COURT DISMISSES ALL CRIMINAL CHARGES IN GE CASE

UNCLAS LIMA 002707 SIPDIS SENSITIVE SIPDIS DEPT FOR WHA/AND, WHA/EPSC, EB/IFD/OFD, EB/CBA, EB/IFD/OIA TREASURY FOR OASIA/INL, DO/GCHRISTOPOLUS COMMERCE FOR 4331/MAC/WH/MCAMERON USTR FOR BHARMAN/DWEINER E.O. 12958: N/A TAGS: EINV ECON KIDE PE SUBJECT: COURT DISMISSES ALL CRIMINAL CHARGES IN GE CASE Contains Sensitive Business Information, not for Internet Distribution. ¶1. (SBU) Summary. Peru's Constitutional Court on July 6 ruled in favor of GE in one of its habeas corpus cases, dismissing all criminal charges against the 23 GE defendants. In its decision, the Constitutional Court commented that the 4th Penal Court, which originally issued international arrest warrants for the GE executives, was wrong to have opened a criminal case, as the issue was clearly civil in nature. Former GE distributor Gonzalez Newmann, who filed criminal fraud charges against GE, is unable to appeal the decision. The 4th Penal Court is charged with implementing the Constitutional Court's ruling, expunging the case from the judicial docket. Once implemented, the Constitutional Court's decision effectively closes the case against GE, as the Constitutional Court is the court of last resort on criminal issues. The resolution of this case is a win for Peru's judicial system and sets precedent for future dispute settlement cases, showing that one should not attempt to criminalize civil disputes. End Summary. Background -------------- ¶2. (SBU) General Electric terminated its relationship in 1998 with Peruvian businessman Guillermo Gonzalez Newmann, former General Manager of LATAM, a distributor for GE in Peru from 1992-1998. Gonzalez Newmann brought two civil suits against GE in 1999 and ¶2001. In both cases, the U.S. courts found in favor of GE. After losing the first U.S. case, Gonzalez Newmann in 2000 filed criminal fraud charges against GE in several courts in Peru, until he found a court that would open a criminal case on what would normally be a civil matter. After two lower Peruvian courts ruled in favor of GE in 2001 and 2002, Gonzalez Newmann appealed the decision in July 2003, and included in his criminal case 23 high-ranking current and former GE officials. In September 2004, the Appellate Court ruled in favor of Newmann's appeal and the Lima Criminal Court issued international arrest warrants for all 23 defendants. GE's local counsel then appealed the Appellate Court decision to the Superior Court. As a result, the arrest warrants were held until the Superior Court could make a decision. ¶3. (SBU) In June 2005, the Superior Court ruled that there was sufficient cause to order the case reopened, remanding the case to the trial court. At the same time, the Court also affirmed the detention order for the 23 executives, to be activated through Interpol. The Chief of the National Police and the Minister of Interior decided, due to irregularities in the arrest warrants, not to submit the warrants to Interpol for action until the appeals process has been exhausted. Criminal Charges Dropped -------------- ¶4. (SBU) In response to the 2005 Superior Court ruling, GE's local counsel submitted six petitions for habeas corpus to the Constitutional Court (reftel). After months of reviewing GE's habeas corpus petitions, the Constitutional Court on July 6 ruled in favor of the American company, noting that the fraud charges were a civil issue rather than a criminal one. The Court, denouncing the actions of the 4th Penal court to open a criminal trial against the 23 GE executives, dismissed all criminal charges and nullified the original arrest warrants. Gonzalez-Newmann is unable to appeal the decision, as the Constitutional Court is the court of last resort for criminal cases. The July 6 decision sets in motion final resolution of GE's case in Peru. ¶5. (SBU) The 4th Penal Court is charged with implementing the Constitutional Court's decision and expunging the case from the judicial docket. According to Disputes Coordinator Aurelio Loret de Mola, GE's lawyers need to present the Constitutional Court's decision to both the prosecutors and the 4th Penal Court. The 4th Penal Court will then have to expunge the case from the judicial docket. Once this is done, the case should be closed. Comment -------------- ¶6. (SBU) The Constitutional Court decision in favor of GE is a win for both the company and the GOP, setting a precedent in the judicial system that one should not criminalize a civil matter. In a previous decision, the Supreme Court issued sanctions against Judge Herrera Cassina, noting irregularities in how he handled the GE case - a signal that the judicial system is taking steps against allegedly corrupt judges. The GOP is committed to attracting foreign investment and creating a good environment for international business. The resolution of this case will help improve Peru's investment climate. STRUBLE