DOMINICAN BANKING SERIES, 14: BANINTER PROSECUTORS

UNCLAS SANTO DOMINGO 000825 SIPDIS SENSITIVE SIPDIS DEPT FOR WHA, WHA/CAR, WHA/EPSC (LKUBISKE),EEB/IFD/OMA, INL; DEPT PASS TO SEC, FEDERAL RESERVE; TREASURY FOR KUSHLIS, TOLOUI, JLEVINE, WAFER, KLINGENSMITH; DOJ FOR OIA ORJALES; SOUTHCOM ALSO FOR POLAD AMSELEM E.O. 12958: N/A TAGS: EFIN KJUS PGOV PREL DR SUBJECT: DOMINICAN BANKING SERIES, 14: BANINTER PROSECUTORS "GUARANTEE" CONVICTIONS, FEAR SENTENCING PHASE REF: 2005 SANTO DOMINGO 4610 ¶1. (U) This is the 14th in a series of cables following the Dominican banking frauds and prosecutions. Extensive additional material on prosecutions is available on our SIPRNET site. Baninter Prosecutors "Guarantee" Convictions, but Fear Sentencing Phase - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (U) Despite being months away from the completion of the State's case, on March 21 prosecutors told Embassy officers and Miami-based Immigration and Customs Enforcement (DHS-ICE) investigators they predicted victory in the 2.3 billion dollar Banco Intercontinental bank fraud trial. Considering the track record of previous bank fraud prosecutions in the Dominican Republic, State officials have cause for concern that any punishment following conviction will not fit the gravity of the crime. -- Background (U) The 2003 collapse of Banco Intercontinental (Baninter) revealed fourteen years of double-bookkeeping designed to hide sweetheart loans, embezzlement, and money laundering. The demise of Baninter, formerly one of the largest Dominican banks, and a subsequent State reimbursement of depositors cost approximately 2.3 billion dollars. With the fraud-based collapse that same year of Banco Mercantil and BanCredito, total fraud-based losses to the Dominican government approached 3 billion dollars for 2003. These frauds gutted the Dominican economy, almost tripled national indebtedness, and caused a massive devaluation of the Dominican peso. Aftereffects are still felt today. (U) The State's work is essentially over in the BanCredito case, where convictions are on appeal. It is just beginning in the case of Banco Mercantil, with the trial phase delayed by a jurisdictional dispute. But Baninter case prosecutors are locked deep in the trial process -- a process that began only on April 3, 2006, after many months of procedural delay by the defense. On trial for abuse of confidence, money laundering, and violation of the monetary law are bank president Ramon ("Ramoncito") Baez Figueroa, bank �00A;vice-presidents Marcos Baez Coco and Vivian Lubrano, and in-house legal counsel Jesus Maria Troncoso Ferrua. Noted Dominican economist and entrepreneur Luis Alvarez Renta, a U.S. citizen, faces charges of criminal money laundering in connection with the collapse. He has already been convicted under civil racketeering (RICO) statutes in the Southern District of Florida for Baninter-associated offenses. -- Prosecutors have "guaranteed" victory - Is this likely? (U) German Daniel Miranda Villalona, Chief of the Attorney General's three-member Bank Fraud Unit, tells U.S. officials, "Given the overwhelming evidence, there is not the slightest doubt that the defendants will be convicted." (U) The evidence supporting his confidence is extensive. Prosecutors are in physical possession of the duplicate books used to hide the fraudulent activities and have a series of nearly 30 experts and other witnesses linking the defendants to the fraudulent practices. The books form only a part of the of the 700-odd pieces of documentary evidence that the prosecutors can use to support their case. Two of the most recent revelations suggestive of guilt and sure to inflame public opinion: the award of 16 billion pesos of "sweetheart" interest-free loans (roughly 890 million dollars at the pre-crash exchange rate) and payment of up to 33 percent interest on deposits by "special" customers. The books also clearly demonstrate that the fraudulent bookkeeping began in 1989. (SBU) As suggested by Villalona, outside pressure for justice by the United States (Embassy),as well as other diplomatic missions and international financial institutions, will play a crucial role in obtaining convictions in this case. But for the pressure of the international community the case might have derailed itself in the face of the country's tradition of pervasive judicial corruption. -- Proceedings have been ongoing since 2003. Why hasn't the Baninter case "aged out?" (U) Despite the "speedy trial" requirement of the 2004 Criminal Procedures Code (CPP),mandating the conclusion of legal proceedings within three years, this case has not yet aged out. The Baninter case properly began on May 16, 2003, when it was first placed before a "Judge of Instruction" (these judges make probable cause determinations, much as grand juries do in the United States). That date in itself is unimportant -- the speedy trial requirement introduced in revised CPP Article 148 did not come into effect until September 27, 2004. As Article 148 is not retroactive, Baninter's "trial clock" did not start until then. (U) One might then assume that Article 148 would mandate termination of this case by September 2007. Prosecutors assure us that certification of Baninter as a "complex case" by the competent Dominican authority has granted an automatic one-year extension of the time available to the parties. Accordingly, sentence need not be pronounced until September 27, 2008. (SBU) Prosecutors predict that they will complete their case within the next 3 months and that the defense case will run no longer than 6 months. A decision should be rendered sometime in December 2007. (SBU) In order to keep things on track, Villalona notes, the State is likely to avoid calling all of its scheduled witnesses. It will certainly introduce no more than 500 of the 703 pieces of documentary evidence in its possession. In this case documents are thought to be the more critical and persuasive form of evidence and prosecutors are using witnesses to introduce them into evidence. As of the meeting, the prosecution had presented 12 witnesses and 227 pieces of documentary evidence. This has continued at a rhythm of two to three full hearing days per week. -- Will criminal convictions in the United States follow? Will a criminal conviction in the Dominican Republic prop up a criminal case in the United States? (U) The short answers appear to be "not necessarily" and "no." Generally speaking, U.S. criminal jurisdiction extends only to those crimes that occur within U.S. territory, as well as to crimes committed by U.S. citizens or Legal Permanent Residents regardless of their location (though the country where the crime is committed exercises primary jurisdiction). (SBU) Given the facts revealed to date, it appears that only Alvarez Renta is subject to U.S. jurisdiction; he is the only U.S. citizen defendant. The Central Bank's successful civil suit against him in U.S. Federal court under racketeering statutes (RICO) is a strong indication he committed Baninter-related money laundering in the United States. There is no indication that any other defendant has conducted criminal activities within U.S. territory. (SBU) For all practical purposes, U.S. prosecution of Renta for money-laundering cannot be undertaken without proof of an underlying statutory offense such as bank fraud or narcotics trafficking. It appears that DHS-ICE investigators have not yet uncovered evidence of any such crime in the United States. Prosecutors recently attempted to amend the Dominican charges against Renta to include conspiracy, abuse of confidence, document falsification, and use of falsified documents - charges that would have facilitated prosecution in the United States. The trial court judges rejected their petition. Nevertheless, prosecutors claim that the danger of "functional impunity" for Renta is somewhat lessened by the Dominican government's ability to certify any local judgment to U.S. courts, at least in regard to asset forfeiture. -- What's the Embassy's assessment of the local prosecutorial effort? (SBU) The prosecutors appear sufficiently competent, thanks in part to technical training on complex fraud cases provided by USAID in 2004-2005 to the School for Judges and Prosecutors. The attempt to amend charges well into the trial process speaks of poor initial preparation and of their relative inexperience. Tellingly, Department for the Prevention of Corruption Director Octavio Lister notes that these prosecutors are "not specialized by training," though they are doing the best that they can. (SBU) Recent indications of a potential disconnect between bank fraud prosecutors and others within the Justice Ministry cast further doubt on the functioning of the banking fraud unit. Prosecutors assigned to the Unit asserted to us on March 21 that no prosecution is planned in the 2005-06 Banco Progresso case, in which shareholders have brought charges against former executive Pedro Castillo for mismanagement and misappropriation. Prosecutors said that this is an "internal bank matter." Shortly afterward, Public Prosecutor for the National District Juan Hernandez Peguero publicly called for the opening of a criminal case against Castillo. Hernandez Peguero is something of a political animal, though, and these may have been spontaneous comments to the press rather than an announcement of firm plans. -- What are the possible sanctions facing the defendants? (U) For the defendants charged with violation of the monetary law the potential sanction is quite serious: a statutory minimum of 5 years upwards to 20 years, the maximum permitted in the Dominican justice system. Other charges have statutory minimums of 3 years and maximums of 10 years. That said, prosecutors and the populace may well be disappointed by the sentences that are ultimately handed down. The prosecutors asked for 8 years for BanCredito executive Arturo Pellerano but the judge gave him and other defendants the statutory minimum of 3 years. That sentence is currently under appeal. ¶18. (U) In a case where the influence and economic power of the defendants is unquestionable, can one hope for better? ¶19. (U) This report, others in the series, and extensive additional material are available on the classified SIPRNET at http://www.state.sgov.gov/p/wha/santodomingo/ . (Search "Baninter" or "Ramon Baez.") HERTELL