Ex-Rebel Opts for Jail, Tests Salvador Legal System : Latin America: Top former guerrilla faces defamation charge. He forgoes $60 bail to force issues of judicial reform, right-wing death squads.

Joaquin Villalobos, who as a master guerrilla strategist eluded capture during 12 years of civil war, completed Day 16 as a prisoner Thursday, awaiting the outcome of a defamation lawsuit.

Two years after peace accords ended the war, legal maneuvering has done to Villalobos what an army backed by billions of U.S. dollars never could.

Villalobos was sued by a wealthy businessman he accused of having financed the right-wing death squads that terrorized Salvadorans through much of the 1980s. A court issued an arrest warrant pending a final ruling in the case.

The former guerrilla commander could have avoided jail by paying a 500-colon bail (just under $60) but chose instead to force the issue and draw attention to El Salvador’s troubled judicial system as well as the still-unresolved questions surrounding the notorious death squads.

“What is at stake is whether the country has really changed or not,” Villalobos said this week in a jailhouse interview with The Times. “We are living through a period of opening up and speaking out. Punishing me . . . sends a message of juridical repression.”

Villalobos, 43, turned himself in Oct. 18, after holding a news conference and leading a 20-car caravan of supporters and journalists to what would become his prison. While he awaits the court’s ruling, Villalobos is being held at the central headquarters of the National Police, in an office once used by police intelligence and next to a room that former rebels say was once used for torturing suspected leftists.

His surroundings are comfortable: He has a telephone, a private bath and his own bodyguards, and his wife, former television broadcaster Roxana Lemus, is allowed to deliver food to him each day.

National Police commander Col. Samuel Dolores Cuellar, a wartime enemy of Villalobos, greeted his new prisoner: “It is an honor to have Mr. Villalobos in this place.”

Since the end of the war, which claimed tens of thousands of lives, El Salvador has undergone a difficult period that has seen greater political participation but many unfulfilled expectations in the area of judicial reform.

The Villalobos episode comes as scandals erupt on a near-daily basis, involving alleged government and police corruption that implicates current and former senior officials. It follows a bitter struggle within the political left, now divided apparently beyond repair.

Villalobos’ legal problems began more than a year ago, when amid a resurgence of political violence he publicly accused businessman Orlando de Sola of helping to organize and pay for death squads that pursued and killed hundreds of leftist sympathizers before and during the war.

The way Villalobos sees it, he was merely stating one of the many “open secrets” that characterize recent Salvadoran history. It is widely believed that prominent Salvadoran business people--some of whom went on to hold important government posts--gave the financial backing that enabled the killers to work so efficiently.

A six-month, U.N.-sponsored probe of war atrocities by a panel known as the Truth Commission issued a scathing report in March, 1993, blaming most abuses on government security forces and some on the guerrillas of the Farabundo Marti National Liberation Front (FMLN). But it failed to name business leaders behind the death squads and instead called for further investigation.

A second probe earlier this year, also directed by U.N. officials, produced a confidential list of military men and civilians suspected of organizing death squads, and further investigation was again urged. The government of President Armando Calderon Sol has not acted on the information. Leaders of his right-wing political party were once associated with death squads.

“You could always speak of (abuses committed by) the armed forces, by judges, by the FMLN,” Villalobos said. “But when it came to the responsibility of important economic and financial sectors, that was prohibited. . . . The death squads are an unfinished topic.”

Originally a court ruled that Villalobos did not commit slander because he was quoting U.S. press reports. As early as 1983, U.S. newspapers named De Sola, a coffee exporter then living in Miami and a member of one of El Salvador’s richest families, in connection with the right’s war on communism.

De Sola appealed the court’s ruling, and a higher court annulled it and ordered the case to proceed.

If the suit continues and he is found guilty, Villalobos could face a sentence of up to three years in jail.

De Sola and the political right, pointing to the privileges Villalobos enjoys while in custody, contend that the whole matter is merely a “show.” The right here continues to insist that death squads are a myth created by the left.

De Sola has denied financing death squads, although he told a Salvadoran television station that he did give money to cashiered army Maj. Roberto D’Aubuisson, the reputed founder of the death squads who died of cancer in 1992, to help found the Nationalist Republican Alliance party. The party has ruled since the election of Alfredo Cristiani as president in 1989. Cristiani was succeeded by Calderon Sol this year.