DGAC EXPLAINS ZEVALLOS' FLIGHT PERMISSIONS

C O N F I D E N T I A L SECTION 01 OF 02 LIMA 004070 SIPDIS DEPT FOR WHA/AND, EB/TRA/AN TREASURY FOR OFAC FAA MIAMI FOR JAY RODRIGUEZ YAOUNDE FOR MALABO OFFICE E.O. 12958: DECL: 09/19/2015 TAGS: EAIR SNAR PGOV EINV PE SUBJECT: DGAC EXPLAINS ZEVALLOS' FLIGHT PERMISSIONS REF: A. LIMA 3974 ¶B. LIMA 3366 ¶C. LIMA 2769 ¶D. LIMA 2053 Classified By: Economic Officer Samantha Carl-Yoder for reasons 1.4 (b) and (d). ¶1. (C) Summary. Despite pledges by the DGAC to ensure that OFAC-listed Narcotics Kingpin Fernando Zevallos paid off previous debts of his former companies, AeroContinente and NuevoContinente, Zevallos received flight permissions for his new company, AeroContinente EIRL in June. The Director General of Civil Aviation Roberto Rodriguez explained that the Ministry of Transport determined that Zevallos technically did not own NuevoContinente and thus should not be held responsible for the company's debts. Zevallos, who sold AeroContinente to his former employees last year, maintained ownership of the fleet of planes and continues to rent them to Air Guinea Cargo, based in Equatorial Guinea. Zevallos continues to push the DGAC, unsuccessfully, for airworthiness certificates for his new company, AeroContinente EIRL. End Summary. Zevallos Not Responsible for Debts -------------- ¶2. (C) Econoff met with Acting Director General of Civil Aviation Roberto Rodriguez and DGAC Director of Security Juan Crovetto on September 14 to discuss the efforts of OFAC-designated Narcotics Kingpin Fernando Zevallos to resume AeroContinente operations. Rodriguez noted that while the DGAC granted flight permissions to the company in mid-June, none of Zevallos' planes have received airworthiness certificates (Ref B). Although Zevallos was listed on the OFAC Kingpin list and is currently on trial for narcotrafficking, Rodriguez explained, there is no legal impediment in Peru that prevents Zevallos from resuming operations. ¶3. (C) Econoff noted that in a previous conversation, Rodriguez emphasized that Zevallos would have to pay off AeroContiente/NuevoContinente's previous debts, including salaries for former employees and NuevoContinente's fuel bill (ref C). According to DGAC records and information from former NuevoContinente employees, these debts are still outstanding. Rodriguez, acknowledging his prior comments, noted that the Ministry of Transport decided, without DGAC consent, that it could not hold Zevallos responsible for debts incurred by NuevoContinente because Zevallos was not technically the owner of the company. (Note: Zevallos sold NuevoContinente to his employees in September 2004. End Note.) The former owners of NuevoContinente, according to the Ministry of Transport, should be held responsible for these debts. Rodriguez commented that if it were up to the DGAC, Zevallos would be held responsible and not granted flight permissions. He further lamented that the Ministry of Transport felt otherwise, resulting in the resumption of AeroContinente operations. But Zevallos Still Owns the Planes? -------------- ¶4. (C) Econoff pointed out, that using the Ministry of Transport's logic, Zevallos technically sold his planes to the new owners of NuevoContinente and should not have been able to rent them to Air Guinea Cargo (Refs A and B). Rodriguez agreed initially, but then speculated that Zevallos may have maintained ownership of the planes and rented them to Nuevo Continente. Econoff then inquired about the airworthiness of the planes that Zevallos rented to Air Guinea, as Zevallos was unable to purchase spare parts for the Boeing planes under the Kingpin Act. Rodriguez noted that before the planes left, Air Guinea representatives registered the planes in Air Guinea's name and petitioned to fly the plane as a "fair flight." Air Guinea pledged to repair the planes once they arrived in Equatorial Guinea. Comment -------------- ¶5. (C) Although the DGAC provided Zevallos with flight permissions for his "new" company, AeroContinente EIRL, Rodriguez continues to emphasize that unless Zevallos purchases or rents new planes, the company's current plane (a Fokker F28) will not receive its airworthiness certificate. We suspect, however, that Zevallos will use his connections within the Peruvian Government to try to manipulate permits from the DGAC. Rodriguez very candidly informed us that several Congressmen, including President of the Transportation Committee (and alleged contact of Zevallos) Victor Valdez, has put pressure on the DGAC to improve competition in the Peruvian aviation industry by authorizing new local airlines. We will continue to monitor the situation and report any new developments. POWERS