US embassy cable - 05SANTODOMINGO3721

UNCLAS SECTION 01 OF 04 SANTO DOMINGO 003721 
 
SIPDIS 
 
DEPT FOR WHA/CAR (SEARBY), DEPT PASS TO SEC, FEDERAL 
RESERVE; TREASURY FOR WAFER, DOJ FOR OIA (MAZUREK AND 
ORJALES) 
 
E.O. 12958: N/A 
TAGS: DR, EFIN, KJUS, PGOV, PREL 
SUBJECT: DOMINICAN BANKING SERIES # 8 - DOMINICAN FAILED 
BANK CASES - MOVEMENT IN THE COURTS 
 
REF: 04 SANTO DOMINGO 5426 
 
1.  (U)  This is number 8 in a series of cables on the 
Dominican bank failures of 2003.  This cable contains an 
action request, please see paragraphs 7 and 12. 
 
Baninter, Banco Mercantil and Bancredito - legal case status 
on the banks that broke the Dominican Republic 
 
2.  For the first time in over a year, there is substantive 
action in the Dominican courts on the Baninter case.  The 
three member appellate panel charged with reviewing the 
decisions of the judge of instruction (investigating judge), 
has begun to hear testimony in the case.  This action takes 
place after a long delayed decision by the Supreme Court 
denying a motion to recuse one of the appellate panel 
members.  In response to the apparent forward motion of the 
court, the Ramon Baez defense team is ramping up once again 
in its public relations efforts to clear the name of its 
client.  Meanwhile, the U.S. investigation appears to be 
stalled by the resignation of the Assistant U.S. Attorney 
handling the case and an internal DHS/ICE conflict on which 
office has the lead investigative role in the case. 
 
3.  Justice continues to move slowly in the Banco Mercantil 
case, but at least it is moving.  Two defendants have been 
bound over for trial, and the first round of the appeals 
process has begun.  The Bancredito case has ground to a halt. 
 It remains in the investigatory phase with no indication of 
when the judge of instruction may issue his decision. 
 
Action on Baninter - witnesses being questioned 
 
4.  On July 15, the three member appellate panel in the 
Baninter case interrogated its first witness in over a year. 
The panel will determine two primary issues on appeal: 1) the 
request of Ramon Baez Figueroa and Marcos Coco Baez attorneys 
(Baez defense team) to reverse the decision of the judge of 
instruction holding that sufficient evidence of crimes exist 
to proceed to trial against them (thereby dropping all 
remaining charges against them), and 2) the request of the 
Central Bank to reverse the decision of the judge of 
instruction holding that insufficient evidence of crimes 
exists to proceed against four other defendants and against 
Baez Figueroa and Coco Baez on certain charges (thereby 
reinstating charges against all six of the original 
defendants in the case). 
 
5.  The case had been stalled in the panel while the Supreme 
Court decided a motion to remove one of the appellate judges 
from the case.  However, rumors circulated that the panel 
slow-down was due to political pressure that started when the 
Fernandez administration took over in August 2004.  President 
Fernandez mostly has kept his distance from the bank fraud 
issue stating consistently that the cases are in the courts 
and that the independent judiciary will issue its decisions 
in due course.  The comments he has made lean toward placing 
the blame for the bank failures on the Mejia administration 
oversight committee (Central Bank and Superintendent of Bank 
officials) rather than the bank executives.  Additionally, 
President Fernandez has claimed "Vincho" Castillo as one of 
his inspirations - Vincho is lead attorney for the Dominican 
based portion of the Baez defense team.  Despite the rumors 
of the politically motivated slow-down, increased pressure by 
civil society, especially the group Participacion Ciudadana 
(Citizen Participation), and a public interest in the cases 
expressed by the local representatives of the International 
Monetary Fund may have contributed to the recent revival of 
the proceedings.  The Supreme Court denied the motion to 
recuse the appellate judge and left the appellate panel 
intact. 
 
6.  The panel began interrogating witnesses on July 15; that 
action in and of itself is notable.  The panel had the option 
of making its decision based solely on the record created by 
the judge of instruction.  However, by calling witnesses, the 
panel has indicated that it intends to consider new 
information and evidence (as permitted by law) prior to 
rendering its decision.  If the panel conducts its 
investigation of the case thoroughly and without outside 
influence, the Central Bank and the Dominican Attorney 
General's office assure us that they will find sufficient 
evidence to move the case to trial against all six defendants. 
7.  Related to the recent movement on the Dominican side of 
the case, the Dominican Attorney General has requested a 
meeting with the U.S. Attorney for the Southern District of 
Florida during a planned trip to Miami (August 3, 4, 5) to 
discuss the progress of the U.S. based investigation. 
Embassy Santo Domingo has contacted DOJ/OIA and the DHS/ICE 
Caribbean to pass on the request.  The Embassy asks for all 
possible assistance in arranging this meeting.  (See also 
paragraph 12). 
 
Baez defense team takes the case to the press 
 
8.  With each new step in the case, the Baez defense team 
takes to the press.  The latest tactic is an attempt to 
discredit current and past government officials by blaming 
their lack of oversight for the bank failures.  Current 
Central Bank President Hector Valdez Albizu was the 
Superintendent of Banks during the first Fernandez 
administration.  He has come under fire, directed by the Baez 
defense team, for signing off on auditors' statements 
assuring the liquidity of Baninter in the late 1990s.  The 
Baez defense team also continues to criticize the Central 
Bank and Superintendent of Banks' leadership under the Mejia 
administration, noting that the bank fraud did not cause the 
economic collapse of 2003; they assert that the 
"over-insurance" paid by the government when it decided to 
make good on bad Baninter accounts caused the collapse. 
Valdez Albizu discussed this with the Ambassador to ensure 
the Ambassador was aware of his position that a fraud had 
occurred and that legal action should continue.  He also 
showed concern that all members of the Fernandez 
administration were not necessarily on the same page on this 
issue.  Valdez Albizu told the Ambassador that he planned to 
talk to President Fernandez about the conflicting public 
messages of the various members of his administration. 
 
9.  Another public Baez defense team tactic to take the 
spotlight away from their client involves the IMF.  Within 
the past three weeks the Baez defense team contacted the IMF 
to ask if any of the conditions of the IMF accords with the 
Dominican Republic required prosecution of named individuals. 
 The IMF answered succinctly via letter that the conditions 
did not require prosecution of any named individual.  The 
Baez defense team bought ad space in all the Dominican 
dailies, reprinted the IMF's letter with the added inference 
that their client must not be at fault in the Baninter 
failure or the IMF would have implicated him.  The spin on 
what the IMF believed to be an innocuous letter was so 
egregious that it felt compelled to write a more detailed 
letter to the press explaining that the IMF did not condition 
its accords on the prosecution of named individuals out of 
respect for an independent judiciary, but that lack of 
conditionality did not mean that the IMF would not continue 
to carefully monitor ongoing court proceedings in which proof 
of fraudulent and illegal activities in the banking sector 
was evident. 
 
10.  The Baez defense team is also on the move in the United 
States with the Miami branch of the international law firm of 
Greenberg Taurig representing Ramon Baez.  Greenberg Taurig 
Attorney Jesus Cuza recently contacted Embassy officials to 
request an interview, "because it appears that certain 
statements and/or representations that may have been made by 
you conflict with our understanding of the USG's position on 
the (Baez legal matters in the Dominican Republic), we would 
like to meet with you as soon as possible to discuss the 
matter in detail."  The Embassy declined the request, because 
we do not comment on ongoing cases, Cuza's tone implied that 
he was fishing for information concerning his client that 
Embassy officials might have. 
 
Baninter in the United States - who's in charge? 
 
11.  With the creation of the Department of Homeland Security 
and ICE, legacy INS and Customs Attache offices were merged 
into ICE Attache offices.  The Baninter case investigation in 
the United States was initiated by the ICE Attache Caribbean 
office and was conducted in conjunction with the ICE office 
of the Special Agent in Charge (SAC), Miami, Florida.  ICE 
Attache Caribbean, as a legacy Customs Attache office, was 
responsible for all legacy customs investigations being 
conducted in the Dominican Republic.  The legacy INS Attache 
office at Embassy Santo Domingo, now an ICE Attache office, 
was subsequently given responsibility for all ICE 
investigative activity, including both legacy INS and Customs 
disciplines, in the Dominican Republic.  The Baninter case 
investigation into U.S. based crimes is waiting to be 
transferred from the Miami based ICE Attache Caribbean office 
to the ICE Attache office at Embassy Santo Domingo.  Until 
the transfer takes place, the investigation is not moving 
forward.  In addition, the ICE agent investigating the 
criminal side of the case in Miami has been hampered by 
health problems and has not been able to fully dedicate 
himself to the case. 
 
12.  At the U.S. Attorney's Office for the Southern District 
of Florida, the Assistant U.S. Attorney previously assigned 
to lead the Baninter investigation and case is resigning. 
The case has been passed to a new AUSA who is not yet 
familiar with the complex fact pattern underlying the alleged 
crimes.  Embassy Santo Domingo reiterates its previous 
requests for Department of Homeland Security and Department 
of Justice assistance in investigating and prosecuting 
U.S.-based crimes related to the Baninter failure, ref A. 
 
Meanwhile in the Banco Mercantil and Bancredito cases. . . 
 
13.  In the case of Banco Mercantil, the third of the three 
failed banks of 2003, the procedural posture has moved 
forward slightly and now mirrors that of the Baninter case. 
On June 14, judge of instruction Eduardo Sanchez Ortiz, the 
judge of instruction also assigned to the Baninter case, 
bound over for trial two defendants, Andres Aybar Baez and 
Evelyn Altagracia Perez Montandon.  He found insufficient 
evidence against 12 other defendants and dropped the charges 
against them.  Aybar Baez was the former president of Banco 
Mercantil and Perez Montandon was the former vice president 
of finances for the bank. 
 
14.  As with Baninter, both sides have filed appeals.  Aybar 
Baez and Perez Montandon have asked an appellate panel to 
overturn the judge of instruction's decision to send them to 
trial.  The Central Bank and the Attorney General's office 
have asked that charges be reinstated against the 12 
additional original defendants in the case and that 
individual charges dropped against Aybar Baez and Perez 
Montandon be reinstated. 
 
15.  The Bancredito case has seen no movement at all since 
our last report on the case in September 2004. 
 
Our thoughts. . . 
 
16.  We are encouraged that the appeals panel in the Baninter 
case appears to be investigating the underlying criminal 
charges against the actors, but we are not optimistic that 
the principals in the case will be prosecuted.  It has been 
two years since the Baninter case was opened in the Dominican 
courts, and it remains in a very preliminary phase.  No trial 
date has been set, the charges are still being contested, and 
all defendants are free on bail.  The judicial system is 
weak; some judges susceptible to bribes and payoffs and 
others are untrained to handle complex fraud cases such as 
these.  The Attorney General's office and the Central Bank 
lawyers have told us that they intend to press forward, but 
that true justice will come only if the criminal charges are 
brought against the main actors in the United States. 
 
17.   (U)  Drafted by Angela Kerwin.  This report and others 
in our bank fraud series can be found on our SIPRNET site at 
http://www.state.sgov.gov/p/wha/santodomingo/ . 
HERTELL