US embassy cable - 05ASUNCION1204

UNCLAS SECTION 01 OF 02 ASUNCION 001204 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/IFD/OIA 
STATE FOR EB/TPP/IPE 
STATE FOR INL/LP ABBY SMITH 
STATE FOR INL/C/CP ADAM SHANTI 
STATE PASS TO USAID FOR LAC/AA 
STATE PASS TO USTR FOR LYANG 
NSC FOR SUE CRONIN 
TREASURY FOR OSIA MAUREEN WAFER 
TREASURY FOR OTA WARFIELD, VAN KOCH, MILLAR 
COMMERCE FOR ITA SARAH COOK 
SOUTHCOM FOR POLAD DAN JOHNSON 
 
E.O. 12958: N/A 
TAGS: ECON, KCRM, KIPR, PA, PGOV, PREL 
SUBJECT: PARAGUAY: IPR-UNIT NABS CUSTOMS OFFICIAL 
 
REF: A. ASUNCION 1167 
     B. ASUNCION 0972 
     C. ASUNCION 0423 
 
1. (U) This cable is sensitive but unclassified.  Please 
protect accordingly. 
 
2. (SBU) SUMMARY: On 9/15, during a Treasury Department 
training course, Col. Felix Cruz, the director of the 
Ministry of Industry and Commerce's (MIC) INL-funded 
Specialized Technical Unit (UTE) coordinated with prosecutors 
to arrest Customs official Luis Alberto Panza Benitez, a 
member of the Customs Verification and Technical Unit 
(UTAVE), on bribery charges.  Panza is reportedly well 
connected to former Senator and current Ambassador to Spain, 
Nelson Argana.  A private sector despatch agent who is a 
Colorado who ran for a governorship in the last election was 
also arrested as an accomplice to bribery.  This success 
demonstrates that US-trained invesgitators and vetted units 
can make a dramatic difference.  End Summary. 
 
3. (SBU) On 9/15, Col. Felix Cruz, the director of the MIC's 
INL-funded Specialized Technical Unit (UTE) that fights 
Intellectual Property Rights (IPR) crime, orchestrated the 
arrest of Luis Alberto Panza Benitez, a politically connected 
UTAVE customs official operating in Cuidad del Este, on 
charges of aggravated bribery.  The operation occurred during 
a four-week criminal investigators training course being put 
on by Treasury's Resident Enforcement Advisor, and the arrest 
took place on the sidewalk outside the meeting site.  Carlos 
Palacios, a private sector customs broker and Colorodo 
politician who unsuccessfully ran for the governorship of the 
Central Department in the last election, was also charged as 
an accomplice to aggravated bribery.  Additional charges 
could be filed against an Air Force Colonel and former 
colleague of Col. Cruz, who initially communicated Panza's 
offer to Cruz. 
 
4.  (SBU) On 9/12, Air Force Colonel Jorge Nunez called Col. 
Cruz and offered to put him in touch with Panza, who was 
prepared to offer Cruz $2,000 for the release of a shipping 
container filled with CDs and DVD,s that UTE had held up for 
inspection for undervaluation.  The importation documents 
registered with the MIC claimed that the shipment included 
738,000 blank CD-Rs valued at about USD 95,000, when in fact 
the shipment contained 138,000 CD-Rs and 600,000 DVDs which 
are more valuable than CD-Rs, worth a total of closer to USD 
130,000.  Cruz immediately went to a prosecutor to file a 
report and obtain the legal authorization to record 
subsequent conversations.  Panza was eventually lured to the 
site of the training class and Col. Cruz stepped out of class 
to assist in the arrest, where he was given a bag containing 
10 million Guaranies (about USD 1,640) as a down payment on a 
USD 2,000 total payment.  During the three days of 
negotiations, Carlos Palacios, the customs broker, also 
called Cruz and offered a USD 5,000 bribe with the condition 
that Cruz would thereafter work exclusively for Palacios. 
 
5.  (SBU) All of the press coverage referred to Cruz only as 
an employee of UTE or the MIC, and never mentioned him by 
name, no doubt at his request.  Panza reportedly faces up to 
three years in prison if the legal process works properly in 
this case.  The prosecutor on the case, Arnaldo Giuzzio, is 
known to the Embassy and has been vetted.  He was recently 
transferred from the anti-kidnapping unit to the 
anti-corruption unit.  He is excited about the new role, but 
laments the lack of resources of the unit. 
 
6.  (SBU) After returning from a Mercosur meeting in 
Montevideo, Customs Director Margarita Diaz de Vivar 
announced that Panza was working as a contractor of Customs, 
and not as a civil servant, and as such his contract would be 
terminated.  Another customs official said that Panza, who 
had previously been a customs inspector, had no specific role 
in Customs after the entry into force in January of the new 
Customs Code. Panza reportedly obtained his position through 
the influence of Nelson Argana, a powerful ex-Senator and 
current Ambassador to Spain, and has been a key player in 
facilitating the illicit trade of Arab and Chinese business 
interests in Ciudad del Este.  Panza is associated with 
Argana,s Colorado Reconciliation Movement (MRC). 
 
7. (SBU) COMMENT: Nelso Argana is the son of assasinated Vice 
President Luis Maria Argana.  The Argana family figures large 
on the political scene in Paraguay; its members have been 
tied in the past to allegations of customs fraud.  UTE 
Director Cruz deserves high marks for orchestrating this 
arrest -- on the margins of a US-sponsored criminal 
investigations course no less.  The bust comes on the heels 
of Finance Minister Bergen's exultation to "bring him some 
big Customs cases" (ref. A) and just as the GOP launches a 
campaign to formalize activities in Ciudad del Este.  Proper 
closure of these cases is always the key and most difficult 
to achieve.  We will follow the case closely and keep 
Washington apprised as appropriate.  This shows, once again, 
that US-trained invesgitators and vetted units can make a 
dramatic difference.  End Comment. 
KEANE