PARAGUAYAN PRESIDENTS' CORRUPTION CASES HIGHLIGHT

C O N F I D E N T I A L ASUNCION 001275 SIPDIS SIPDIS E.O. 12958: DECL: 12/07/2026 TAGS: PGOV ECON KCRM KCOR PREL PINR PA SUBJECT: PARAGUAYAN PRESIDENTS' CORRUPTION CASES HIGHLIGHT IMPUNITY Classified By: DCM Michael J. Fitzpatrick; Reasons 1.4(b),(d) ¶1. (U) SUMMARY: Seventeen years into its transition to democracy, respect for the rule of law remains an elusive ideal for the Paraguayan justice system. All three of Paraguay's former Presidents in the post-Stroessner era are in various stages of the legal process for multiple financial crimes mostly tied to corruption. They have proven adept at manipulating Paraguay's judicial system, drawing on their wealth and influence. A recent USAID and the University of Asuncion report highlighted excessive delays in economic crime and corruption cases, which usually end without resolution when the statute of limitations expires. Paraguayans regularly identify the judiciary as one of the most corrupt institutions in the country. Paraguay's MCA program is rightly focused on combating impunity. However, until Paraguay can effectively apply justice to the rich and powerful and institute genuine respect for rule of law, its transition to democracy will remain egregiously incomplete -- and thus at risk. END SUMMARY. WASMOSY DECISION ON HOLD FOR TWO YEARS ====================================== ¶2. (C) Corruption was a hallmark of the Stroessner dictatorship (1954-1989) serving as a tool for the dictator, to curry favor and wield influence over key political and economic players. General Rodriguez, interim President from 1989 until Paraguay's first post-Stroessner election, was widely accused of corruption and links to drug trafficking. Unfortunately, Paraguay's first civilian-elected President in the post-Stroessner era, Juan Carlos Wasmosy (1993-1998),did not usher in a new era of "clean" government. Accused of having authorized irregular financial relief for a local bank that did not meet the minimum requirements for that assistance, Wasmosy was convicted for fraud and sentenced to four years in prison in 2002. This conviction was subsequently overturned by the Appellate Court and the prosecution's appeal to the Supreme Court is about to enter its third year without a decision. Rene Fernandez, prosecutor in the Economic Crimes and Corruption Unit in the Attorney General's Office, blamed "pure politics" for the courts' failure to deliver and stand firm on a guilty verdict. The Supreme Court is dominated by judges aligned with the ruling Colorado Party, many of whose key leaders do not want to see Wasmosy's conviction reinstated. CUBAS CASES: SEVEN YEARS AND COUNTING ===================================== ¶3. (C) Three criminal cases against former President Raul Cubas (August 1998 - March 1999) remain caught up in legal procedures. Cubas was forced out of office and fled to Brazil in the wake of the assassination of Vice President Argana and the subsequent killing of seven student protesters. The original charges against Cubas include obstruction of justice (connected to freeing his patron, the coup-plotting General Lino Oviedo, from prison); breach of trust (connected to a withdrawal of some 2 billion guaranis (approximately USD 370,370) from government reserve funds); and manslaughter (for the death of VP Argana and the seven students in 1999). Cubas was arrested and confined to several months of pre-trail detention when he returned to Paraguay in 2002. Ultimately, he was released on bail but is not allowed to leave Paraguay. As the case against Cubas originated under the old Criminal Procedure Code, no statute of limit applies though historically cases are considered effectively dead after 10 years. Cubas' daughter was kidnapped in 2004 and found killed in 2005. (NOTE: As if to highlight that Paraguayan justice can be both swift and severe when there is sufficient political will, leftists from Patria Libre have already been captured, tried, convicted and sentenced to as much as 35 years in prison for her murder. END NOTE.) Imprisoned General Oviedo -- and not his front-man, Cubas -- remains the target of most Paraguayans' grief over Argana's assassination. Conventional wisdom suggests the charges against Cubas will likely remain dormant -- out of sympathy over his daughter's murder and given the fact that he (unlike Ovideo) manifests no desire to reenter the political fray. GONZALEZ MACCHI: DOWN, BUT HARDLY FINISHED ========================================== ¶4. (SBU) Luis Gonzalez Macchi, who assumed the Presidency in 1999 when elected President Raul Cubas stepped down, was convicted of financial crimes in June 2006. He was sentenced to six years for his involvement in the illegal transfer (to private bank accounts in the U.S. and the Cayman Islands) of USD 16 million from two banks that were in financial ruin and in the process of being liquidated in 2000 while he was President. This court decision was overturned shortly afterwards, however, when the Appellate Court subscribed to the arguments presented by the defendant's legal counsels and dismissed charges against him, ruling that there was no material evidence of conspiracy. The prosecution's request the sentence be reinstated is now before the Supreme Court for consideration. ¶5. (U) In a separate decision, Gonzalez Macchi was sentenced December 4 to eight years in prison for illegal enrichment and for providing false documents in connection to the case involving the illegal transfer of the USD 16 million noted above. The court also fined him 3 billion guaranis (approximately USD 600,000),and impounded assets worth up to USD 362,000. Gonzalez Macchi has appealed this decision and remains under detention at the Presidential Guard Regiment pending a ruling by the Appellate Court. Gonzalez Macchi's wife, Susana del Pilar Galli, and businessman Reinaldo Dominguez Dibb were acquitted on charges connected to Gonzalez Macchi's case. (NOTE: The prosecution lost the ability to prosecute Gonzalez Macchi for separate embezzlement and illegal enrichment charges on November 19 when the defense ran out the statutory time limit with abusive delatory tactics. END NOTE). ¶6. (C) Rene Fernandez, the prosecutor in this case, was excited about his win in the case convicting Gonzalez Macchi for illegal enrichment and false documentation, stressing the importance of the case for the Paraguayan justice system. He stated that he is cautiously optimistic about the conviction against Gonzalez Macchi being confirmed by the Appellate Court. By statute, the case should be heard within 30 days, but Fernandez said in reality the process will more likely drag out for six months. He indicated that he was exploring the possibility of introducing new charges against Pilar Galli and Dominguez Dibb for illegal enrichment as accomplices of Macchi. NDF: THE NEXT PRESIDENT TO FACE CORRUPTION CHARGES? ============================================= ====== ¶7. (C) Nicanor Duarte Frutos, Paraguay's current President, has also been accused in the press of corruption and illegal enrichment. Duarte grew up poor and has worked for the government for almost his entire life (except for a stint as a newspaper reporter and consultant to a publicity firm) making a modest salary at best. Nevertheless, he reportedly owns several large properties; applied for membership at the country's most exclusive country club (Members must pay a $35,000 initiation fee; he ultimately withdrew his application in the face of controversy); and has used an airplane registered to a military official who similarly lacks the resources to have acquired such an expensive asset. A high-profile prosecutor from the Attorney General's Office - already investigating several close associates of Duarte - has an open file on the question of the President's use of the airplane. A recent series of articles revealing how friends and family members have gotten rich off government contracts has drawn much attention. Duarte is vying to amend the Constitution to allow him to run for reelection, and should that fail, will seek election as a Senator. Duarte's ambition to remain at the center of Paraguay's political future is driving his effort; but a welcome corollary for him of holding political office will be the protection it avails from criminal prosecution. (Even as a Senator, it would require a two-thirds majority vote to strip him of his immunities.) COMMENT ======= ¶8. (C) COMMENT: These cases against Paraguay's former Presidents are a testament to high-level corruption in Paraguay and how that same corruption undermines the judicial process. Former President Gonzalez Macchi's conviction reflects a positive development in building respect for the rule of law. However, corruption remains a serious problem and flaws within the penal and procedure codes often obstruct the effective prosecution of criminal defendants. Wealth and influence, taken together with the strict (if usually ignored) time limits of the law allow savvy defendants to use delay tactics to run roughshod over due process. These tactics permit well-connected defendants to file "nonsense" motions to prevent legal progress and guarantee the statute of limitation runs out in this Paraguayan version of "Beat the Clock." A USAID/University of Asuncion (UNIDA) study on the universe of economic crime and corruption cases prosecuted between 2001 - 2005 reinforces this point, finding that 77 percent of the cases ultimately expired under the statute of limitations. Significant measures to reform the penal code are presently before Congress; if adopted, they should resolve many of the problems with the legal system. But until Paraguay can get a grip on the overarching problem of corruption and impunity for wealthy, influential defendants, all the reforms in the world will only serve as little more than window dressing. As December's riots over a court decision minimizing the crime and punishment in the Ycua Bolanos Supermarket tragedy suggests, the patience of the Paraguayan public for "routine" corruption and non-delivery of justice has clear limits. END COMMENT. CASON