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Bribes, Lies, and Videotape in Peru

A grainy, sepia-tinged image focuses on two sofas and a plant. Two men enter. One tries out different positions on the sofa, extending his arm repeatedly to show the other how to catch the best camera angle. Rehearsal over, they exit. Minutes later, one returns with a different guest. They talk. The well-versed front man hands over a wad of dollars in full view of the lens. The other, an opposition congressman, smiles and takes the money away.

Episodes like this -- only one entry in the seedy video library shot in secret by Peru's fugitive spymaster Vladimiro Montesinos -- are becoming sickeningly familiar for Peruvians. They have been reeling from tales of corruption and ill-gotten gains that have unmasked politicians, generals, and judges ever since last September, when a leaked video showed Montesinos hand over $15,000 to a congressman-elect in his now-infamous reception room at spy HQ.

Montesinos' meticulous recording of his dirty deals, probably with a view to blackmail, have turned Peruvians into Peeping Toms with an unprecedented glimpse into the depths of their nation's political sleaze. Other videos show Montesinos offering a judge a $10,000-a-month salary to head the electoral board and ease former President Alberto Fujimori's reelection in 2000. Or counting out $2 million in cash while apparently clinching a deal to buy a 75% share in a newspaper whose front pages regularly smeared Fujimori's rivals.

"VLADIVIDEOS." But the first scene -- transmitted last week -- was a fresh blow for a country that's trying to turn over a new leaf. Late last year, Fujimori fled from the growing scandal to Japan, while Montesinos went underground. Three bodyguards say the disgraced spy chief slipped out of the country on a yacht and sailed the Pacific to Ecuador's Galapagos Islands, then on to Costa Rica and Venezuela. He was last sighted at a clinic in Venezuela where he reportedly had plastic surgery. Now, he has disappeared, leaving as souvenirs his frozen Swiss bank accounts containing $70 million, a dozen gold- and diamond-encrusted watches, and more than 1,000 Christian Dior shirts found stashed at his apartment.

In his wake, Peru appointed an interim government to oversee investigations into the country's murky recent past and to hold new, clean elections in April ("Peru's Toledo: 'A Market Economy with a Human Face'"). It seemed to be a new start. But the congressman seen receiving cash from the brother of one of Montesinos' best-known associates was Ernesto Gamarra, a member of the Independent Moralizing Front (FIM) party, known for its anticorruption campaigns. Worse still, he was the No. 2 on the congressional commission in charge of investigating the corruption network set up by the ex-spy chief.

Sociologist Julio Cotler says Peru is on a knife-edge. "I don't remember a situation of greater precariousness than the one we are in now," he told an annual meeting of Peruvian businesspeople last week. Fresh revelations that the country's big businesses have more than a walk-on part in the so-called Vladivideos -- as the 700 videos seized from Montesinos home in Lima are known -- already has the business class on tenterhooks. "They are stunned," says Carlos Montoya, president of Fleming Latin Pacific.

AMERICAN CONNECTION? One video released last week shows Montesinos pressuring a provisional Supreme Court judge to rule in favor of the U.S.'s Newmont Mining Co. in a multimillion-dollar court case over a 25% stake in Yanacocha, Latin America's largest gold mine. Montesinos tells the judge that the U.S. government has conditioned its role as a guarantor of the peace treaty with Ecuador on a favorable ruling and "it is a question of state." The judge cast his vote in favor of Newmont and its Peruvian partner, Buenaventura, against France's BRGM, although he claims he judged the case on its merits alone.

The companies deny any wrongdoing. "We brought our case to the State Dept.'s attention," says Newmont spokesman Doug Hock. "In our conversations with the State Dept., our emphasis and concern was that the rule of law be followed in this case." Of the allegations that judges were bribed in relation to the case, Hock says: "We are bound by and adhere to the U.S. Foreign Corrupt Practices Act." U.S. officials say they also are blameless. The U.S. Ambassador in Lima, John Hamilton, acknowledges that U.S. officials lobbied the Peruvian government to ensure that the case was settled impartially, but he denies any undue interference in the justice system. After the French side filed for international arbitration against Peru over the case, the dispute was settled last year.

The scandal, however, leaves Peru's investment climate clouded. "The more that the extent of interference in the judiciary of the last government is confirmed, the more uncertainty exists about the conditions of the country as a place where foreign investment can be comfortable," Montoya says. With only about 70 of the 700 videos having been seen, more shockwaves are expected.

TAINTED ELECTIONS. A court order already has been issued barring Dionisio Romero, president of Peru's largest bank, Banco de Credito del Peru, from leaving the country after he was seen on one of the videos. The bank has not issued a statement about Romero's appearance on the tapes, but in a letter distributed to employees, general manager Raimundo Morales contends that the bank, too, was innocent of any wrongdoing. Banco de Credito was simply trying to stave off bankruptcy and layoffs at companies in the Hayduk Group, in which it had a major stake, Morales contends. "The intervention of Mr. Romero was limited to suggesting the name of the receivers to help the continuity of the companies," the letter says.

Uncertainty is likely to persist, as the Vladivideos take a starring role in the electoral campaign. The Gamarra video has seriously undermined the presidential candidacy of FIM party leader Fernando Olivera. The arrest of Lima mayor Luis Bedoya, also taped apparently receiving cash, could taint the candidacy of Lourdes Flores of the National Unity ticket.

Even President Valentin Paniagua is now calling for the viewing of videos to be speeded up to reduce their damage to the April elections. Already, disenchantment with politicians is immense. Manuel Torrado of polling company Datum says 50% of voters say none of Peru's presidential candidates is honest. "Peru needs a catharsis, but leaking the material out drop by drop is causing enormous commotion," says Minister of Women Susana Villaran.

Ultimately, rooting out Peru's bad apples is a good thing. But corruption is so deeply entrenched that it could take a year working round-the-clock to uncover even 70% of the truth about who did what, says David Waisman, the head of the Montesinos probe in Peru's congress. Until then, suspicion rules -- and the tapes roll on. By Jane Holligan in Lima, Peru

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