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Last week, the Group of 30, the unofficial grouping of the great-and-good of international finance sent word to its distinguished members, the likes of Paul Volcker, the former Fed chairman now trying to overhaul Andersen, the troubled auditor; Larry Summers, the former U.S. treasury secretary now leading Harvard; Gerald Corrigan, former head of the New York Fed; Bill Rhodes, Citigroup vice chairman; and Stan Fischer, the former International Monetary Fund economist, that fellow member Domingo Cavallo might not be able to make their next meeting because he was otherwise engaged.
Just as he was about to leave Buenos Aires to attend a Washington conference of the Trilateral Commission, another high-level pow-wow of past-and-present Masters of the Universe, the architect of Argentina's economic reform program in the 1990s under president Carlos Menem was locked up by an Argentine judge in connection with a long-running probe into alleged illegal arms sales under Menem's government.
John Walsh, executive director of the exclusive Washington-based Group of 30, said they were not reviewing Cavallo's membership in light of his arrest. "He continues as a member of the group. We just sent word out to the members about this latest development. Obviously, things haven't been too easy for him these last months."
They haven't. Cavallo returned to Argentina's Economy ministry during much of 2001, this time under President Fernando De la Rúa, and was sacked Dec. 20, just hours before the president himself resigned-following two days of street protests and lootings against his minister's policies that left 26 people dead.
Now Cavallo has joined former president Menem, a former president, a former army chief and other senior officials as the past and present suspects in an arms smuggling scandal. It sounds like an Eric Ambler novel: weapons smuggled to countries under a U.N. arms embargo, allegations of corruption, a dead witness and a suspect list that reads like a `"Who's Who" in Argentina.
The latest twist in the case came last week, when Cavallo was detained and questioned by federal Judge Julio Speroni about an alleged conspiracy to smuggle arms to Croatia and Ecuador between 1991 and 1995. As Economy minister at the time, Cavallo's signature was one of many on the arms sales decrees. The judge has now until the end of this week to file charges against Cavallo or release him.
The first official talk of wrongdoing came in 1995, when a lawyer, Ricardo Monner Sans, told a court he believed the government had sold 6,500 tons of weapons, officially listed as destined for Panama and Venezuela, to Croatia and Ecuador. The weapons included rifles, machine guns, bombs and canons worth $100 million.
At the time of the alleged sales, Croatia and Ecuador were both under U.N. arms embargoes. More embarrassing still, Argentina was a mediator in an ongoing border clash between Ecuador and Peru.
In the following years, there were allegations that top government officials had filled foreign bank accounts with profits from the sales, that Argentine diplomats had hidden evidence of the exports, even that a businessman, found dead days before he was to testify in the case, was the victim of foul play. However, locked into a judicial system with strong links to the government, the investigation seemed stuck.
Only the 1998 detention of Luis Sarlenga, director of a state-owned munitions company that allegedly manufactured some of the arms, caused a stir. By 2001, Sarlenga was still under arrest and Menem out of power, his party replaced by an opposition alliance in an election dominated by the issue of corruption.
Sarlenga decided he wanted to talk, reportedly telling federal judge Jorge Urso enough to begin bringing in top officials for questioning about an alleged "illicit association" to benefit from weapons sales.
A former army chief, a former defense minister, and Menem's former brother-in-law were all detained for months on end by Urso or Speroni, but all were later released after being cleared of major charges.
Still, Urso's big splash came last June 7, when he placed Menem under house arrest. There Menem stayed for the next five months, charged with organizing the "illicit association" and facing a possible 10-year sentence if convicted. But he appealed his arrest and denied the charges and on Nov. 20, the Supreme Court threw out the accusations.
Of all those who signed the three arms sales decree, only Cavallo had escaped charges. As the head of the ministry that included the customs service, Mr. Cavallo was required to sign documents stating that the weapons were actually being sold to Panama and Venezuela. The 55-year-old economist has denied any wrongdoing, that he never imagined that the decrees would be used to disguise the sidetracking of the shipments to Croatia and Ecuador.
Political colleagues said Cavallo had been surprised by the judge's decision because he had already given evidence in the case last year and his lawyers made a legal appeal for his release. If he is charged and found guilty of arms smuggling, he could face up to 12 years in prison.
In Argentina's highly politicized judiciary system it doesn't help Cavallo that since imposing a freeze on bank deposits in December the former titan of Latin American finance has become one of the most reviled figures in the country.
On the floor of the Argentine Congress, Elisa Carrío, the leader of a new center-left movement critical of both of the country's traditional parties, said she felt "immense joy" at Cavallo's arrest. But she argued that further action was needed in the form of treason trials for both Cavallo and de la Rúa because of the way they had handled a debt swap with foreign creditors last year.
In fact, Cavallo is already facing a separate judicial investigation into charges that he conspired with foreign bankers to increase Argentina's indebtedness and inflate commissions to investment banks in return for their agreeing to renegotiate $29.5 billion in bonds.
Claudio Campuzano (claudio-campuzano@hotmail.com) is U.S, correspondent for the Latin American newsweekly Tiempos del Mundo and editorial page editor of the New York daily Noticias del Mundo. He writes weekly for World Tribune.com