US embassy cable - 04BRASILIA1384

UNCLAS SECTION 01 OF 02 BRASILIA 001384 
 
SIPDIS 
 
STATE FOR WHA/BSC, EB/TPP/MTA/IPC SWILSON, INL BWILLIAMSON 
STATE PASS TO USTR FOR SCRONIN, LYANG AND BPECK 
USDOC FOR 
4322/ITA/MAC/WH/OLAC/WBASTIAN/JANDERSEN/DMCDO UGALL/ADRISCOLL 
USDOC FOR 3134/USFCS/OIO/EOLSON/DDEVITO 
TREASURY FOR OASIA/SEGAL 
NCS FOR DEMPSEY 
 
E.O. 12958: N/A 
TAGS: KIPR, KCRM, PGOV, ECON, BR, IPR & Biotech 
SUBJECT: BRAZIL ARRESTS MAJOR TRAFFICKER OF PIRATED GOODS 
 
Refs:  A) 2003 Sao Paulo 2199  B) 2003 Brasilia 3564 
 
1.  SUMMARY: Brazilian Federal Police arrested June 1 one of 
the country's biggest pirated goods smugglers, Law Kin Chong, 
and his lawyer Pedro Lindolfo for corruption, conspiracy to 
commit bribery, conspiracy involving organized crime 
(racketeering) and disrupting the functioning of a 
Parliamentary Investigative Commission (CPI).  Chong, through 
his lawyer, allegedly attempted to bribe Piracy CPI President 
Deputy Luiz Medeiros (PL-SP) with US$1.5 million to avoid being 
mentioned in the CPI's final report.  The lawyer was 
apprehended in Medeiros' Sao Paulo office offering the deputy 
US$75,000 as the first installment of the bribe.  Both Lindolfo 
and Chong were transferred to Brasilia June 3 for security 
reasons and await formal hearings.  Chong, owner of three 
popular shopping malls in downtown Sao Paulo, is said to be the 
head of a contraband mafia that is responsible for the 
trafficking of a significant portion of pirated goods in 
Brazil.  The Piracy CPI has targeted Chong for months, and took 
him in for questioning in November 2003 (ref A).  End Summary. 
 
2.  The Chamber of Deputies' Parliamentary Investigative 
Commission on Piracy (CPI) scored a major bust on Tuesday, June 
1 with the arrest of Law Kin Chong, a Chinese businessman 
(naturalized Brazilian).  Chong owns three shopping centers in 
downtown Sao Paulo selling mostly pirated goods and is thought 
to lead a major smuggling ring in Brazil.  According to press 
reports, Chong's lawyer was arrested in the Sao Paulo office of 
CPI President Deputy Luiz Medeiros on June 1 with the US$75,000 
he offered to Medeiros as the first installment of a US$1.5 
million bribe to keep Chong out of the CPI's soon-to-be- 
released final report.  Chong himself was arrested an hour 
later in a Sao Paulo parking lot, reportedly trying to flee to 
Paraguay. 
 
3.  Medeiros told the press that the Federal Police had been 
monitoring exchanges among Chong, his associates and Medeiros 
for over a month, initiated when Chong offered to assist the 
CPI by providing information.  Medeiros arranged a meeting with 
Chong's lawyer during which the bribe was offered in the 
presence of Medeiros' security guard, a Federal Police officer. 
Medeiros did not refuse the bribe, alerted the Federal Police, 
and had subsequent meetings in Sao Paulo with Chong and/or his 
associates that were taped by the Federal Police.  Chong and 
Medeiros reached a final agreement May 29 for US$1.5 million to 
be paid in five installments. 
 
4.  After the June 1 arrests in Sao Paulo, the two suspects 
were transferred to Federal Police custody in Brasilia, 
reportedly for security reasons.  Police seized computers, 
documents and millions in U.S and Brazilian currency from 
Chong's accounting office and currency-exchange business, all 
to be examined at Federal Police headquarters in Brasilia.  The 
lawyer handling Chong's defense told journalists that he would 
request the repeal of Chong's arrest and seek a writ of habeaus 
corpus (injunction or stay) if the request is denied. 
 
5.  Chong has been the target of several investigations over 
the last seven years, according to press accounts.  Widely 
believed to be the biggest smuggler in the country, he 
reportedly has ties to authorities throughout the government 
and was involved with judge Rocha Mattos, currently under 
investigation for corruption, as well as federal police 
officials arrested during Operation Anaconda, a big corruption 
sting operation carried out last year (ref B, para 9).  He is 
also under investigation for money laundering and tax evasion. 
The CPI targeted Chong last year, raiding two of his shopping 
centers and bringing him in for questioning in November 2003. 
Despite closure of the stores ordered by the Department of 
Investigations of Organized Crime (DEIC) following the raid, 
Chong obtained court orders forcing the reopening of the stores 
and the return of all seized merchandise.  Chong was also 
quickly released (ref A).  The CPI had scheduled a public 
hearing on their final report for June 3, but delayed the event 
until June 8 in view of the Chong arrest. 
 
6.  Comment:  The timing of the arrest serves to highlight the 
work of the CPI as it nears closure later this month.  It will 
likely be more difficult for Chong to quickly and fully escape 
unscathed from this arrest due to the CPI's spotlight of public 
scrutiny and the hard evidence against him, but he has shown he 
has the wherewithal to get high-level officials to weigh in 
heavily in his favor.  Some Sao Paulo IPR contacts have already 
expressed doubt that he will remain in custody or that the 
charges against him will stick.  Mission will continue to 
follow the case as well as developments regarding the CPI.  End 
comment. 
 
7.  This message was coordinated with Consulate Sao Paulo. 
 
HRINAK