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RR RUEHWEB

DE RUEHPE #0128/01 0121507
ZNR UUUUU ZZH
R 121507Z JAN 06
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 8039
INFO RUEHBO/AMEMBASSY BOGOTA 2833
RUEHQT/AMEMBASSY QUITO 9905
RUEHLP/AMEMBASSY LA PAZ JAN SANTIAGO 0056
RUEHCV/AMEMBASSY CARACAS 8884
RUEHBU/AMEMBASSY BUENOS AIRES 2179
RUEHME/AMEMBASSY MEXICO 3253
RUEHBR/AMEMBASSY BRASILIA 6430
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNSC/NSC WASHDC

UNCLAS LIMA 000128 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/AND, WHA/EPSC, EB/IFD/OFD, EB/CBA, EB/IFD/OIA 
TREASURY FOR OASIA/INL, DO/GCHRISTOPOLUS 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
USTR FOR BHARMAN/DWEINER 
E.O. 12958: N/A 
TAGS: EINV ECON KIDE PE
SUBJECT: GE - ONE STEP CLOSER TO RESOLUTION 
 
Contains Sensitive Business Information, not for Internet 
Distribution. 
¶1.  (SBU) Summary.  On December 27, the 8th Penal Court in 
Lima ruled in favor of General Electric (GE) on one of its 
six habeas corpus cases, lifting the international arrest 
warrant for the GE executives accused of having wrongfully 
terminated and committed fraud against former GE distributor 
in Peru Guillermo Gonzalez Newmann.  Newmann's lawyers on 
December 28 appealed the Court's decision to overturn the 
arrest order, claiming that only the Constitutional Court 
can issue such a ruling.  The Constitutional Court still has 
not ruled on the three remaining habeas corpus cases, two of 
which, if the Court rules in favor of GE, could throw out 
the case against GE.  End Summary. 
 
Background 
---------- 
 
¶2. (SBU) General Electric terminated its relationship in 
1998 with Peruvian businessman Guillermo Gonzalez Newmann, 
former General Manager of LATAM, a distributor for GE in 
Peru from 1992-1998.  Gonzalez Newmann brought a civil suit 
in a Kentucky Court against GE in 1999, seeking multi- 
million dollar damages.  The American court, in 1999, found 
in favor of GE.  In 2001, Gonzalez Newmann opened another 
civil case against GE in Miami Federal Court, which resulted 
in the American court again ruling in favor of GE in 2002. 
After losing the first (Kentucky) U.S. case, Gonzalez 
Newmann in 2000 filed criminal fraud charges against GE in 
several courts in Peru, until he found a court that would 
open a criminal case on what would normally be a civil 
matter. 
 
¶3.  (SBU) After two lower Peruvian courts ruled in favor of 
GE in 2001 and 2002, Gonzalez Newmann appealed the decision 
in July 2003, and included in his criminal case 23 high- 
ranking current and former GE officials.  (Note:  20 of 
these officials are American citizens, with two from Chile 
and one Brazilian citizen.  American citizens include former 
GE CEO Jack Welch, current CEO Jeffrey Immelt, James 
Campbell, David Blair, and current Home Depot CEO Robert 
Nardelli, among others.  Please protect. End Note.)  In 
September 2004, the Appellate Court ruled in favor of 
Newmann's appeal.  Subsequently, the Peruvian prosecutors 
convinced the Lima Criminal Court to issue an international 
arrest warrant for all 23 defendants.  (Note:  the warrants 
had glaring deficiencies per Peruvian law; for example 
inadequate identification of the suspects.  End Note.)  GE's 
local counsel then appealed the Appellate Court decision to 
the Superior Court.  As a result, the arrest warrants were 
held until the Superior Court could make a decision. 
 
¶4.  (SBU) In June 2005, the Superior Court ruled that there 
was sufficient cause to order the case reopened, remanding 
the case to the trial court.  At the same time, the Court 
also affirmed the detention order for the 23 executives, to 
be activated through Interpol.  The Superior Court also 
ordered the seizure of GE property.  The Ambassador, working 
closely with GE's local counsel, met several times with the 
Chief of the National Police and the Minister of Interior , 
who determined that the Peruvian police should not submit 
the warrant to Interpol for action until the appeals process 
has been exhausted. 
 
GE's Plan of Attack 
------------------- 
 
¶5.  (SBU) In response to the 2005 Superior Court ruling, 
GE's local counsel submitted six petitions for habeas corpus 
to the Constitutional Court.  GE filed four petitions 
against Criminal Court Judge Herrera Cassina (who issued the 
international arrest warrant on August 3, 2005), questioning 
the arbitrariness of the detention orders and arguing that 
the process violates due process.  The habeas corpus cases 
also note that the detention order was improperly filed, as 
it did not include specific information required under 
Peruvian law (four names, identifying features, etc). (Note: 
Herrera Cassina is widely suspected of corruption.  In 
filing these habeas corpus petitions, GE hopes to raise 
suspicions on why  Gonzalez Newmann chose Cassina's court in 
which to file his case.  End Note). If the Constitutional 
Court rules in favor of GE in any of these four cases, it 
would overturn the detention order and remand these cases to 
the Criminal Court for a trial. 
 
¶6. (SBU)  GE also submitted to the 8th Penal Court of Lima 
an additional fifth habeas corpus case filed against the 
Court of Appeals.  This case argues that the 21 of the 23 
current and former GE executives had no relationship with 
Gonzalez Newmann and should not be included in the arrest 
warrants.  The final sixth habeas corpus case was submitted 
to the Constitutional Court.  With this case, GE argues that 
two courts in the United States already adjudicated the 
facts of the fraud case, albeit as a civil case, and ruled 
in favor of GE.  GE's local counsel claims that by allowing 
Newmann to venue shop, it violates the 23 GE officials' due 
process.  By ruling in favor of GE in either of these two 
cases, the Constitutional Court could conclude that the 
process itself was illegitimate and dismiss the criminal 
cases against the GE executives. 
 
One Ruling in Favor of GE 
But Case is Appealed 
------------------------- 
 
¶7.  (SBU)  On December 27, the 8th Penal Court in Lima 
issued a ruling in favor of GE on one of its two habeas 
corpus petitions against the Appellate Court.  The Court 
found that there was no clear link between the 21 of the 23 
GE defendants and the justification stated in the warrant as 
well as a lack of specificity in the warrants.  Judge 
Eduardo Jose Martin Gago of the 8th Penal Court, also 
declared null and void the international arrest warrants for 
all 23 GE executives.  The Court also remanded the case to 
the criminal court, pending rulings by the Constitutional 
Court on the other habeas corpus cases. 
 
¶8.  (SBU) The next day, the lawyers for Gonzalez Newmann 
submitted an appeal of Judge Gago's decision, arguing that 
only the Constitutional Court has the power to nullify 
international arrest warrants.  The Constitutional Court 
accepted the appeal, and it will hear arguments on this 
habeas corpus case in late January. 
 
Next Steps 
---------- 
 
¶9.  (SBU)  The Constitutional Court is expected to issue a 
final ruling on the four pending habeas corpus cases 
presented against Judge Herrera Cassina in mid-January. 
GE's local counsel, Jorge Santistevan, informed us that he 
expects the Constitutional Court make one of two decisions: 
either go beyond Judge Gago's ruling to include either 
nullification of the opening of the criminal case or call 
for a new opening of the case by a judge other than Judge 
Herrera Cassina.  Additionally, Santistevan noted that the 
Constitutional Court may rule in early February on the 
habeas corpus case against the members of the Appeals Court. 
If the Constitutional Court rules in favor of GE in this 
case, it would reverse the decision to open the case, 
eliminating the criminal case against the GE executives. 
 
¶10.  (SBU)  GE's U.S. legal team will be traveling to Peru 
the week of January 30 to meet with Peruvian officials.  We 
will also meet with the GE team, as well as the local 
counsel, to coordinate our next steps. 
 
Comment 
------- 
 
¶11.  (SBU)  The ruling in favor of GE sets a precedent for 
the Constitutional Court to issue additional rulings in 
favor of the U.S. company.  This case may have implications 
for Peru's investment climate. 
 
STRUBLE