PARAGUAY: IPR-UNIT NABS CUSTOMS OFFICIAL

UNCLAS SECTION 01 OF 02 ASUNCION 001204

SIPDIS

SENSITIVE

STATE FOR EB/IFD/OIA
STATE FOR EB/TPP/IPE
STATE FOR INL/LP ABBY SMITH
STATE FOR INL/C/CP ADAM SHANTI
STATE PASS TO USAID FOR LAC/AA
STATE PASS TO USTR FOR LYANG
NSC FOR SUE CRONIN
TREASURY FOR OSIA MAUREEN WAFER
TREASURY FOR OTA WARFIELD, VAN KOCH, MILLAR
COMMERCE FOR ITA SARAH COOK
SOUTHCOM FOR POLAD DAN JOHNSON

E.O. 12958: N/A
TAGS: ECON KCRM KIPR PA PGOV PREL
SUBJECT: PARAGUAY: IPR-UNIT NABS CUSTOMS OFFICIAL

REF: A. ASUNCION 1167

B. ASUNCION 0972

C. ASUNCION 0423


1. (U) This cable is sensitive but unclassified. Please
protect accordingly.


2. (SBU) SUMMARY: On 9/15, during a Treasury Department
training course, Col. Felix Cruz, the director of the
Ministry of Industry and Commerce's (MIC) INL-funded
Specialized Technical Unit (UTE) coordinated with prosecutors
to arrest Customs official Luis Alberto Panza Benitez, a
member of the Customs Verification and Technical Unit
(UTAVE),on bribery charges. Panza is reportedly well
connected to former Senator and current Ambassador to Spain,
Nelson Argana. A private sector despatch agent who is a
Colorado who ran for a governorship in the last election was
also arrested as an accomplice to bribery. This success
demonstrates that US-trained invesgitators and vetted units
can make a dramatic difference. End Summary.


3. (SBU) On 9/15, Col. Felix Cruz, the director of the MIC's
INL-funded Specialized Technical Unit (UTE) that fights
Intellectual Property Rights (IPR) crime, orchestrated the
arrest of Luis Alberto Panza Benitez, a politically connected
UTAVE customs official operating in Cuidad del Este, on
charges of aggravated bribery. The operation occurred during
a four-week criminal investigators training course being put
on by Treasury's Resident Enforcement Advisor, and the arrest
took place on the sidewalk outside the meeting site. Carlos
Palacios, a private sector customs broker and Colorodo
politician who unsuccessfully ran for the governorship of the
Central Department in the last election, was also charged as
an accomplice to aggravated bribery. Additional charges
could be filed against an Air Force Colonel and former
colleague of Col. Cruz, who initially communicated Panza's
offer to Cruz.


4. (SBU) On 9/12, Air Force Colonel Jorge Nunez called Col.
Cruz and offered to put him in touch with Panza, who was
prepared to offer Cruz $2,000 for the release of a shipping
container filled with CDs and DVD,s that UTE had held up for
inspection for undervaluation. The importation documents
registered with the MIC claimed that the shipment included
738,000 blank CD-Rs valued at about USD 95,000, when in fact
the shipment contained 138,000 CD-Rs and 600,000 DVDs which
are more valuable than CD-Rs, worth a total of closer to USD
130,000. Cruz immediately went to a prosecutor to file a
report and obtain the legal authorization to record
subsequent conversations. Panza was eventually lured to the
site of the training class and Col. Cruz stepped out of class
to assist in the arrest, where he was given a bag containing
10 million Guaranies (about USD 1,640) as a down payment on a
USD 2,000 total payment. During the three days of
negotiations, Carlos Palacios, the customs broker, also
called Cruz and offered a USD 5,000 bribe with the condition
that Cruz would thereafter work exclusively for Palacios.


5. (SBU) All of the press coverage referred to Cruz only as
an employee of UTE or the MIC, and never mentioned him by
name, no doubt at his request. Panza reportedly faces up to
three years in prison if the legal process works properly in
this case. The prosecutor on the case, Arnaldo Giuzzio, is
known to the Embassy and has been vetted. He was recently
transferred from the anti-kidnapping unit to the
anti-corruption unit. He is excited about the new role, but
laments the lack of resources of the unit.


6. (SBU) After returning from a Mercosur meeting in
Montevideo, Customs Director Margarita Diaz de Vivar
announced that Panza was working as a contractor of Customs,
and not as a civil servant, and as such his contract would be
terminated. Another customs official said that Panza, who
had previously been a customs inspector, had no specific role
in Customs after the entry into force in January of the new
Customs Code. Panza reportedly obtained his position through
the influence of Nelson Argana, a powerful ex-Senator and
current Ambassador to Spain, and has been a key player in
facilitating the illicit trade of Arab and Chinese business
interests in Ciudad del Este. Panza is associated with
Argana,s Colorado Reconciliation Movement (MRC).


7. (SBU) COMMENT: Nelso Argana is the son of assasinated Vice
President Luis Maria Argana. The Argana family figures large
on the political scene in Paraguay; its members have been
tied in the past to allegations of customs fraud. UTE
Director Cruz deserves high marks for orchestrating this
arrest -- on the margins of a US-sponsored criminal
investigations course no less. The bust comes on the heels
of Finance Minister Bergen's exultation to "bring him some
big Customs cases" (ref. A) and just as the GOP launches a
campaign to formalize activities in Ciudad del Este. Proper
closure of these cases is always the key and most difficult
to achieve. We will follow the case closely and keep
Washington apprised as appropriate. This shows, once again,
that US-trained invesgitators and vetted units can make a
dramatic difference. End Comment.
KEANE