US embassy cable - 04SANTODOMINGO745

C O N F I D E N T I A L SECTION 01 OF 02 SANTO DOMINGO 000745 
 
SIPDIS 
 
STATE FOR WHA, WHA/CAR, WHA/EPSC, EB/OMA; NSC FOR SHANNON; 
TREASURY FOR DO - N LEE, R TOLOUI, L LAMONICA 
 
E.O. 12958: DECL: 01/30/2014 
TAGS: DR, EFIN, KJUS, PGOV, PREL 
SUBJECT: DOMINICAN BANKING SERIES #4: BANCREDITO AND 
BANINTER MANEUVERS 
 
REF: A. A) 03 SANTO DOMINGO 06671 
 
     B. B) 03 SANTO DOMINGO 06857 
     C. C) 03 SANTO DOMINGO 07566 
 
Classified By: DCM Lisa B. Kubiske, Reason 1.5 (b) and (d). 
 
1.  This is the fourth cable in a series on the Dominican 
Banking Sector. 
 
BANCREDITO AND BANINTER MANEUVERS 
 
(U) Baninter and Bancredito are no more.  Baninter has been 
dissolved and Bancredito has been sold to Grupo Leon and 
renamed Banco Leon.  Although the legal entities no longer 
exist, the legacies of their failures continue to plague 
Dominican citizens.  The debt incurred by the Central Bank in 
guaranteeing accounts and loans at the banks is a major 
factor in the current economic crisis.  In addition, the 
conduct of the cases has done little to rebuild -- or 
establish -- confidence in Dominican administration of 
justice.  However, not all avenues have been exhausted. 
 
BANCREDITO - District Attorney won't prosecute, so the 
Central Bank finds another route 
--------------------------------------------- --------- 
 
(U) District Attorney Maximo Aristy Caraballo announced on 
January 28 that he will not pursue criminal prosecutions in 
the Bancredito case, since "the alleged fraud is a matter for 
the civil courts."  He thereby declined to entertain the 
complaint lodged with him in November by the Central Bank 
legal team.  Within 24 hours Central Bank attorneys took 
advantage of a procedural mechanism to file their criminal 
complaint directly with the administrator of courts.  The 
administrator has assigned the case to a judge of 
instruction, charged to assemble evidence and review charges 
to determine if there is sufficient grounds for a full 
criminal trial.  If so, a second judge (or judiciary panel) 
will be assigned to hear the case. 
 
(C) This unusual procedural posture became the Central Bank's 
only recourse to pursue a criminal case after the District 
Attorney's refusal to bring charges.  As reported in November 
in our Banking Series #2, the District Attorney issued arrest 
warrants for Bancredito officials Arturo Pellerano and his 
vice president Mendoza but withdrew them on the next working 
day at the instructions of President Mejia and Attorney 
General Victor Cespedes.  At the time, the President, 
Attorney General and District Attorney all said they would 
study the evidence and charges, so the case was not being 
dropped.  They took their time.  During the December holidays 
Mejia told a Central Bank attorney the case would move 
forward by January 3rd.  Nothing happened until the District 
Attorney's disappointing announcement at the end of the month. 
 
(U) The press put a spotlight on the District Attorney's 
decision not to prosecute.  The Central Bank legal team 
countered the coverage with a scathing ad in the dailies, 
scolding Aristy for failing to consult or study the evidence: 
"The decision of the prosecutor has opened a new avenue for 
the 'powerful' of our country to enjoy impunity."  All four 
attorneys signed the letter with its declaration that they 
refused to stand by and let case go unprosecuted. 
 
(SBU) Bancredito president Pellerano has been in the United 
States since shortly after the Central Bank first filed its 
case in November.  He is attending to the gravely ill 
patriarch of the Pellerano clan.  The Pelleranos have been 
hard hit by the bankruptcy of TRICOM, their Dominican-based 
multinational telecoms operator, listed on the New York stock 
exchange but currently in restructuring with accord of 
bondholders.  Their minority share holdings are worth just 
about zero and they have had no management oversight for some 
time.   Pellerano may be attending to other family business, 
taking advantage of his liberty to shield other assets. 
 
BANINTER - Judge challenged, case stalled 
----------------------------------------- 
 
(C) At a time when banking frauds have ignited inflation and 
peso devaluation for the presidential campaign, the District 
Attorney's decision not to prosecute on Bancredito combines 
uneasily with last Christmas Eve's release of Baninter 
accused Ramon Baez and Marcos Baez Cocco.  The investigation 
against them is currently suspended, due to a defense 
petition to the Supreme Court asserting that investigating 
Judge Eduardo Sanchez Ortiz is biased.  Last week the 
Attorney General filed a brief opposing the removal of Judge 
Sanchez.  Until the Supreme Court examines the petition, 
Judge Sanchez's hands are tied.  He cannot even file for his 
sixth extension of the time allotted for investigation of 
this complex and highly political case. The Baez defense team 
moved its petition into the public spotlight on February 4, 
when it placed full page ads in local dailies with Judge 
Sanchez's photo and a listing of the defense position on why 
Judge Sanchez should be removed from the case. 
 
(C) Dominican expectations of mishandled justice may yet be 
proven wrong.  For one thing, President Mejia has told us, 
privately, that he will prosecute all those responsible.  For 
another, the press is on the scent.  In its lead editorial of 
January 30, Listin Diario highlighted an AP report that "put 
its finger directly on the wound in a single paragraph, and 
we quote, 'The Dominican Republic went to the IMF when the 
deterioration of its economy was aggravated by a fraud 
totaling USD 2 billion in one of the most important banks in 
the country!"  The Central Bank team is tenacious and ready 
to go public, while overt meddling by administration 
officials is unlikely, especially during a difficult 
presidential campaign.  Hope rests in the last instance, 
however, on the judicial system and its relatively unproven 
ability in these circumstances to resist pressure and bribery. 
 
2. (U) Drafted by Angela Kerwin and Michael Meigs. 
HERTELL