"GOT VIAGRA?" PARAGUAY RISES TO THE OCCASION

C O N F I D E N T I A L ASUNCION 000148 SIPDIS SIPDIS PASS TO WHA/BSC KREAD, PLEASE PASS TO USAID E.O. 12958: DECL: 03/11/2028 TAGS: ECON PGOV ECPS PREL PA SUBJECT: "GOT VIAGRA?" PARAGUAY RISES TO THE OCCASION Classified By: DCM Michael J. Fitzpatrick; reasons 1.4 (b) and (d). ¶1. (SBU) SUMMARY: After almost two years of legal and illegal maneuvering, one of the largest cases of Intellectual Property Rights (IPR) violations prosecuted in Paraguay concluded March 6 with the destruction of the seized shipment of counterfeited medicines. With a combined local market value of roughly 4 million USD, some 800,000 four-pill packages of fake Viagra and Cialis as well as smaller amount of other medical drugs were destroyed by judicial order. Through political and judicial interference, attempted bribery (the lead prosecutor was offered 100,000 USD),and intimidation, powerful economic and political interest groups tried repeatedly, yet unsuccessfully, to derail the destruction and obtain a release of the seized goods. END SUMMARY. ¶2. (SBU) The case began in early 2006 when Caacupemi's port Administrator Luis Gonzalez informed Public Prosecutor Soledad Quiones of a suspicious shipment of 103 television boxes from China. The "TV" boxes were stuffed with large quantities of Viagra (Pfizer) and Cialis (Eli Lilly and Company) and with smaller quantities of other medical drugs*-Fosamax (Merck US),Zinnat (Glaxo Smith Kline), Xenical (Hoffman-La Rouche US),Aricept (Pfizer),and Concor 5 (Merck). Almost the entire inventory of fake medicines was counterfeits of US-branded pharmaceuticals. With the unwavering support of the case's presiding judge, Judge Oscar Delgado, Quiones charged in April 2006 Alberto Benitez and Raphael Aires Miller (Brazilian national),directors of the import/export company Dumont S.R.L., with IPR violations, illegal commercialization of toxic goods, contraband and tax evasion. In what was a long and difficult legal process, three independent experts finally confirmed in September 2007 that the seized goods were fakes and the two charged individuals were convicted of IPR violations. They were sentenced to house arrest and a fine of roughly 550,000 USD (2.9 billion Guaranies). The charges for illegal commercialization of toxic goods, contraband and tax evasion are still pending. (NOTE: Under the IPR statues of the new Penal Code approved January 2008, this IPR conviction would have qualified for a sentence with prison terms. END NOTE.) ¶3. (C) National Director of Customs Margarita Diaz de Vivar, Supreme Court Justice Alicia Pucheta, and other senior judicial branch officials joined the Ambassador at the March 6 destruction at Caacupemi's port. In the widely covered press event, Diaz de Vivar echoed Ambassador's Cason strong words condemning IPR violations and corruption. She explained, without mentioning anyone specifically, how she was privately asked to release the goods under the justification that they would be sold not in Paraguay but in Brazil. (NOTE: In a subsequent private meeting Diaz de Vivar (strictly protect) told the Ambassador that none other than President Duarte Frutos had called Diaz de Vivar the night before the destruction to plead that she permit at least a portion of the seized inventory of fake medicines to be diverted back to the responsible syndicate. Diaz de Vivar also mentioned that Senator Juan Carlos Galaverna (Colorado) pressured her initially, and that Senator Enrique Gonzalez Quintana (president of opposition party UNACE) consistently pressured her to release the goods. Diaz de Vivar evidently held firm. END NOTE.) ¶4. (C) COMMENT: The biggest challenge in this case was to secure the destruction of the entire inventory of seized goods. Combined with the enormous pressure from powerful groups demanding the release or partial release of the fake medicines, there was a real threat of "loss" or theft. After the September 2007 determination that the medicines were fake, what should have been an immediate destruction turned into a bidding war in which powerful economic interests sought to buy a favorable appeal of the destruction order. The Embassy lobbied the Supreme Court and very closely coordinated with Prosecutor Quiones and Judge Delgado to ensure the fake medicines did not "disappear". Consideration was even given to storing the goods on Embassy grounds until destruction could be arranged. The seriousness of the judge and prosecutor leading the case, and the fact that the fake inventory was held in Caacupemi, a privately owned port, greatly contributed to the successful outcome. END COMMENT. Please visit us at http://www.state.sgov.gov/p/wha/asuncion CASON