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SANTIAGO, Sept 3 (Reuters) - Investor confidence in Chile has been shaken by a market manipulation scandal involving the former son in law of ex-dictator Augusto Pinochet, a business leader said on Wednesday as a union denounced the affair as "shameful."
The case surrounding Julio Ponce, Pinochet's former son in law and chairman of fertilizer giant SQM, "seriously puts at risk financial market transparency and confidence in those involved," said Hermann von Muhlenbrock, the head of industry body Sofofa, in a statement on Wednesday.
Usually considered one of Latin America's least corrupt economies, Chile has been roiled in recent months by the affair involving companies linked to SQM, which owns vast nitrate and lithium resources in the Atacama desert.
On Tuesday Ponce, the chairman of SQM , was fined nearly $70 million by the market regulator, the biggest individual fine out of a total $164 million levied in the market manipulation scandal.
Copper workers' union FTC called the scandal "shameful" and said it could damage the pension funds of Chilean workers.
The pension regulator said it had instructed the country's main pension funds to quantify the impact and detail legal action they would take to recuperate their losses.
The market regulator's probe, which also took in Chile's largest brokerage LarrainVial, accuses those involved of buying shares below market prices and selling them above market prices through a complex web of holding companies known as "cascadas."
Billionaire Ponce, who controls SQM via stakes in the cascadas , acquired the firm in the 1980s when he was the son-in-law of then-dictator Pinochet.
Cabinet minister Alvaro Elizalde, the government spokesman, said the fine sent a message on financial abuse.
"In Chile, nobody can be above the law. There cannot exist privileged people or groups," he said.
Minority shareholders in SQM have complained before, and could decide to take civil action.
Those accused have 10 days to appeal or pay the fine. A lawyer for Ponce told local media that the fine would be appealed.
In a statement late on Tuesday, LarrainVial called the fine "unfair and disproportionate", saying: "We never knew of or were part in any supposed scheme intended to benefit one investor over another." (Reporting by Felipe Iturrieta and Rosalba O'Brien; Editing by Cynthia Osterman)