VZCZCXYZ0000
PP RUEHWEB

DE RUEHDG #2721/01 3452001
ZNR UUUUU ZZH
P 112001Z DEC 07
FM AMEMBASSY SANTO DOMINGO
TO RUEHC/SECSTATE WASHDC PRIORITY 9787
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEHPU/AMEMBASSY PORT AU PRINCE PRIORITY 4751
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUCOWCV/CUSTOMS CARIBBEAN ATTACHE MIAMI FL PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHMCSUU/FBI WASHINGTON DC PRIORITY
RUEAHLC/HOMELAND SECURITY CENTER WASHINGTON DC PRIORITY
RUEPINS/HQ BICE INTEL WASHINGTON DC PRIORITY
RUEFHLC/HQS DHS WASHDC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY 1711
RUMISTA/CDR USSOUTHCOM MIAMI FL PRIORITY

UNCLAS SANTO DOMINGO 002721 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR WHA, WHA/CAR, WHA/EPSC, EB/IFD/OMA; DEPT PASS TO 
SEC, FEDERAL RESERVE; TREASURY FOR GRAY AND FOSTER; DOJ FOR 
OIA (MAZUREK AND ORJALES); SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: N/A 
TAGS: EFIN PGOV PREL KJUS KCOR DR
SUBJECT: DOMINICAN BANKING: RECENT BANK FRAUD CONVICTIONS 
CHALLENGE IMPUNITY 
 
REF: SANTO DOMINGO 825 
 
¶1. SUMMARY:  Recent convictions in the Banco Intercontinental 
(Baninter) bank fraud case demonstrate improvement in the 
fight against impunity in the Dominican Republic, especially 
when viewed in the light of previous bank fraud prosecutions. 
 End Summary. 
 
¶2. BACKGROUND:  Fraudulent accounting and embezzlement were 
the leading causes of the failures in mid-2003 of three 
Dominican banks, with losses at the largest of the three, 
Baninter, now estimated at US $2.7 billion, a figure roughly 
equivalent to 15 percent of the country's 2003 Gross Domestic 
Product (GDP).  A decision to fully cover depositors, losses 
via Central Bank issued certificates of deposit more than 
doubled national debt in 2003-04, from the equivalent of 
about 26 percent of GDP to the equivalent of 57 percent of 
GDP, caused massive devaluation of the peso, and ultimately 
resulted in successive victories in the 2004 presidential and 
2006 congressional and municipal elections for the political 
party then in opposition, the Dominican Liberation Party 
(PLD). 
 
¶3. BANINTER - PROCEDURE, VERDICT, SENTENCING:  The first and 
most spectacular of the 2003 bank failures, both for economic 
impact and the personalities involved, was the multi-billion 
dollar collapse of Baninter. Baninter executive Ramon 
("Ramoncito") Baez Figueroa had played a prominent role in 
Dominican society; his family owned a majority share of 
leading newspaper "Listn Diario," he was reputed to be 
preparing to run for the presidency, and his generosity made 
him the darling of both social and philanthropic circles. 
Some of his largess came from a personal expense account at 
the bank, through which he siphoned roughly US $38 million. 
Other indicted executives included two Bank vice-presidents, 
a prominent local attorney, and renowned US-Dominican 
entrepreneur Luis Alvarez Renta. 
 
¶4. The prosecutorial history of the criminal case was 
tortuous, involving preventive detention, a judicial 
reduction of charges, and an appeal reinstating charges. 
Despite initial charges being lodged in 2003, the first 
hearing by a trial court did not occur until April 3, 2006, 
and while defense counsel (Presidential drugs advisor Vincio 
"Vincho" Castillo) utilized an obvious strategy of delay, the 
trial finished in a timely fashion, with verdicts, as 
follows, pronounced in November 2007: 
 
-- Bank President Ramon Baez Figueroa ) guilty of violating 
monetary and banking laws and acquitted of money laundering. 
Baez Figueroa was sentenced to ten years incarceration, 
indemnification of the government in the amount of 63 billion 
pesos (approx. US $1.9 billion), forfeiture of various 
confiscated media outlets, and additional fines. 
 
-- Bank Vice President Marcos Baez Cocco - guilty of 
violating monetary and banking laws and acquitted of money 
laundering.  Sentenced, after two postponements, to eight 
years incarceration, indemnification of the government in the 
amount of 18.05 billion pesos (approx. US $540 million), plus 
assumption of 75 percent of the indemnification originally 
assigned Baez Figueroa) and additional fines. 
 
-- Bank Vice President Vivian Lubrano de Castillo ) 
acquitted of all charges. 
 
-- Bank Legal Counsel Jesus Maria Troncoso Ferrua ) 
acquitted of all charges. 
 
-- Entrepreneur Luis Alvarez Renta ) guilty of the sole 
charge submitted:  money laundering.  Alvarez Renta was 
sentenced to ten years incarceration and various fines. 
 
¶5. All convictions are on appeal by the defense and all of 
the convicted defendants remain free on bail.  The 
prosecution is asking on appeal that: 1) Lubrano be declared 
 
guilty of forgery, breach of trust and violation of the 
Monetary and Financial Law, which carries a penalty of 6 
years incarceration; and 2) Baez Figueroa, Baez Cocco, and 
Alvarez Renta be sentenced to the statutory maximum (twenty 
years) -- though, interestingly, prosecutors are not 
contesting the money laundering acquittal. 
 
¶6. BANINTER - PUBLIC REACTION, EMBASSY COMMENT:  The verdicts 
were controversial and thought by many public commentators to 
be "politically expedient" and to "support impunity," in 
that: 1) some defendants were acquitted; 2) the convicted 
received less than the maximum sentence possible; and 3) the 
verdicts appeared internally inconsistent in terms of the 
money laundering convictions/acquittals.  Embassy 
nevertheless views the result as a step forward, as this is 
the first time that significant sentences were given to upper 
class, socially prominent members of the banking sector. 
 
¶7. COMPARISON WITH BANCREDITO, BANCO MERCANTIL: As was the 
case with Baninter, both Bancredito and Banco Mercantil were 
owned by prominent Dominican families and, again, as in 
Baninter, false accounts and sweetheart deals to other 
family-owned firms eventually forced the banks into 
bankruptcy in 2003.  The total value of both of these banks 
prior to bankruptcy approached US $1 billion.  Following a 
lengthy trial, convictions in the Bancredito case, currently 
under appeal (by the defense for lack of evidence, by the 
prosecution to impose stiffer sentencing), were entered in 
August 2006 against: 
 
-- Bank President and media mogul Manuel Arturo Pellerano 
Pena for falsification of public or authentic, commercial or 
banking writings, criminal association and manipulation of 
data and documents in prejudice of the Dominican state. 
Pellerano was sentenced to three years incarceration and a 
one million peso (approx. US $30,000) fine. 
 
-- Bank Vice President Juan Felipe Mendoza Gomez for 
falsification of public or authentic, commercial or banking 
writings, criminal association and manipulation of data and 
documents in prejudice of the Dominican state.  Mendoza was 
likewise sentenced to three years incarceration and a one 
million peso (approx. US $30,000) fine. 
 
Civil society and press commentators have widely criticized 
these sentences as being too light. 
 
As for Banco Mercantil, a controversial February 2006 Supreme 
Court decision has upheld only the prosecution of former bank 
president Andres Aybar Baez.  A lower appeals court decision 
allowing the prosecution of nine other defendants was 
reversed and remanded.  The case has not reached the trial 
phase. 
 
¶8. NEXT STEPS/CONCLUSION:  Although the appeals process is 
lengthy, it appears at first blush that the Embassy's work 
with local NGOs and the judicial sector to create a climate 
of accountability also created circumstances that allowed the 
legal process against all of the defendants to continue 
unimpeded.  Embassy will continue to monitor all three cases 
mentioned - the Baninter and Bancredito appeals, as well as 
the Banco Mercantil trial.  A final disposition that upholds 
or augments these sentences will be seen here as proof of a 
judicial shift away from impunity. 
BULLEN