ECUADOR PROSECUTES LANDMARK MONEY LAUNDERING CASE

UNCLAS QUITO 000212

SIPDIS

SENSITIVE
SIPDIS

TREASURY FOR MMALLOY AND MEWENS

E.O. 12958: N/A
TAGS: SNAR ECON EFIN KTFN EC
SUBJECT: ECUADOR PROSECUTES LANDMARK MONEY LAUNDERING CASE


1. (SBU) Summary: On February 18, Ecuador convicted seven
associates of Hernan Prada-Cortez, a drug trafficker involved in
money laundering. The convictions are the result of an Ecuadorian
national police investigation, in concert with DEA, which yielded
ten arrests and the seizure of assets in excess of $6.5 million in

2006. The sentences are the first under Ecuador's money laundering
legislation. End summary.


2. (SBU) In October 2005, Hernan Prada was arrested in Bogota,
Colombia on a provisional arrest warrant and was extradited to
Miami, where he is currently scheduled to go to trial in May 2008.
Since 1986 Prada has been suspected of being involved in trafficking
multi-ton cocaine shipments and accumulating and transporting large
amounts of drug proceeds. He was the subject of an FBI
investigation in 1989, and a federal arrest warrant was issued for
him based on dangerous drug offenses. He subsequently fled to
Colombia.


3. (SBU) A U.S. citizen, Prada requested and received Ecuadorian
citizenship in an effort to protect his suspected drug proceeds. In
September 2005, the Quito DEA office, in coordination with the
Ecuadorian National Police's vetted Sensitive Investigation Unit
(SIU),initiated an investigation of his money-laundering activities
in Ecuador. They eventually found that Prada, his family members,
and associates had been investing and dispersing an estimated $50
million in suspected drug proceeds through numerous front companies
in Ecuador since 2001.

PROSECUTING PRADA'S RING


4. (SBU) On August 25, 2006, after nearly a year of investigation,
the Ecuadorian National Police initiated and executed over 300
seizure and arrest warrants in Quito, Manta, and Guayaquil. The
Ecuador SIU located and arrested ten of the defendants. All were
personally involved in either the ownership or management of
fictitious and/or front businesses, or the actual transfer of drug
proceeds totaling well over $6 million. One hundred thirty-five
properties (including penthouses, hotels, commercial lots, and one
farm) valued at $6.4 million were seized, along with seven vehicles,
jewelry, paintings, firearms, computers, and numerous financial
documents. These were the first arrests and prosecutions based on
the then recently established Ecuadorian Anti-Money-Laundering
legislation.


5. (SBU) On February 18, 2008, the Second Superior Court of Quito
convicted and sentenced seven of those arrested (4-8 year prison
terms, plus $5000 fine each). The court ordered the forfeiture of
all seized properties to the state, and the closing of six
businesses. The defendants are currently appealing their
convictions.


6. (SBU) Comment: The Prada case is a significant victory for the
Ecuadorian legal system that has demonstrated that it can bring a
conviction under the money laundering law, drafted with technical
assistance from the USG. Our extensive, productive cooperation with
the Ecuadorian police contributed directly to this success. End
comment.