PRESIDENT INVESTIGATED FOR MONEY LAUNDERING

UNCLAS ASUNCION 000132

SIPDIS

SIPDIS

STATE FOR WHA/BSC KBEAMER

E.O. 12958: N/A
TAGS: SNAR PGOV PREL PA
SUBJECT: PRESIDENT INVESTIGATED FOR MONEY LAUNDERING

REF: A. A. ASUNCION 18

B. B. ASUNCION 127


1. (U) Prosecutors in Paraguay's financial crimes
specialized unit launched an investigation February 28
against President Nicanor Duarte Frutos on suspicion of
violating Paraguay's anti-money laundering statutes. The
unit's lead prosecutor, Carlos Arregui, appointed two
prosecutors, Rene Fernandez and Liliana Alcaraz, February 27
to investigate cash transactions involving an Interbanco bank
account co-owned by Duarte and Colorado President Jose
Alberto Alderete. According to the complaint filed February
22 by Deputy Rafael Filizzola, Duarte received multiple
donations totaling USD 950,000 from unknown donors one week
before the December 2002 Colorado primary. Filizzola claimed
Duarte closed the account in February 2003 after spending the
money on his presidential campaign. Filizzola also alleged
that Duarte received the funds from illicit sources and
alleged unlawful enrichment for accepting funds as a public
official. (NOTE: Duarte resigned as education minister in
January 2001 to campaign for the presidency and was not a
public official at the time of the alleged money laundering.
Deputy Filizzola is the Democratic Progressive Party (PDP)
chairman and a supporter of opposition presidential candidate
Fernando Lugo. END NOTE.)


2. (C) Duarte dismissed the investigation February 28 as
politically motivated and claimed that if drug traffickers or
other illicit contributors donated to his campaign, "they
helped the wrong man." He asserted that his administration
has been effective in executing anti-narcotics operations,
increasing government transparency, and fighting piracy.
Duarte claimed that that much of his campaign funding -- but
not necessarily the money in this particular account -- came
from donations by businessmen Osvaldo Dominguez Dibb and
Antonio Vierci, although he refused to disclose how much
money he received. (NOTE: Dominguez is owner of La Nacion
and Cronica newspapers and involved in the local cigarette
industry. Vierci, owner of Stock supermarkets, the Ultima
Hora newspaper, and Telefuturo cable channel, is a supporter
of former presidential candidate Luis Castiglioni. Duarte
ordered an investigation against Vierci's Stock Supermarket
in Ciudad del Este December 11, on the eve of this year's
Colorado primary (Ref A). END NOTE.) Financial crimes
prosecutors told RLA February 28 that the investigation does
not have a set timetable, but they want to resolve the case
well in advance of elections. The prosecutors complained
that no matter what they find in their investigation, the
Colorados will attempt to use their findings for political
gain (if they find nothing, by over politicizing the unit to
shore up Duarte's senate candidacy and his reputation; if
they find wrongdoing, by alleging the charges are political
and withholding support from the courts, which Duarte
controls).


3. (SBU) COMMENT: This investigation will likely have
little impact on the April 20 national election. Colorado
presidential hopeful Blanca Ovelar may be beginning to
distance herself from Duarte, and she is polling (according
to a COIN poll released February 26) in second place with 25
percent of the vote (behind Lugo's 31 percent and just ahead
of Oviedo's 23 percent)(Ref B). The higher voter turnout,
the more Ovelar, who has the highest negatives in the field,
is likely to fall behind Lugo. Duarte enjoys political
immunity as president, and if elected senator as expected,
would continue to enjoy immunity from prosecution until he
leaves political office, unless a majority votes to strip
him. END COMMENT.

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CASON