LUGO'S FIRST MAJOR ATTACK ON CORRUPTION

UNCLAS ASUNCION 000672

SENSITIVE

SIPDIS

DEPT FOR WHA/BSC MDASHBACH, BFRIEDMAN, MDRUCKER, WHA/FO CMCMULLEN

E.O. 12958: N/A
TAGS: PGOV ECON PREL PA
SUBJECT: LUGO'S FIRST MAJOR ATTACK ON CORRUPTION


1. (SBU) SUMMARY: The new Paraguayan government scored its first
major victory against corruption in September. Prosecutors and
police conducted a mega-operation which uncovered the existence of
the infamous "black suitcases" containing bribery monies. For
years, the Paraguayan press has reported the existence of "black
suitcases" full of money derived from a mafia-type customs
organization which passes illegal gains up the government chain of
command. Authorities charged all 13 port administrators with
bribery and issued warrants for their arrest; 12 defendants were
released on bail and were given house arrest while one defendant
remains at large. END SUMMARY.


2. (SBU) The new Paraguayan government scored its first major
victory against corruption in September. President Lugo promised
during the election campaign to conduct a frontal fight against
endemic corruption in public entities. Lugo's first anti-corruption
efforts targeted the ports administration.


3. (SBU) Prosecutors and police conducted a mega-operation which
uncovered the existence of the infamous "black suitcases" containing
bribery monies. The investigation started when the new port
administration's president, Albino Gonzalez, received information
about the illegal activity when some port administration agents
involved in the scam "tested the waters" to see if Gonzalez would
continue the practice. Gonzalez informed his superior, Minister of
Public Works Efrain Alegre, who in turn informed the Public
Prosecutors' Office. The Economic Crimes Unit then set up an
undercover operation in which it filmed each of the 13 port
administrators visiting Gonzalez's office to hand in his weekly
contributions. Gonzalez told the press that in three weeks since he
took office, he received more than USD 25,000 in contributions. The
audio record revealed that the administrators promised to "deliver"
as much USD 400,000 per month to Gonzalez's office. Gonzalez told
the press that according to past practice, he was supposed to keep
USD 100,000 and distribute USD 300,000 to his higher-ups in
government.


4. (SBU) For years, the Paraguayan press has reported the existence
of "black suitcases" full of money derived from a mafia-type customs
organization which passes illegal gains up the government chain of
command. The ports administration handles all imports to and
exports from Paraguay and charges service fees for storage and
handling of all containers entering or leaving the country. The
ports' fee is a percentage of the value of the goods declared with
the country's customs authorities, which are often drastically
undervalued. In the past decade, there were several enigmatic road
assault cases against customs and ports agents traveling from the
interior to Asuncion. In each case, police officials reported that
"nothing of value was stolen." However, in September 2005, a
customs vehicle traveling from Ciudad del Este towards Asuncion was
riddled with bullets. The press speculated that the murdered agent
had been carrying a suitcase containing USD 300,000.


5. (SBU) Authorities charged all 13 port administrators with bribery
and issued warrants for their arrest. After the first two
defendants were released on bail and were given house arrest, ten
others turned themselves in and received the same legal treatment.
One administrator remains at large. Prosecutors said they may also
present money laundering, illicit enrichment, criminal association
and corruption charges against the defendants.


6. (SBU) COMMENT: President Lugo's first major attack on endemic
Paraguayan corruption continues to make headlines. The public is
somewhat skeptical that the case will move forward given the fact
that not a single defendant is currently behind bars (none had a
previous criminal record, which explains why all were given house
arrest). This will be the first test of the Lugo administration's
mettle on corruption, and will likely give Lugo his first glimpse at
the weaknesses in the Paraguayan judiciary. END COMMENT.


AYALDE