IPR INVESTIGATIVE UNIT'S ACTIVITIES IN THE FIRST

UNCLAS SECTION 01 OF 03 ASUNCION 000972

SIPDIS

STATE FOR WHA/BSC, WHA/EPSC, EB/TPP/IPE
STATE PASS TO USTR FOR LYANG
USAID FOR AA/LAC ADOLFO FRANCO
TREASURY FOR OSIA MAUREEN WAFER
COMMERCE ITA SARAH COOK
NSC FOR MIKE DEMPSEY AND SUE CRONIN
SOUTHCOM FOR POLAD
US SOUTHERN COMMAND MIAMI, FLORIDA

E.O. 12958: N/A
TAGS: ECON KIPR PREL PA
SUBJECT: IPR INVESTIGATIVE UNIT'S ACTIVITIES IN THE FIRST
HALF OF 2005

Ref: 05 Asuncion 595


1. Summary. In its first 6 months of 2005, the Specialized
Technical Unit (UTE) of the Ministry of Industry and
Commerce (MIC),an IPR enforcement unit assisted with INL
funds, conducted 23 operations in Asuncion, Ciudad del Este,
and other parts of the interior. In all, over 275,000 DVDs,
CDs, and video games, over 23,000 printer cartridges, and
over 30,000 cell phone products were seized. The operations
were not limited to these specific products; falsified
products ranging from Coca-Cola bottles to sporting
equipment were also found. With only two full-time members
of UTE during this period, the results demonstrate the
dedication and effectiveness of the unit's two founding
members, as well as the GOP's continued political support
for firm action against IPR violators. Post expects the
unit to grow to at least ten vetted members by September.
End Summary.


2. This cable summarizes all operations conducted in the
past six months by the Specialized Technical Unit (UTE) of
the Ministry of Industry and Commerce (MIC) that we are
assisting with an INL grant. They are presented in
chronological order starting with late December, 2004 and
the details were provided by the UTE. The locations are
described as Asuncion, Ciudad del Este, and Interior
(representing the rest of the country). UTE had two members
for this entire period. New candidates are in the process
of taking polygraphs, and we expect the unit to grow to at
least ten members by September, when the unit's new office
space should be completed. Beginning in the first quarter
of FY2006, we expect to see a significant increase in
enforcement actions.

Descriptions of Individual Operations
--------------


3. Most of the leads for the raids described below came
from the private sector, either the regional arm of the
International Federation of the Phonographic Industry
(IFPI),or from private trademark protection companies such
as US-based McCabe and Associates.


4. Operation Carai Pyjare 1: After a nighttime raid in
Asuncion, the MIC determined that the premises were
dedicated exclusively to the mass production and
commercialization of phonographic materials. These products
would then be given to traveling salesmen and thus
distributed to the main markets in various towns. In all,
10,000 DVDs and CDs were confiscated.


5. Operation Truco: The 3rd floor of an apartment building,
in the Interior, was being used to mass-produce phonographic
materials. The attorney general's office took control of
the goods to aid with the prosecution of the case. Around
36,000 DVDs and CDs were seized along with a computer used
to download and produce pirated material.


6. Operation Bat: The company in question, operating in the
Interior, was suspected of falsifying British American
Tobacco products. Despite the presence of industrial
machinery, no convincing evidence was found supporting this
claim and the machinery did not appear to have been used
recently. The MIC was acting on a lawsuit brought against
the company by lawyers of British American Tobacco.


7. Operation Turco: A container, valued at around
US$800,000, full of counterfeit Nintendo games, Nokia
products, and Sony PlayStation games, was seized in
Asuncion. The goods were of Chinese origin.


8. Operation Carai Pyjare 2: The operation was carried out
in Asuncion. It was deemed that the premises were dedicated
exclusively to the mass production and commercialization of
phonographic materials. 20,000 DVDs and CDs, along with
200,000 DVD and CD covers were seized. All products were
then transferred to the Attorney General's office.


9. Operation Carai Pyjare 3: two different locations were
raided in Asuncion. Both were found to be dedicated solely
to phonographic piracy. 10,350 DVDs and CDs were
confiscated, along with 18,000 DVD and CD covers and 2
computers used to download and produce pirated materials.


10. Operation Pelicano 1: five different locations in two
shopping malls were investigated in Ciudad del Este with the
help of the Economic Crimes Unit (ECU) of the Public
Ministry. None of them had a single valid bill of sales and
all carried pirated goods. Before the team entered, the
owners would leave employees in charge of the store, who
were then instructed to cooperate but not reveal anything
about the business. Local policemen and documents recovered
from the stores indicated Lebanese ownership. In all, over
22,000 DVDs, CDs, and Sony PlayStation video games were
seized.


11. Operation Monte: A large container containing 1,225
boxes of miscellaneous electronic goods was stopped by
Customs in the Interior. Valued at US$1 million, all goods
were of Chinese origin.


12. Operation Mate: A container of falsified Nokia and
Motorola cell phone covers was seized by customs in the
Interior. Valued at US$1 million, the products were of
Chinese origin.


13. Operation Rodeo: This operation in the Interior
included 3 houses found to be producing pirated phonographic
material, four stores near the bus station selling pirated
goods, and a photocopy shop that made the falsified covers.
At the time of the report a full inventory of goods seized
was not available. UTE did notice that the bus station
management had leased out the areas to the offending stores
and is looking into the connection.


14. Operation Semana Santa: (reftel) 3 containers of CDs
and DVDs from Uruguay were investigated in Asuncion and it
was concluded that the importer had claimed several hundred
thousand DVDs as CDs. Since the tax on CDs is less, the
importer evaded taxes totaling $341,000. Two customs
inspectors and three MIC inspectors lied about their
findings. Their dismissal and criminal charges are still
being pursued by the MIC.


15. Operation Otoal: The operation took place with the
help of a local Special Operations Unit. The store
contained 9,900 pirated cell phone covers, batteries, and
keyboards, all of which were confiscated by the Attorney
General's office.


16. Operation Bono: In addition to cell phone batteries and
covers, UTE found several other generic products at the
location in the Interior. All goods seized were valued at
$121,250.



17. Operation Villetana: The seized container was turned
over to authorities in the Interior after the importer
claimed, and proved, that the contents were not those he had
originally requested. There was evidence that only 503 of
the original 791 boxes of diverse software applications were
in the container at the time of investigation.


18. Operation Juez: In the first part of the operation, a
store in Ciudad del Este selling falsified HP and Epson
toner and ink cartridges was raided, resulting in the
confiscation of 198 ink cartridges. The second part of the
operation, the raid of an alleged sixth floor storeroom, was
unsuccessful because the judge initially failed to authorize
entrance into the sixth floor of the building. When
authorization was finally granted, nothing was found in the
room.


19. Operation Lustro: The goal of this operation, in the
Interior, was to identify a distributor of falsified HP and
Epson toner and ink cartridges. Those were not found, but
hundreds of boxes of pirated sports equipment and toys were
recovered from the container initially investigated.


20. Operation Pelicano 2: This large operation consisted of
raids in 6 different commercial locations, each producing
and selling pirated phonographic material in Ciudad del
Este. One of the owners was identified as a Peruvian
national with connections to Lebanon. Many of those
involved evidently were of Arab origin and are now
candidates to be deported from the country by the Department
of Immigration. All of the stores failed to produce legal
bills of sale for any of their products. Of note, several
of the stores had been raided in the past, after which they
would restock with new pirated products and continue doing
business.


21. Operation Pille 1: Ministry of Industry and Commerce
(MIC) inspectors conducted a verification of businesses
registered with the MIC. Of the 27 Import/Export businesses
registered in Ciudad del Este and included in this round of
inspections, 15 of them were not located in the address on
file.


22. Operation Coca-Cola: The objective of this raid was to
identify a bottling operation falsely producing Coca Cola
products in Asuncion. Approximately 1000 bottles were found
containing the Coca-Cola brand name as well as a large
number of bottle caps with the same logo.


23. Operation Carai Pyjare 4: UTE investigated 16 Asuncion
businesses suspected of producing and commercializing
pirated phonographic material. Over 117,000 CDs were
confiscated during the operation. Three people were
identified as supposed leaders of the pirating operations
and the attorney general's office is pursuing formal charges
against them.


24. Operation Funebre: This raid took place at a funeral
home in Asuncion where space was being rented out to
producers of pirated phonographic materials. In addition to
around 40,000 CDs containing domestic and international
music, investigators also found fake domestic currency and
an automatic pistol. The operation was carried out in
cooperation with the ECU.


25. Operation Kaaguy Rory: two out of the five Ciudad del
Este houses investigated showed proof of falsification of
Epson ink cartridges with a total value of around $300,000.
One man was arrested and all products were confiscated by
the Attorney General's office.


26. Operation Duve Libra: The original goal of the mission
was to find evidence of Sony PlayStation game duplication
and commercialization in a Ciudad del Este business.
Although the evidence against the company was suspicious,
nothing concrete was found to implicate it in illegal
piracy. The company was, however, found to be undervaluing
its imports and thus evading import taxes. A subsequent fine
was issued for tax evasion.

KEANE