US embassy cable - 05QUITO839

C O N F I D E N T I A L QUITO 000839 
 
SIPDIS 
 
E.O. 12958: DECL: 04/15/2015 
TAGS: PGOV, EFIN, PREL, ECON, EC 
SUBJECT: GUTIERREZ CLAIMS EMERGENCY DECLARATION BANK-RELATED 
 
 
Classified By: Ambassador Kristie A. Kenney, Reasons 1.4 (b),(d) 
 
1. (C) Summary.  President Gutierrez April 15 declared a 
state of emergency, suspending the Supreme Court and certain 
constitutional rights of Ecuadorians (septel).  According to 
GOE sources, one of the reasons given for the declaration was 
that the Ecuadorian Supreme Court was about to arrest 
directors of the Banco de Pichincha and allow the return of 
their rivals, and fugitive bankers, Roberto and William 
Isaias, who formerly ran the failed Filanbanco bank.  We find 
this rationale rather dubious.  End Summary. 
 
Declaration of Emergency 
------------------------ 
 
2. (C) President Gutierrez told the Ambassador April 15 that 
he declared the state of emergency because he learned that 
the Supreme Court was about to order the arrest of the 
directors of Ecuador's largest bank, the Banco de Pichincha. 
(Note: see septel for other, non-economic reasons for the 
declaration. End note.)  The Banco de Pichincha is run by the 
Egas family, which also owns an Ecuadorian television 
station.  In addition, newly nominated Ecuadorian Ambassador 
to the United States Mauricio Pozo also has a brother who is 
an executive with the bank.  It was Pozo who first told the 
Ambassador about the state of emergency. 
 
3. (C) Another reason for the emergency declaration, 
according to Gutierrez and other GOE officials is that the 
Supreme Court was also about to dismiss pending charges 
against fugitive bankers (now in the United States) Roberto 
and William Isaias, allowing them to return to Ecuador 
without threat of arrest.  The Isaias brothers once ran 
Filanbanco, one of the banks that failed in the 1999-2000 
banking crisis.  They still own a television channel as well. 
 The brothers are alleged to have absconded with hundreds of 
millions of dollars.  The GOE has made requests (some might 
say half-hearted) to the USG for the return of the Isaias 
brothers, either through extradition or deportation 
procedures. 
 
The Feud 
-------- 
 
4. (C) There is no love lost between the Egas and Isaias 
families.  Last fall the Egas family, using their television 
station, broadcast a serial program on corruption in Ecuador. 
 One of the episodes involved bank corruption and focused on 
the alleged misdeeds of the Isaias brothers.  They offered 
the Isaias brothers the opportunity to air their side of the 
story.  Instead, the Isaias brothers, through their own media 
sources, encouraged a run on Banco de Pichincha, which nearly 
caused the collapse of the bank.  That incident was 
eventually resolved through the intervention of the Catholic 
Church. 
 
Gutierrez Fears Collapse of the Government 
------------------------------------------ 
 
5. (C) Gutierrez, who ran for president on an anti-corruption 
campaign, had vowed to obtain the return to Ecuador of all 
the fugitive bankers, including the Isaias brothers.  He and 
others in his Government feared that the return of the Isaias 
brothers would bring the fall of his administration.  The 
head of the Supreme Court, a member of former Ecuadorian 
President Abdala Bucaram's PRE party had only two weeks ago 
dismissed criminal charges against Bucaram, former President 
Gustavo Noboa and former Vice President Dahlik.  Gutierrez's 
party has little influence of its own in the Supreme Court. 
Rumors fly constantly about who is in the Isaias brothers' 
pocket, and it is likely that many Ecuadorian politicians 
have received funds from the brothers.  The prevalent rumor 
in recent weeks has been that the Isaias' are close to 
Bucaram, and that the next step by the Supreme Court 
President would be to drop the charges against them. 
 
Comment 
------- 
 
6. (C) We think Gutierrez's emergency declaration is, at 
minimum, an overreaction to the threatened action.  It may 
have also been the result of over-confidence by Gutierrez, 
having just witnessed the failure of a proposed nation-wide 
strike against him.  The Ambassador has asked Gutierrez and 
the opposition to show restraint and work together toward a 
peaceful resolution to this latest crisis. 
KENNEY