"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