February 12, 2018
Consortium – Rodríguez, Aguilar, Castellanos, Solares & Alvarado, S.C.
TRACE Partner Law Firm
Recent years have seen a significant increase in the criminal prosecution of electoral crimes in Guatemala, mainly related to illegal financing of political parties. The tumultuous political events of 2015 led to a number of new proposals for the reform of Guatemala’s system of electoral financing. Among these was the Law on Elections and Political Parties (Ley Electoral y de Partidos Políticos, or LEPP). The new law’s provisions include more rigorous monitoring of contributions, additional documentation requirements for political parties, the prohibition of certain types of contribution, and the criminalization of a number of actions previously sanctioned with monetary or administrative penalties. The focus of the reforms is preventing the co-opting of individuals who might later occupy public positions.
1. Private Contributions to Political Parties
A key concept in the LEPP is that of a “financer” (financista), defined at Article 21.quater as any person, individual, or corporate entity that makes a contribution of money or cash, or by contracting outside of market conditions, to any political organization, political association, or national or foreign entity engaged in activities for the benefit of a political party, candidate, or person interested in running for public office.
2. Prohibitions Related to Foreigners and Corporate Entities
Article 21.ter of the LEPP bars the receipt of political contributions from anyone within the following categories:
- States and foreign individuals/corporate entities;
- Those who have been convicted of crimes against public administration, money-laundering or asset-laundering, or related crimes;
- Those whose assets have been subject to confiscation proceedings (extinción de dominio) because of ties to criminal activities, or persons related to them;
- Non-political and non-partisan foundations or civil associations, except for contributions from academic institutions or training foundations, which must be promptly reported to the Supreme Electoral Tribunal.
The last of these prohibitions targets the use of electoral financing vehicles, aiming to ensure that all contributions are personal, thereby making it easy to identify the individual behind each contribution.
Also prohibited are donations made directly to the candidate or to any person linked or related to the candidate; all contributions must be channelled through a political party. The aim is to prevent donations or contributions that might lead to a personal relationship between the financer and the candidate, thereby facilitating the future capture of the elected leader.
Finally, the article forbids anonymous contributions; parties have the obligation to establish the source of all contributions.
3. Rules for National Individuals
The LEPP establishes two main restrictions involving campaign costs:
- Political organizations are limited to spending the equivalent of USD 0.50 per registered voter. In the case of coalitions between parties, the total limit cannot surpass the individual campaign expense limit.
Related or linked individuals or corporate entities may not make contributions exceeding 10% of the campaign expense limit.
While the amounts prescribed in the law are clear, the real question relates to the second limitation: how to determine whether individuals or corporate entities are linked. To this end, Article 21.quater defines the following concepts (emphasis added):
- Related Persons: Two or more individuals or corporate entities that are independent from the political organization, which receive, channel, manage or grant any type of financing to it, having a direct or indirect relationship between them as a result of property relations, management or any other type of links as defined by the Supreme Electoral Tribunal.
- Linked Persons: the individual or corporate entity that is linked to the political organization, the political financer or any members of its permanent or management and control bodies or its candidates, as a result of property relations, management or any other type of links as defined by the Supreme Electoral Tribunal.
- Financing Unit: Constituted by two or more individuals or corporate entities related or linked that provide financing to a political organization.
- Linking Unit: The group of persons with common property, management or control links pursuant to the previously established criteria.
The Supreme Electoral Tribunal will determine the existence of linking units based on criteria that includes property, management, joint business strategies and other elements duly supported by the Superintendency of Banks.
These definitions establish a broad scope for the Supreme Electoral Tribunal to conclude that given entities or individuals are related. The scope of this authority is intended to block any scheme that might be developed to exceed the limit of 10% by any financer.
The law also authorizes the Supreme Electoral Tribunal to request accounting information regarding both monetary and non-monetary contributions made by any financer. The information may be requested directly from the person making the contribution as well as from the political party in question. In addition, under the Regulations for the Control and Monitoring of Public and Private Financing of Permanent Activities and Electoral Campaigning of Political Organizations, any person making a contribution of more than USD 10,000 must submit a sworn and notarized statement regarding the source of the funds.
Consistent with the aim of maintaining an effective control over contributions, the law requires that in-kind contributions be registered in a special book describing their market value. Those not included in the book will be appraised by the Supreme Electoral Tribunal.
Under the LEPP, political financing is subject to the principle of public awareness. This principle is embodied in Article 21.quinquies, which requires every political party to electronically publish the following information 30 days before an election takes place:
a. The amount of contributions from individuals or corporate entities, regardless of their nature, within the prior two years;
b. The amount of contributions from individuals or corporate entities, regardless of their nature, for the specific electoral process in which it is participating;
c. The entity’s balance sheet for the year before the election in which it is participating.
This information is sent to the Supreme Electoral Tribunal, which publishes it at a later date. It is notable that not only the names of the financers will be published, but also the amount of their contributions to each party. We expect that government monitoring and public scrutiny during the next electoral process will be much higher than in previous years. The availability of this information to the public will allow it to be analyzed and discussed not only by the media but also by social networks.
The Supreme Electoral Tribunal is also authorized to demand relevant information from the General Comptroller’s Office, the Tax Administration Superintendence, the Superintendency of Banks, the Communications Superintendence, and any other public official.
Sanctions related to electoral financing can be divided into three types: monetary, administrative, and criminal.
Monetary sanctions consist of a fine imposed by the Supreme Electoral Tribunal within the limits established by law and based on the seriousness of the incident. The maximum fine for breach of electoral financing provisions is USD 250,000.
Administrative sanctions consist of the cancellation of the corporate entity. This sanction may be imposed on either of two grounds: making propaganda in favor of a political entity before or after an electoral process; or, pursuant to Article 38 of the Criminal Code, recidivism by the corporate entity in the commission of a crime.
With respect to criminal sanctions, Article 38 stipulates that the directors, managers, executives, representatives, administrators, officers or employees of a corporate entity who were involved in the criminal deed shall be deemed responsible and shall be sanctioned with the same penalties established for individual persons. Furthermore, whenever a corporate entity is made responsible, a fine from USD 10,000 to USD 625,000 may be imposed.
The specific crimes on electoral financing are described in Articles 407M and 407N of the Criminal Code, both introduced in 2010. Article 407M (“Electoral Financing”) stipulates a penalty from one to five years for any person who surpasses the 10% maximum of campaigning contributions. In addition, Article 407N (“Illicit Electoral Financing”) contemplates penalties of four to twelve non-commutable years and a fine of GTQ 200,000 to GTQ 500,000, for whoever contributes, receives, or authorizes to receive contributions with resources resulting from illicit activities, as well as anonymous contributions.
6. Social Context
The reforms introduced by the Law on Elections and Political Parties, including the dramatic strengthening of the powers of the Supreme Electoral Tribunal, were driven by the recent social context and high-profile media events in Guatemala. Imposing criminal liability on the authors of illicit electoral financing, the new law is designed to hinder any attempt to influence or compromise the actions of the candidates should they come to occupy a public position. We can expect the next electoral process to be characterized by a more thorough and careful scrutiny, not only of political parties but also of electoral financers.