Quintero’s hostile Hidroituango demagoguery that prompted the resignation of the entire EPM Board of Directors — and the subsequent chaos of multiple hirings-and-firings of EPM General Managers — Wall Street bond rater Fitch Ratings subsequently slashed EPM’s debt rankings, the report notes.

“Fitch believes that the actions recently taken by the company are contrary to what is established in the Governance Agreement signed on April 23, 2007, between the Mayor’s Office of Medellín and the management of EPM. In this agreement, the municipality agreed to respect the autonomy of EPM as a commercial and industrial company of the city and act exclusively through the Board of Directors,” the Fitch statement noted, contradicting Quintero’s claims and actions.

Ludicrous Lawsuit

Long before the Mapfre insurance payments, “what was not known is that Quintero was hiding a card up his sleeve by launching a newly created Vice Presidency of Legal Affairs with a former magistrate of the Council of State — Alexander Sánchez Pérez — who arrived with the sole task of putting together the famous lawsuit demanding COP$9.9 trillion (US$2.3 billion) against the designers, builders and auditors of the Hidroituango project,” according to the SINPRO report.

As SINPRO noted in a 2021 public statement about this lawsuit: “The claim of COP$9.9 trillion (US$2.3 billion) by EPM from the contractors represents great risks for the company’s finances and for the development of Medellín and Antioquia, as there could also be a possible counterclaim from the contractors to EPM, with possible consequences, among others, affecting the position of the risk-rating agencies and the possible loss of part of the insurance coverage, without taking into account what it means for contractors to work for a company that has sued them.”

That Quintero lawsuit ultimately went nowhere — stalled in the Court Administration of Antioquia — which instead asked EPM to correct certain errors.

“The Mayor misinformed the public when he repeatedly said that thanks to that lawsuit, money was recovered — because the truth is that the Court has not even admitted the demand,” the SINPRO report notes.

“Mayor Daniel Quintero repeated ad nauseam that the Hidroituango project is the largest corruption case in Antioquia and one of the largest in Colombia,” the report added.

But as SINPRO notes by citing a report from Colombian daily newspaper El Espectador, “the problem with that claim is that nothing shows that there was corruption. The Comptroller’s Office itself recognizes this by charging all those responsible with serious negligence, but not with fraud. None of the evidence collected by the investigative experts indicates that the COP$4.3 trillion (US$1.01 billion) that Colombians supposedly lost have been stolen.”

According to SINPRO, “among the lies that Quintero told, these stand out: that the construction contractors had lowered the quality of materials of the works, including substandard iron materials and bolts, and that they had changed designs and made bad decisions” – all allegations made in a report by the Bogotá-based firm of JAHV McGregor, specifically hired by the Quintero-appointed vice president of legal affairs Alexander Sánchez Pérez, “whose conclusions lack any seriousness,” according to SINPRO.

Meanwhile, the CCC Ituango consortium definitively left the project on February 22, 2023, with power turbines 1 and 2 already generating electric power since mid-December 2022.

“Turbines 3 and 4 were installed by General Electric, which subcontracted Schrader Camargo for the secondary concrete civil works. Now the tender for the remaining works to install turbines 5 to 8 is being carried out, which EPM initially valued at COP$410 billion (US$97 million), but suddenly the budget increased to COP$900 billion (US$213 million), a figure similar to the one proposed by one of the firms bidding on this occasion,” the SINPRO report notes.

Given the change in contractors — and the legal fights initiated by Quintero — the Hidroituango project has suffered further delays, beyond the delays caused by the diversion-tunnel collapse, the report notes.

“An administration that when attempting to assume management of the project [by replacing contractors] does not seem to think about the fines that could be generated totaling about US$260 million and the income that could be generated totaling about US$500 million that would be lost due to reliability charges,” according to SINPRO. “This is due to the delay in the works with the implementation of an improvised plan.”

Expert analysis indicated that “the delay in the continuity of civil works of the Hidroituango project could total COP$5 billion (US$1.2 million) per day, per generation unit, which through July 15, 2023, it adds-up to COP$3 trillion (US$709 million) in losses,” according to SINPRO.

“The calculation may be wrong by a few billions of pesos (a few million dollars), but the truth is that having made the decision to change the project’s builders, this can generate a financial detriment to EPM and those who made the decisions in this situation could be held responsible, such as the government of Medellín and EPM, including the current board of directors,” according to SINPRO.

“Seven months after the [diversion-tunnel collapse] contingency, as is his custom, Mayor Daniel Quintero Calle began to set the social-networks on fire with rigged comments about what happened in the project and began to look for alleged culprits.

“Among other things, he said that Hidroituango was an uncertain project, located on geological faults and EPM had lost hydraulic control of the [Cauca] River. That is, he was building a catastrophic scenario and then presenting himself as the ‘savior’ of the project, of EPM and of the city.”

Long before Quintero’s unfounded claims, project insurer Mapfre had already arrived at its own conclusions in September 2019, “when Mapfre informed EPM of its decision to grant coverage,” SINPRO notes.

That is, long before Quintero Calle was Mayor of Medellín, “Mapfre agreed to pay insurance claims. However, Quintero affirms that thanks to his management, COP$4.3 trillion (US$1.01 billion) was recovered,” which was completely false, SINPRO notes.

City Budget Schemes

While EPM transferred 55% of its estimated profit (COP$2.9 trillion/US$686 million) to the city of Medellin in 2022, the Quintero-appointed EPM Board in April 2023 authorized a request to the Medellin City Council for an additional transfer of COP$330 billion (US$78 million) – a request the Council rejected for lacking any clarity on the destiny of such funds.

“With this request, EPM transfers would exceed the 55% limit and the destination of the money did not have a specific justification,” the SINPRO report notes.

In yet another failed, vaguely-justified scheme, Mayor Quintero earlier this year proposed to the City Council that EPM sell its half-interest in telecom/cell-phone/internet giant Tigo-UNE, which according to Quintero potentially could net EPM about COP$3 trillion (US$709 million).

Ultimately, rather than selling its half-interest, EPM last month instead decided to help capitalize financially struggling Tigo-UNE with a COP$300 billion/US$71 million capital raise, matched by a COP$300 billion/US$71 million capital raise by its investment partner, Luxembourg-based Millicom.

Quintero never offered any rational explanation for the latest capitalization move, which contradicted his earlier proposal to sell EPM’s half-share.

Despite Quintero’s failed scheme to sell Tigo-UNE — supposedly to garner needed funds for social programs — “in this four-year (2020-2023) period, the Quintero Mayor’s office has received more than COP$6.3 trillion (US$1.39 billion) via EPM transfers –20% more than the past administration, without having seen a direct impact on public works,” the report notes.

“The lack of financial planning is so evident that the Medellín Comptroller’s Office revealed that various agencies failed to use all of the funds allocated in the 2022 budget. Among these, 21 projects only managed to execute 50% of their resources, potentially generating a surplus that could have been transferred to the budget of 2023.

“Credibility and trust in Quintero’s mayoralty completely declined in this last year of his government — not only in the Council but in the city, as evidenced by citizen perception surveys,” the report notes, in reference to Quintero’s miserable 28% approval rating.

Afinia Purchase Aims to Boost Presidential Ambitions

On a related front, the Quintero-appointed EPM board earlier approved the purchase of part of the former Electricaribe electric utility – now split into two divisions, including “Afinia,” which serves Bolívar, Cesar, Córdoba, Sucre and a part of Magdalena departments.

This purchase of bankrupt Electicarbe assets seems to have come on a whim, answering “the mayor’s childish disposition,” according to SINPRO.

“For EPM, this expansion meant facing important challenges in terms of investment in infrastructure and portfolio management, given that this is an area where the culture of bill payment is not well rooted,” the report notes.

Following the Afinia buyout, bill-payment compliance goals “went from 96% to 75%, so that the Superintendency of Public Services (Superservicios) activated a monitoring committee to the management program,” according to SINPRO.

“According to Superservicios there is continuing non-compliance with the goals of reducing energy losses for a longer time than the estimate in the initial commitments,” as many neighborhoods in the Afinia market areas have thousands of illegal electric-power connections, without paying anything to Afinia.

As a result, “Afinia could have the same fate as Electricaribe,” triggering a future bankruptcy because of massive power thefts, the report notes.

“In this context, it seems evident that Quintero’s interest in Afinia is mainly political. His objective is to establish a bureaucratic presence on the Atlantic Coast, a region that has significant weight in national elections, due to its significant flow of votes.

“Given that Quintero aspires to become president in the future, his obsession with Afinia is not surprising,” the report concludes.

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