Identifier
Created
Classification
Origin
06LIMA2707
2006-07-11 20:57:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Lima
Cable title:  

COURT DISMISSES ALL CRIMINAL CHARGES IN GE CASE

Tags:  EINV ECON KIDE PE 
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VZCZCXYZ0007
RR RUEHWEB

DE RUEHPE #2707/01 1922057
ZNR UUUUU ZZH
R 112057Z JUL 06
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 1344
INFO RUEHBO/AMEMBASSY BOGOTA 3638
RUEHQT/AMEMBASSY QUITO 0523
RUEHLP/AMEMBASSY LA PAZ JUL SANTIAGO 0722
RUEHCV/AMEMBASSY CARACAS 9660
RUEHBU/AMEMBASSY BUENOS AIRES 2510
RUEHME/AMEMBASSY MEXICO 3412
RUEHBR/AMEMBASSY BRASILIA 6879
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
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.

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