It appears that the Ecuadorian debt audit commission has found serious and pervasive irregularities in the debts that it owes.

This is not surprising, foreign debt to third world nations is typically geared toward maximizing the shafting of the recipient countries, and not the niceties of western accounting:

Ecuador’s debt audit commission said it uncovered “illegality and illegitimacy” in the country’s foreign obligations, findings that may give President Rafael Correa the legal basis he’s sought to halt bond payments.

The commission said in a 172-page report that the global bonds due in 2012 and 2030 “show serious signs of illegality,” including issuance without proper government authorization. Correa, who last week withheld a $30 million interest payment on the 2012 bonds while he awaited the audit, said today that the country’s bonds due in 2015 also are marred by irregularities. He called the audit results “truly disastrous” and “conclusive.”

It appears that they are looking at filing criminal charges.

It’s likely true that the audit committee’s review is accurate. The question is whether the western banking interests can get him to knuckle under, and if not, what happens when other 3rd world nations follow Ecuador’s example look at their debt deals closely.