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
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(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
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