VZCZCXYZ0010
PP RUEHWEB

DE RUEHMU #1004/01 1251753
ZNR UUUUU ZZH
P 051753Z MAY 06
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 6206
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 0665
RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHDC
RHEHNSC/NSC WASHINGTON DC

UNCLAS MANAGUA 001004 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR WHA/CEN 
PASS TO USAID FOR AA/LAC 
 
E.O. 12958: N/A 
TAGS: PGOV PREL KDEM KCRM SOCI ECON EAID NU
SUBJECT: NICARAGUA'S MOST WANTED PART III: THE CRIMES OF 
ARNOLDO ALEMAN AND HIS FAMILY 
 
REF: A. MANAGUA 1002 
     ¶B. MANAGUA 1003 
 
¶1.  (SBU) This is the third and final cable in a series 
summarizing the crimes and abuses of power committed by 
Nicaragua's corrupt party bosses and their associates.  The 
first cable focused on Daniel Ortega and his family, the 
second highlighted the abuses of the FSLN, both while in 
power in the 1980s and in opposition since 1990.  This third 
cable centers on the crimes and abuses of ex-president and 
Liberal Constitutional Party (PLC) leader Arnoldo Aleman.  As 
noted in reftels, post intends to use the information from 
these "rap sheets" in discussions with domestic and 
international interlocutors as a means of reminding 
Nicaraguan voters and others of the true character of Aleman, 
Ortega, and the Sandinistas.  While the summaries themselves 
are unclassified, some of the sources of information are SBU. 
 Post will distribute the summaries to appropriate contacts, 
but not the sources.  Post is sending both the summaries and 
the sources to the Department and other Washington agencies 
for similar uses. 
 
CRIMES OF ARNOLDO ALEMAN AND HIS FAMILY 
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Theft of 100 Million Dollars from the Nicaraguan People and 
Laundering of the Money in Nicaragua and Abroad 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶2.  (U) While Arnoldo Aleman was president, he and his family 
stole approximately 100 million dollars from the Nicaraguan 
people by looting money from the government treasury and the 
accounts of many different government agencies and ministries 
that were controlled by corrupt associates, including Byron 
Jerez, Esteban Duque Estrada, Jorge Solis, Noel Ramirez, and 
Eduardo Mena.  Aleman, his family, and their associates used 
a variety of schemes to steal and launder government money, 
but most of the funds were eventually laundered through shell 
companies and accounts in Panama, the United States, and the 
Dominican Republic.  Once he laundered the stolen money, 
Aleman then used it to support his family's lavish lifestyle, 
as well as to bribe and reward political allies, manipulate 
Nicaragua's institutions, and maintain his political power. 
 
¶3.  (SBU) Sources: thousands of checks and other financial 
documents from the presidency, numerous government ministries 
and agencies signed personally by Arnoldo Aleman and his 
corrupt associates, bank account information from Panama, the 
United States, and Nicaragua in possession of all three 
governments; court records from Aleman's trial in Nicaragua 
and the original accusations brought against Aleman by the 
Procuraduria. 
 
The Path and Documentation of Aleman's Money Laundering 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶4.  (U) Most of the elaborate schemes orchestrated by Arnoldo 
Aleman involved the transfer of public funds from various 
government agencies to the accounts of shell corporations 
(mostly in Panama) that were established for the sole purpose 
of defrauding the people and government of Nicaragua.  Tens 
of millions of dollars from agencies like ENITEL, the Rural 
Development Institute (IDR), and the Directorate of Taxation 
(DGI), all of which were controlled by cronies of Aleman, 
were transferred to shell companies like Industrias Andinas 
de Desarollo (IAD) and Consultores Corporativos in Panama. 
Once the money arrived in the accounts of the shell 
companies, Aleman and his family then transferred it to the 
Panamanian accounts of the Nicaraguan Democratic Foundation 
(FDN).  Some of this money was disguised as a fake "donation" 
from the government of Taiwan. 
 
¶5.  (U) Once funds were in the FDN accounts, Aleman used them 
for both political and family ends.  He bribed and rewarded 
political supporters and transferred funds to other accounts 
for his family's private use.  Documentation on all of this 
money laundering, including copies of the documents signed 
and passports used by the Aleman family when they opened the 
shell companies, checks signed by Arnoldo Aleman transferring 
funds from one shell company to another, and bank transfer 
documents showing the origin and destination of the payments 
are all in the possession of the governments of Nicaragua, 
Panama, the United States, and the Dominican Republic. 
 
¶6.  (SBU) Sources: thousands of checks and other financial 
documents from the presidency, numerous government ministries 
and agencies signed personally by Arnoldo Aleman and his 
corrupt associates, bank account information from Panama, the 
United States, and Nicaragua in possession of all three 
governments, court records from Aleman's trial in Nicaragua 
and, the original accusation brought against Aleman by the 
office of the Nicaraguan Attorney General (Procuraduria). 
 
The Role of Aleman's Family in his Money Laundering 
- - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶7.  (U) While Arnoldo Aleman orchestrated the entire 
conspiracy, personally signed checks to launder government 
funds, and gave Byron Jerez and others orders to transfer 
government funds into private accounts, other members of his 
family also played important parts in the money laundering 
process. The list that follows does not include all of 
Aleman's relatives who participated in his corruption, only 
the most prominent individuals. 
 
¶8.  (U) Aleman's wife, Maria Fernanda Flores de Aleman, 
personally established several of the shell companies in 
Panama that Aleman used to launder his stolen funds, 
including Locery S.A., Aleman-Flores Corporation, and 
Inversiones Quisa S.A.  She flew to Panama on numerous 
occasions, showed her passport, and signed documents to 
establish the companies and open their bank accounts.  In 
2002, when Aleman transferred 4 million dollars in stolen 
government funds from Nicstate Development (another shell 
company in Panama) to four other sham companies, he ordered 
that the Nicstate checks for the 4 million dollars be made 
out to Maria Fernanda and delivered to her personally. She 
took personal possession of these checks in Panama on July 
25, 2002 and signed for them. 
 
¶9.  (U) Jose Antonio Flores Lovo, Maria Fernanda's father and 
Aleman's father-in-law, also played key parts in Aleman's 
money laundering schemes. After Maria Fernanda received the 
checks for the 4 million laundered dollars in July 2002, she 
gave them to her father, who used them the next day (July 26, 
2002) to open certificate of deposit accounts in Panama in 
the names of four shell companies: Kalveto S.A., Voria 
Holding S.A., Budapest Corporation S.A., and Teremina S.A. 
Flores Lovo showed his passport for all of these transactions 
and his signature is on all of them. 
 
¶10.  (U) Aleman's oldest daughter, Maria Dolores, also flew 
to Panama and opened several of the shell corporations and 
bank accounts that were used to launder stolen Nicaraguan 
government money, including one of the accounts of the FDN. 
She was also one of the owners of Consultores Corporativos 
and was an official legal representative of Oakwood Finance 
S.A., another shell company.  Maria Dolores showed her 
passport and her signature appears on official documents 
establishing all of these shell companies and their bank 
accounts. Maria Dolores, name also appears on certificates 
of deposit that were purchased by Byron Jerez in the United 
States using stolen government funds. 
 
¶11.  (U) Another of Aleman's daughters, Maria Alejandra, is 
known to have received funds directly from the FDN Panama 
accounts.  She also appeared personally, showed her passport, 
and signed documents to open a Panamanian bank account for 
Inversiones Quisa S.A. and was listed as an official legal 
representative of that shell company.  Byron Jerez also 
purchased certificates of deposit in her name in the United 
States. 
 
¶12.  (U) The name of Aleman's adult son, Carlos Miguel, 
appears on yet another certificate of deposit in the United 
States that was purchased by Byron Jerez with stolen 
government funds. 
 
¶13.  (SBU) Sources: Aleman's family members personally signed 
documents for most of the transactions described above. Maria 
Dolores, Maria Alejandra, Maria Fernanda, and Jose Antonio 
Flores Lovo all personally appeared in Panama on multiple 
occasions to establish shell companies and bank accounts for 
money laundering purposes. They all showed their passports, 
U.S. visas, and other identifying documents in order to open 
the companies and accounts. Copies of the records with their 
signatures and passport photos are in the possession of the 
Panamanian, Nicaraguan and U.S. governments. The names of 
 
Aleman and his children appear on the CDs in the U.S. and 
their names appear in documents submitted by their lawyers in 
U.S. courts seeking to unfreeze and repatriate the stolen 
money to Nicaragua. 
 
Convictions in Nicaragua and Stolen Money Seized in the 
United States 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶14.  (U) The cases listed above highlight only a small 
fraction of the many corruption schemes that Arnoldo Aleman 
and his family orchestrated during his presidency. Aleman and 
his family have yet to face trial in some of the cases, but 
several verdicts have already been handed down in Nicaragua 
and the United States. 
 
¶15.  (U) In December 2003 a Nicaraguan judge found Arnoldo 
Aleman and Byron Jerez guilty of money laundering, fraud, 
embezzlement, misuse of public funds, and criminal conspiracy 
for their actions in the "Huaca I" case, which involved the 
theft of government money from ENITEL, the government 
treasury, and the state social security fund.  Aleman 
received a twenty year criminal sentence in this case and his 
conviction remains in effect. 
 
¶16.  (U) In October 2004, Aleman's lawyers in the United 
States accepted the seizure of over 600,000 dollars from the 
sale of a helicopter that Aleman had purchased in an attempt 
to launder additional government funds that were stolen in 
the "Huaca I" case.  Aleman's lawyers had proclaimed his 
innocence and tried to recover the seized funds, but 
ultimately accepted defeat in the face of the overwhelming 
documentation of the money laundering. The seized funds will 
soon be returned to the Nicaraguan government to support its 
ongoing fight against corruption. 
 
¶17.  (U) In June 2002 authorities in the United States seized 
a condominium worth well over 2 million dollars that was 
purchased by Byron Jerez with money stolen from the 
Nicaraguan government in the "Huaca I" case.  In the face of 
overwhelming evidence, in December 2003 Jerez's lawyers 
admitted defeat in their efforts to recover the condominium 
or the profits from its sale.  In December 2004, the United 
States government returned to the Nicaraguan government the 
money that was seized from the sale of the condominium.  The 
nearly 2.8 million dollars are to be used to support 
continued anti-corruption efforts and to build two modern 
secondary schools in Managua. 
 
¶18.  (SBU) Sources: The helicopter and condominium cases are 
both matters of public record in U.S. courts in Oklahoma and 
Florida, just as Aleman's 2003 conviction is a matter of 
public record in Nicaragua. 
 
Ongoing Investigations in Nicaragua, Panama, the United 
States, and the Dominican Republic 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶19.  (U) Aleman still has several corruption charges pending 
in Nicaragua, including the "Huaca II" case that includes 
most of the fraudulent Panamanian transactions described 
above.  However, Aleman is trying to negotiate with FSLN 
leader Daniel Ortega, who controls the court system, to have 
all remaining charges dismissed and his conviction erased. 
 
¶20.  (U) The government of Panama has frozen nearly ten 
million dollars stolen by Aleman and Jerez and hidden in 
Panamanian shell companies.  Prosecutors in Panama have 
issued a criminal indictment against Aleman and several of 
his family members, including Maria Fernanda Flores de 
Aleman, Maria Dolores Aleman,  and Jose Antonio Flores Lovo 
for their money laundering activities in that country. 
Although the Aleman family and their lawyers have repeatedly 
used legal trickery in Panama and Nicaragua to delay the 
start of the criminal trial, the first hearing took place on 
March 30, 2006. 
 
¶21.  (U) Approximately 700,000 dollars stolen from the 
Nicaraguan government by Aleman and Jerez and invested in CDs 
in Florida in the names of Arnoldo Aleman, Maria Dolores 
Aleman, Maria Alejandra Aleman, Carlos Miguel Aleman and 
other family members is presently frozen by the United States 
government and is subject to a pending civil forfeiture 
proceeding.  Fearing the loss of the stolen money, the Aleman 
 
family has repeatedly sought to delay resolution of this 
case.  The United States Department of Justice is also 
studying a possible criminal money laundering case against 
several members of the Aleman family. 
 
¶22.  (U) Reports that the Aleman family has hidden stolen 
government funds in the Dominican Republic with the help of 
business associates and family members in that country are 
presently under investigation. 
 
¶23.  (SBU) Sources: The Panamanian details are contained in 
the charges brought against Aleman and his family in that 
country, details of the "Huaca II" case are in the hands of 
both the Procuraduria and the Fiscalia (the latter of which 
is trying to sabotage the case). Many of these documents are 
the same ones described above that document the Panamanian 
money laundering activities of Aleman and his family. The 
Procuraduria has formally invoked regional anti-corruption 
treaties (including the Inter-American Convention on Mutual 
Assistance in Criminal Matters)  to ask the government of the 
Dominican Republic to begin investigating Aleman's activities 
in that country. The Dominican investigation began in early 
2006, and centers on money transferred to the D.R. from the 
accounts of the &Budapest8 shell company set up in Panama 
by Aleman. Jose Grullon Flores Lovo, the brother-in-law of 
Aleman's wife, who lives in the D.R. facilitated the transfer 
to that country of at least USD 140,000 in laundered funds 
stolen from the GON. 
 
How the Aleman Family Spends its Stolen Money 
- - - - - - - - - - - - - - - - - - - - - - - 
 
¶24.  (U) While he was still president, Aleman and his entire 
extended family spent taxpayer money flying all over the 
world on "official" trips to such places as Miami, Rome and 
Stockholm.  These trips were really family vacations, as the 
family would often use government credit cards to spend tens 
of thousands of dollars in a single afternoon on jewelry, 
clothing and other personal purchases at shopping malls. 
While most Nicaraguans were recovering from the devastating 
effects of Hurricane Mitch in the spring of 1999, Aleman was 
hauling his entire extended family to Sweden for a hurricane 
reconstruction meeting so that they could enjoy a vacation 
and go shopping at government expense.  On this and other 
trips, the Aleman family ran up a combined total of nearly 
two million dollars in personal expenses on government credit 
cards, and had Central Bank President Noel Ramirez write 
checks to make the Nicaraguan people pay for the Aleman 
family's private shopping and travels.  Documentation on all 
of this spending is in the hands of the Nicaraguan and United 
States governments. 
 
¶25.  (U) When Aleman married Maria Fernanda in 1999, he threw 
an engagement party at the exclusive Biltmore hotel in Miami, 
flying his entire family and hundreds of other Nicaraguans to 
the United States and paying for hundreds of thousands of 
dollars in hotel expenses.  This extravagant affair was 
followed by a honeymoon around the world that included stops 
in Egypt and India.  Since Aleman left office in 2002, his 
family has continued to live the good life on its stolen 
government money, as evidenced by the study of Carlos Miguel 
at exclusive schools in the United States and Spain or the 
extravagant high society party thrown at the Hotel Princess 
by Maria Fernanda in 2004 when her second daughter with 
Aleman was born. 
 
¶26.  (SBU) Sources: Most of these examples of the extravagant 
lifestyle of the Aleman clan were widely reported by the 
Nicaraguan media at the time that they occurred. The Aleman 
family has never made any effort to disguise its massive 
spending. Quite the contrary; the family has always wanted 
everyone to see it living the good life and recognize its 
financial and political power. The family's misuse of 
government credit cards for personal spending, and of the 
role of Noel Ramirez in using government funds to pay the 
card bills, is thoroughly documented in Nicaraguan Central 
Bank records. 
 
The Impact of the Aleman Clan's Thievery on Nicaragua 
- - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶27. (U) In addition to robbing the Nicaraguan people of a hundred million dollars that could have otherwise have been used to do everything from buQding roads and infrastructure to increasing salaries of public sector workers, the vast corruption of Arnoldo Aleman and his family damaged Nicaragua in many other ways. For starters, Aleman's thievery has given Nicaragua a reputation for endemic corruption and driven away potential investors who would otherwise have brought jobs and economic development to the country.
 
¶28. (U) At the same time, Aleman's determination to use his stolen money to retain political power and protect himself from punishment for his crimes has led him to enter into a "pact" with Daniel Ortega that has allowed the two caudillos to divide up, politicize, and corrupt almost all the institutions of the Nicaraguan state, including the National Assembly, the judiciary, the Supreme Electoral Council (CSE), and the offices of the Controller General and National Prosecutor (Fiscalia). Aleman's wanton disregard for the Nicaraguan people and his efforts to run Nicaragua as a feudal family state have severely damaged all of the country's democratic institutions and endangered its political stability and future economic development.
 
¶29. (SBU) Sources: One specific impact of Aleman's thievery on Nicaragua is seen in the annual Corruption Perceptions Index produced by Transparency International. Nicaragua's ratings in this index declined throughout Aleman's presidency and have never really recovered. From a high of 3.1 (out of 10) in 1998, Nicaragua's rating declined to 2.4 by the time Aleman left office. Although the country's reputation has improved slightly because of the anti-corruption efforts of President Bolanos, the fact that Aleman (and Ortega) continue to control most of the institutions of the state has continued to do severe harm to Nicaragua's reputation and ability to attract international investment. In the most recent ratings, in 2005, Nicaragua received a lowly 2.6 (out of 10) for a rating of 107th out of 159 countries surveyed. All of these details and more are available on Transparency International's website (www.transparency.org). This is, of course, merely one example of the damage Aleman did (and continues to do) to Nicaragua's reputation and economic growth potential.
 
¶30.  (SBU) Sources continued: Aleman's various "pact" 
negotiations with Ortega and his stocking of government 
institutions with corrupt cronies are all a matter of public 
record, and account directly for the sorry state of the 
Fiscalia, the Supreme Court, the Supreme Electoral Council, 
the National Assembly, and the Contraloria to this day. 
TRIVELLI