VZCZCXRO2544
RR RUEHGR
DE RUEHPO #0502/01 2622109
ZNR UUUUU ZZH
R 192109Z SEP 07
FM AMEMBASSY PARAMARIBO
TO RUEHC/SECSTATE WASHDC 9685
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 1627
RUEHTC/AMEMBASSY THE HAGUE 1603
RUEHAO/AMCONSUL CURACAO 1166
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 PARAMARIBO 000502 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR JROSHOLT, BLAMPRON (EB/TPP/BTA/EWH), DEPT FOR 
INL/LP BCARHART, CARACAS FOR LEGATT, PORT OF SPAIN FOR 
LEGATT, TREASURY FOR FINCEN 
 
E.O. 12958: N/A 
TAGS: EFIN SNAR KCRM NS
SUBJECT: UNPRECEDENTED CONVICTIONS AGAINST OLDEST BANK IN 
SURINAME 
 
REF: A. 07 PARAMARIBO 444 
 
     ¶B. 07 PARAMARIBO 470 
 
PARAMARIBO 00000502  001.2 OF 002 
 
 
¶1. (U) SUMMARY  In a highly emotional proceeding on August 30 
the former and current directors of the De Surinaamsche Bank 
(DSB), Ed Muller and Sigmund Proeve, were convicted for 
violating Suriname's foreign exchange law by transferring 
funds internationally  without the consent of the Foreign 
Exchange Commission.  Along with them the bank itself (as an 
entity), its compliance officer, Patrick Bhagwandin, and 
casino owner and then-manager of the Suriname Leisure Company 
(SLC), Jeffrey Clague, were also convicted.  The conviction 
shocked many in the financial and business community who 
expected a light sentence, if any.  The bank's Board of 
Supervisors and the Central Bank of Suriname were quick to 
point out that neither the stability of the oldest bank in 
the country nor the monetary stability of Suriname are at 
risk, and Director Proeve refused to step down.  The Bankers' 
Association Suriname (BVS) has called into question the 
practicality of the 1947 Foreign Exchange law on which the 
case is based. END SUMMARY 
 
------------- 
THE SENTENCES 
------------- 
 
¶2. (U) Suriname's financial and business community, 
apparently expecting a sentence no harsher than a rap on the 
knuckles, was shocked at the convictions of both the past and 
the present directors of the oldest bank of Suriname.  As per 
request of the public prosecutor, a judge sentenced Muller 
and Proeve to one year imprisonment - of which six months is 
conditional - and three years probation.  Bhagwandin was 
sentenced to three months conditional imprisonment and three 
years probation. Clague was sentenced to one year 
imprisonment, of which six months conditional, and was fined 
500,000 Surinamese dollars (SRD; about U.S. $178,500).  A 
fifth defendant, Ghautam Pharboe, was acquitted of all 
charges.  The DSB Bank, as an entity, was fined two amounts: 
SRD 100,000 (U.S. $35,700), plus SRD 1 million (U.S. 
$357,000) based on presumed profits from the illegal 
activities, which it must pay back within one year or risk 
having its activities halted for up to one year.  Clague's 
former company SLC was also fined SRD 1 million (U.S. 
$357,000) in presumed profits.  In his sentencing the judge 
noted that the bank officials acted "knowingly and willingly" 
and that their actions "jeopardized" the fragile monetary 
stability of Suriname.  The judge's sentencing was further 
guided by the fact that both the Central Bank and the Foreign 
Exchange Commission repeatedly warned DSB that its transfer 
of funds on behalf of its clients was in violation of the 
ruling legislation.  Although no similar case has ever gone 
before the court, other cases involving the Foreign Exchange 
Commission have been resolved as economic offenses leading 
only to fines. 
 
--------- 
REACTIONS 
--------- 
 
¶3. (U) Amidst the shock ripples, the supervisory board and 
the union of DSB each issued statements condemning the 
convictions and declaring their full support for the bank's 
management.  The supervisory board has gone so far as to 
retain Proeve as the president of the bank, asking him to 
continue the overall management, and he has agreed.  In an 
effort to calm the financial market, the Central Bank 
immediately issued a statement that it guarantees DSB will 
continue to provide its regular services, and that it still 
has the fullest confidence in DSB, which has a market share 
of close to forty percent. 
 
¶4. (U) Organizations like the Bankers' Association of 
Suriname (BVS) and the Association of Economists (VES) have 
expressed concern for the ramifications of the convictions 
for both Suriname and DSB.  They say the convictions have 
seriously dented the trust people have in their banking 
institutions, and that trust is of the utmost necessity.  The 
VES has, however, questioned the board's decision to retain 
Proeve as its manager.  The BVS asked the government to 
update the country's foreign exchange legislation, citing its 
impracticality.  The law dates back to 1947 and was passed as 
a continuation of a World War II measure to secure the 
 
PARAMARIBO 00000502  002.2 OF 002 
 
 
country's financial system; it works contrary to the 
liberalized international system of today. 
 
---------------------- 
BIG NAMES OR BIG MONEY 
---------------------- 
 
¶5. (U) All three bank officials are considered prominent 
members of the community whose social status alone was seen 
as important enough to keep them out of prison.  Muller is 
currently the president of a regional development bank for 
medium sized businesses, is president of Rotary Suriname, and 
is Honorary Consul of Sweden.  Proeve is an up-and-coming 
face in the business community with significant links to 
social organizations.  Bhagwandin is the son-in-law of the 
Governor of the Central Bank, Andre Telting.  After the 
sentencing, the prosecutor stated that the payment of the 
fines is more important to her than the imprisonment.  If the 
convictions hold, the government stands to earn approximately 
U.S. $1 million in fines. 
 
¶6. (SBU) COMMENT  Businessmen might shake their heads over 
the doleful state of over-regulation which led to the case in 
the first place, or question the apparent government efforts 
to make money off the case.  However, Post views the symbolic 
message of the case - unforgiving enforcement of the law - as 
a positive signal in a country where corruption has long been 
tolerated.  Moreover, it is only the latest in a series of 
attacks on corruption (refs).  Also of note is the 
interesting reaction of the Surinamese public: forgiveness 
and shock that the GOS would dare to convict prominent 
citizens.  Given the above, Post notes that the GOS legal 
system may be ahead of the public in taking the fight against 
corruption seriously.  END COMMENT 
 
 
SCHREIBER HUGHES