The filing put the Chilean government in a double bind. On the one hand, it could not refuse the arbitration, to which it was committed by treaty with Spain, without sending a negative signal to foreign investors interested in Chile’s booming economy. In cases of confiscation the arbitration process allowed for restitution not only of the property itself but also of unrealized profits. Thus Pey’s claim was initially set at a stratospheric $517 million, although the three arbitration judges appointed to the case will establish any final settlement.

On the other hand, the government did not feel free to negotiate a lesser settlement through direct talks with Pey for fear of the wrath of Chile’s powerful rightist parties and their ally, El Mercurio. Alarm bells went off inside the Concertación. According to a former official directly involved, Concertación leaders warned President Ricardo Lagos that if the government did not put up a fierce fight, employing the best lawyers, it could be accused of ”some sort of connivance with the Allende Foundation.”Such accusations did in fact soon materialize, not only from the right but from the Christian Democrats, the large centrist party that is a mainstay of the Concertación coalition. El Mercurio’s writers pounded on the story, citing ”rumors”that the money for Clarín was actually going to end up in the treasury of the Socialist Party.

The warnings set in motion a counter-strategy to avoid settling with Pey and the foundation. The strategy amounted to paying a lesser amount to other claimants in Chile, on the legal theory that once the case had been administratively resolved in Chile, the World Bank arbitration process would be closed.

At that point–mid-1998–there were no rival claimants to Clarín. Darío Sainte-Marie had died in the early eighties. His will, obtained from government files on the case released to me, has a long list of bank accounts and properties, but no mention of Clarín. Another man whose name appeared on the Superintendent of Corporations registry, Emilio González, had also died and his will, too, contained no claim to Clarín.

Nevertheless, within a few months of the filing of Pey’s claim with the arbitration center, the heirs of Sainte-Marie, González, and two other men whose names appeared on the registry surfaced to file a joint claim in Chile, and in record time were granted a settlement of $9 million. (Needless to say, none of the recipients expressed any intention of publishing a newspaper.) The strategy and the government’s actions are too complex to explain in detail, but the central elements were confirmed by two government officials involved in the deal and by government documents released to me through a petition using the Chilean equivalent of the Freedom of Information Act.

In the simplest form, here is what happened: the government’s Committee for Foreign Investment, which was fighting the Pey arbitration case in Washington, hired a lawyer to make the legal argument, called a ”Study in Law,”against Pey’s claim of ownership. The lawyer did that in a twenty-page confidential document in which he concluded that only the people listed in the Superintendent of Corporations registry (or their heirs) were the legitimate owners, and that because Pey had failed to register the titles and transfer papers in his possession, ”a legally certified purchase”by Pey could not be demonstrated.

The same lawyer then approached at least two of the families mentioned in his report and made them aware of a possible financial windfall if they teamed up with him to make a claim. According to Roberto Mayorga, who was in charge of the case for the Committee for Foreign Investment and who hired the lawyer, ”What I know is that the heirs were not aware they had rights to Clarín, and they had learned about it through the Study in Law which was leaked and which concluded that they were the title holders to the stocks of the company that owned the newspaper.”He said the lawyer’s action in contacting the families was ”unethical”but not illegal under Chilean law. In exchange for their legal services, the lawyer and his partners received a $1.6 million share of the restitution paid to the families.

John Dinges is the co-founder of the investigative journalism center in Santiago, Chile. He has written three books about military dictatorships and human rights in Latin America. The most recent is The Condor Years: How Pinochet and his Allies Brought Terrorism to Three Continents. He is a professor of journalism at Columbia University.