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DE RUEHAC #1113/01 3071925
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R 031925Z NOV 06
FM AMEMBASSY ASUNCION
TO RUEHC/SECSTATE WASHDC 4976
INFO RUCNMER/MERCOSUR COLLECTIVE
RUMIAAA/USCINCSO MIAMI FL//SCJ3/SCJ33/SCJ34/SOCSO LNO//
RHEHNSC/WHITE HOUSE NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC

C O N F I D E N T I A L ASUNCION 001113 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR WHA/BSC, INL/LP (JIM HIDES), AND EB/IFD/OIA 
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 
 
E.O. 12958: DECL: 11/02/2026 
TAGS: PHUM PGOV PREL ECON AID PA
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, OCTOBER 28 
- NOVEMBER 3, 2006 
 
 
Classified By: PolCouns James P. Merz; Reasons: 1.4(b),(d). 
 
¶1. (U) SUMMARY: 
 
-- First Money Laundering Conviction in Paraguayan History 
-- Senior Military Official Indicted 
-- Bridging the Digital Divide 
 
 
FIRST MONEY LAUNDERING CONVICTION IN PARAGUAYAN HISTORY 
 
¶2. (U) Daniel Fretes Ventre, the former Inspector General 
under President Wasmosy, was sentenced October 24 to 12 years 
in prison and a $68,000 fine for illicit enrichment, money 
laundering and other crimes.  (NOTE: Members of Fretes' 
family were also convicted of the same crimes.  Elisa 
Corvalan Caceres (spouse), Rosa Corvalan Caceres 
(sister-in-law), and Leonardo Fretes Ventre (brother) were 
all sentenced to 10 years in prison and must pay fines of 
$38,000, $5,690 and $85,000, respectively.  In addition, 
Ruben Fretes Ventre (brother) was sentenced to 8 years in 
prison. END NOTE.)  Fretes and his accomplices laundered the 
money through a family-established college (The Commercial 
and Development Technical University - UTCD) and three 
family-owned businesses.  In addition to other penalties, the 
authorities confiscated 11 family-owned properties in 
Asuncion and Ciudad del Este.  COMMENT: This decision revoked 
the December 2004 decision absolving the defendants. Current 
Paraguayan requires defendants be found guilty of a precedent 
criminal offense before they can be convicted of money 
laundering.  This condition has proved a serious hurdle to 
building successful money laundering cases.  This case easily 
represents the most significant money laundering conviction 
-- from less than a handful to date -- and reinforces the 
fact that convictions are possible, however difficult, unde 
the currently flawed legal framework.  END COMMENT 
. 
SENIOR MILITARY OFFICIAL CHARGED WITH ILLICIT ENRICHMENT 
 
¶3.  (U)  Col. Heribero Galeano, the Commander of the First 
Infantry Division and former Head of the President's 
Protection Regiment, was arrested and charged with illicit 
enrichment October 31.  Anti-Corruption Prosecutor Arnaldo 
Giuzzio maintained Galeano had assets in his name that 
exceeded his income by well over $200,000.  Galeano had 
already been the subject of controversy, alleged to have been 
involved in wiretapping political opponents when he headed 
the Presidential Protection Regiment until earlier this year. 
 Duarte Administration officials questioned the timing of 
this arrest only weeks before municipal elections scheduled 
for November 19.  Galeano represents the most senior active 
military official to ever face such serious charges. 
 
¶4.  (C)  Prosecuting attorney Giuzzio has become a lightning 
rod for controversy himself.  His five-year term as a 
prosecutor expired last year and he is up for renewal. 
Absent a vote, his contract runs month-to-month, allowing for 
no long-term stability, financially, professionally or 
personally.  Many prosecutors in this situation prove 
cautious about taking on political interests lest they risk 
losing favor with a selection board that is driven by such 
interests.  Giuzzio -- one of two full-time anti-corruption 
prosecutors -- told the DCM he takes a different approach. 
Refusing to bow to political pressure, he looks for cases 
that will place him in the spotlight as a crusader against 
corruption.  Earlier in October, he opened a case against the 
President of the House of Deputies, Victor Bogado, for 
corruption.  The Colorados voted down a motion that would 
have lifted Bogado's congressional immunity but Giuzzio 
maintains his investigation will continue. Guizzio insists he 
does not choose his targets based on political affiliation, 
and told DCM that newspaper exposes are his single-most 
important source for leads on where to look for cases of 
public corruption. 
 
BRIDGING THE DIGITAL DIVIDE 
 
¶5. (U) Paraguay is one of 20 countries selected for funding 
under USAID's Global Last Mile Initiative, which is designed 
to bridge the "digital divide."   The Paraguayan program aims 
to increase internet services to 100 sites in rural and other 
underserved areas.  The U.S. Government is providing more 
than $400,000 to install internet access to the Chaco Region 
(particularly the Departments of Colonel Oviedo and San 
Pedro) including schools, clinics, and NGOs.  Public-private 
partnerships, including a key alliance formed already with 
the Paraguayan company TIGO and a local NGO (Fundacion 
Paraguaya), are expected to leverage additional contributions 
to the project.  (NOTE: Excessive prices continue to limit 
internet access, constraining economic opportunity.  Recent 
corruption charges have been leveled against past and present 
senior officials at both the communications regulatory agency 
and service company, creating a "do-nothing" climate with 
respect to improving and increasing public access. END NOTE.) 
 
CASON