VZCZCXYZ0007
RR RUEHWEB

DE RUEHPE #2707/01 1922057
ZNR UUUUU ZZH
R 112057Z JUL 06
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 1344
INFO RUEHBO/AMEMBASSY BOGOTA 3638
RUEHQT/AMEMBASSY QUITO 0523
RUEHLP/AMEMBASSY LA PAZ JUL SANTIAGO 0722
RUEHCV/AMEMBASSY CARACAS 9660
RUEHBU/AMEMBASSY BUENOS AIRES 2510
RUEHME/AMEMBASSY MEXICO 3412
RUEHBR/AMEMBASSY BRASILIA 6879
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC

UNCLAS LIMA 002707 
 
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: COURT DISMISSES ALL CRIMINAL CHARGES IN GE CASE 
 
 
Contains Sensitive Business Information, not for Internet 
Distribution. 
 
¶1.  (SBU) Summary.  Peru's Constitutional Court on July 6 ruled in 
favor of GE in one of its habeas corpus cases, dismissing all 
criminal charges against the 23 GE defendants.  In its decision, the 
Constitutional Court commented that the 4th Penal Court, which 
originally issued international arrest warrants for the GE 
executives, was wrong to have opened a criminal case, as the issue 
was clearly civil in nature.  Former GE distributor Gonzalez 
Newmann, who filed criminal fraud charges against GE, is unable to 
appeal the decision.  The 4th Penal Court is charged with 
implementing the Constitutional Court's ruling, expunging the case 
from the judicial docket.  Once implemented, the Constitutional 
Court's decision effectively closes the case against GE, as the 
Constitutional Court is the court of last resort on criminal issues. 
 The resolution of this case is a win for Peru's judicial system and 
sets precedent for future dispute settlement cases, showing that one 
should not attempt to criminalize civil disputes.  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 two civil suits against GE in 1999 and 
¶2001.  In both cases, the U.S. courts found in favor of GE.  After 
losing the first 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.  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.  In September 2004, the Appellate Court ruled 
in favor of Newmann's appeal and the Lima Criminal Court issued 
international arrest warrants for all 23 defendants.  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. 
 
¶3.  (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 Chief of the National Police and the Minister of 
Interior decided, due to irregularities in the arrest warrants, not 
to submit the warrants to Interpol for action until the appeals 
process has been exhausted. 
 
Criminal Charges Dropped 
------------------------ 
 
¶4.  (SBU) In response to the 2005 Superior Court ruling, GE's local 
counsel submitted six petitions for habeas corpus to the 
Constitutional Court (reftel).  After months of reviewing GE's 
habeas corpus petitions, the Constitutional Court on July 6 ruled in 
favor of the American company, noting that the fraud charges were a 
civil issue rather than a criminal one.  The Court, denouncing the 
actions of the 4th Penal court to open a criminal trial against the 
23 GE executives, dismissed all criminal charges and nullified the 
original arrest warrants.  Gonzalez-Newmann is unable to appeal the 
decision, as the Constitutional Court is the court of last resort 
for criminal cases.  The July 6 decision sets in motion final 
resolution of GE's case in Peru. 
 
¶5.  (SBU)  The 4th Penal Court is charged with implementing the 
Constitutional Court's decision and expunging the case from the 
judicial docket.  According to Disputes Coordinator Aurelio Loret de 
Mola, GE's lawyers need to present the Constitutional Court's 
decision to both the prosecutors and the 4th Penal Court.  The 4th 
Penal Court will then have to expunge the case from the judicial 
docket.  Once this is done, the case should be closed. 
 
Comment 
------- 
 
¶6.  (SBU)  The Constitutional Court decision in favor of GE is a win 
for both the company and the GOP, setting a precedent in the 
judicial system that one should not criminalize a civil matter.  In 
a previous decision, the Supreme Court issued sanctions against 
Judge Herrera Cassina, noting irregularities in how he handled the 
GE case - a signal that the judicial system is taking steps against 
allegedly corrupt judges.  The GOP is committed to attracting 
foreign investment and creating a good environment for international 
business.  The resolution of this case will help improve Peru's 
investment climate. 
 
STRUBLE