HONDURAS: BIOGRAPHICAL INFORMATION: LEION "LEO"

S E C R E T SECTION 01 OF 02 TEGUCIGALPA 001921 SIPDIS SIPDIS NOFORN STATE FOR WHA/PPC, WHA/EPSC, INR/IAA, AND WHA/CEN TREASURY FOR AFABISHENKO STATE PASS AID FOR LAC/CAM E.O. 12958: DECL: 10/11/2036 TAGS: PINR TBIO ENRG PGOV HO SUBJECT: HONDURAS: BIOGRAPHICAL INFORMATION: LEION "LEO" STARKMAN MILLA Classified By: Classified by Charge James Williard for reasons 1.5 (B,D ) ¶1. (S) Biographical Note: Leion Starkman Milla (DPOB 17 May 1968, San Pedro Sula, Honduras) served until recently as Minister without portfolio for Investment Promotion and later simultaneously as Director General of the parastatal electric company ENEE. Starkman has been criticized for failing to spur much new investment, though he claims over USD 2.5 billion in projects have been put into the pipeline during his tenure. (Note: this claim is somewhat dubious, considering that some of his projects, such as an ambitious railroad to link Puerto Trujillo on the Atlantic with Puerto San Lorenzo on the Pacific, exist only as vague notions. End Note.) Anecdotal reports indicate Starkman is avariciously corrupt, in one instance reportedly offering to facilitate an investment in exchange for a 10 percent share of the deal. Post contacts claim Starkman was also corruptly involved in a March 2006 attempt to steer a USD 62 million contract to a Spanish firm to consult on restructuring ENEE. Juan Bendeck, former head of ENEE, privately tells Post that he (Bendeck) was fired in part for opposing that contract. Bendeck alleges Starkman was put in his place to shepherd the contract through. If so, Starkman failed, as the project was never signed, and ENEE was turned over to two separate commissions -- one a management commission seeking to restructure the company, the other a transparency commission put in place to vet all procurement decisions. Amid a flurry of attacks, Starkman resigned both his ENEE and Minister positions on September 22. President Zelaya, however, has yet to formally accept those resignations, and Starkman traveled to Roatan on September 30 on GOH business relating to electricity. ¶2. (S) Starkman's private business affairs are equally tainted, as he is currently being sued by over six parties, each of whom allege breach of contract, failure to pay, and assorted other improprieties stemming from his personal import/export firm REMSA. Starkman has owed U.S. firm Wrigleys over USD 250,000 for two years. Post used its good offices in April to negotiate a repayment schedule, which REMSA promptly failed to meet. Pressed by Post, REMSA made a series of payments, but has now fallen two months behind in repayments again. Though Post has not spoken with other claimants, their allegations against REMSA follow similar outlines and therefore strike us as credible. Asked about allegations that he violated his distribution agreement with U.S. firm Hershey by re-exporting to other countries, Starkman admitted his actions, but claimed that everyone in the region did it, and that there was "tacit" approval from Hershey to do so. Starkman alleges that the Hershey official responsible for the policy was subsequently fired. Asked about allegations that he violated another contract by re-exporting Campbell's Soup products to other countries including (possibly illegally) the U.S., Starkman claimed he sold goods to clients in Honduras' free-zones and has no knowledge of what they might have done with the goods afterwards. ¶3. (S) Starkman's firm, REMSA, now focuses on importation and distribution of liquor, including for Diageo (distributor of Johnny Walker and Jose Cuervo, among other top-selling brands). It is widely rumored (though unproven) that REMSA colludes with corrupt customs officials in avoiding customs duties on these liquor imports. One Post contact, so fed up with the extent of this alleged corruption, passed us a series of REMSA import documents. Post passed them to DHS/CBP officials, who could find no "smoking gun" in the paperwork. ¶4. (S) Starkman ceased actively managing his firm in 2005 when he worked as the finance manager for Mel Zelaya,s presidential campaign in San Pedro (capital city of Cortes Department, arguably the swing department that won Zelaya the Presidency in the November 26, 2005 elections). He blames inattention and mismanagement for declining sales and payments arrears, and claims he will repay debtors and return the firm to profitability in 6 to 12 months. In the meantime numerous other importers continue to infringe his distribution contracts. Starkman says he will act as "a TEGUCIGALP 00001921 002 OF 002 gentleman" in allowing those other distributors to continue for now, since REMSA cannot currently service market demand. Were Starkman to enforce his rights, he says, the market could not be fully served, sales volumes would drop, and he would risk having his distribution contracts canceled. ¶5. (S) Starkman was educated in the United States and speaks fluent English. As such, it is Post's view he is often dispatched to "handle" the Americans. Post has on several occasions caught him misrepresenting known facts (such as concerning the details of secret meetings with the Venezuelans over oil imports) and does not consider him a trustworthy interlocutor. Taken with a large grain of salt, however, some of his information can be quite revealing. Williard WILLIARD