The Case of the Central Banker's E-Mail

Banco Central de Chile Governor Carlos Massad is on the hot seat, thanks to a scam involving stolen messages being passed to an investor

After the Alan Greenspan of this South American nation discovered that his secretary had been passing sensitive information to a local financial firm, his -- and the Central Bank's -- credibility is under fire

The Banco Central de Chile is the most highly respected central bank in Latin America. And few monetary policymakers in the Spanish-speaking world are better regarded than its governor of five years, Carlos Massad. Economists say Massad's conservative policies have helped keep Chile on sound financial footing and largely immune from the economic crises that have engulfed many countries in the region in recent years, including Argentina, Brazil, and Venezuela.

So bankers, economists, and politicians in Santiago were horrified when news broke in January that privileged information was being passed from Massad's personal computer to Enzo Bertinelli, the general manager of local financial group Inverlink. Even though Massad reported irregularities in his e-mail log as soon as he noticed them, some financiers worry that the Central Bank's credibility has been compromised, and questions have been raised about Massad's managerial capabilities. Others charge that the unprecedented security breach could have distorted local markets by giving Inverlink access to Central Bank monetary policy decisions before they were made public.


  It almost certainly enabled Bertinelli, who has since resigned and disappeared, to make millions in the stock and currency markets. Either way, Massad is now fighting a rearguard action to restore his own reputation and that of the Central Bank.

Massad himself first figured that something was wrong when he detected irregularities in his e-mail log. Thinking his computer had a virus, he alerted the Central Bank's information-technology manager, who traced the irregularities to Massad's own secretary, Pamela Andrada Diaz. Andrada is now charged with sending illicit e-mail messages from the governor's computer to Bertinelli.

Precise details about the e-mail, which insiders say contained market-sensitive information, haven't yet been disclosed. But as soon as their existence was discovered, Andrada was sacked and the Chilean Fraud Squad alerted. Both Andrada, who has also gone missing, and Bertinelli are now being sued. The case came before the courts in Santiago on Feb. 6.


  Critics of Massad -- political and financial -- are having a field day. They blame the security breach on his lax management style and are demanding fundamental changes to the way the bank is run and operates. Andrada had been Massad's secretary for many years, well before he joined the Central Bank. She began working for him during his stint as Health Minister in the early '90s.

Massad accepts that he's ultimately at fault for what went wrong. "I bear the responsibility for having chosen a bad secretary," he says. But he insists that no one else in the bank was involved. "This event is absolutely limited to one person, and it does not tarnish the reputation of the rest of the employees of the Central Bank," he says.

He also denies that the bank's credibility has been damaged. "It can happen to anybody that at a given moment a human being should radically change his attitudes and betray the trust that one has put in him. It's very difficult to guarantee that it isn't going to happen."


 The Central Bank is now revamping its security procedures to prevent any reoccurrence. Inverlink, which sells and manages mutual funds, also denies any wrongdoing. A spokesman says: "This is an isolated incident involving only Bertinelli. We did not benefit as a company. The only person who could have made money out of this was Bertinelli."

Still, the affair has central bankers around the world thinking twice. "If it can happen in Chile, it can probably happen anywhere," one official at a European central bank said privately. "We're reassessing our security procedures as a result." Economists point out that Massad is lucky that the leaks -- which could have been going on for more than two years -- didn't cause further damage.

With global markets on a roller coaster, the last thing monetary policymakers need is for market participants to get their hands on sensitive information that they could use to their advantage, possibly disrupting the markets in the process.

By David Fairlamb in Frankfurt

Edited by Douglas Harbrecht

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