Cable by Dazzlepod US Embassy Diplomatic Cables from WikiLeaks Released 251287 Cables (Sep 2, 2012)
ORIGIN
CONFIDENTIAL (97070)
CONFIDENTIAL//NOFORN (4678)
SECRET (11322)
SECRET//NOFORN (4330)
UNCLASSIFIED (75792)
UNCLASSIFIED//FOR OFFICIAL USE ONLY (58095)
Reference ID 05QUITO1000 (original text)
SubjectEMBASSY RECOMMENDS 3C FINDINGS FOR ISAIAS BROTHERS
OriginEmbassy Quito
ClassificationCONFIDENTIAL
ReleasedAug 30, 2011 01:44
CreatedMay 2, 2005 23:21
This record is a partial extract of the original cable. The full text of the original cable is not available. C O N F I D E N T I A L SECTION 01 OF 04 QUITO 001000 
 
SIPDIS 
 
VISAS DONKEY 
 
DEPARTMENT FOR WHA/AND, WHA/PPC, CA/VO/L/C, L/LEI, L/WHA, 
INL/C/CP, P, COUNSELOR 
 
E.O. 12958: DECL: 04/19/2015 
TAGS:          
SUBJECT: EMBASSY RECOMMENDS 3C FINDINGS FOR ISAIAS BROTHERS 
 
REF: A. QUITO 839 
      B. QUITO 623 
      C. 04 QUITO 3206 
      D. 04 QUITO 1745 
      E. 03 QUITO 2349 
      F. STATE 262132 
      G. STATE 262205 
 
Classified By: Ambassador Kristie A. Kenney, Reasons 1.4 (b) 
 
 1.  (C) SUMMARY:  William and Roberto Isaias, former chiefs 
of Filanbanco bank and among Ecuador's richest men, fled 
Ecuador in 1999 after absconding with over $100 million in 
government bailout funds.  They used their ill-gotten wealth 
to buy safe passage from Ecuador and later pressured 
prosecutors to reduce criminal charges against them.  Similar 
pressure tactics resulted in GoE-prepared extradition 
packages that were insubstantial and non-actionable by the 
Department of Justice.  Proof of their financial shenanigans 
was sufficient, however, to permit the State Department to 
revoke their visas on money-laundering charges in 2003. 
 
 2.  (C) The Isaiases' presence in the United States has 
proven a bilateral irritant for nearly six years.  Ecuador's 
rabid media accuse us of harboring fugitives and paying lip 
service to our anti-corruption OAS commitments, and former 
President Lucio Gutierrez, elected partly on a "bring the 
bankers home" platform, regularly demanded their and others' 
return as quid pro quo for supporting U.S. policies.  From 
south Florida the brothers recently spurred a bank run here, 
hurting U.S. efforts to help foment Ecuadorian economic 
growth, a key Mission goal. 
 
 3.  (C) The Immigration and Nationality Act's Section 212 
(a)(3)(C) renders inadmissible any "alien whose entry or 
proposed activities in the United States the Secretary of 
State has reasonable grounds to believe would have serious, 
adverse foreign policy consequences for the United States 
Government."   Understanding 3C can be utilized to deport 
aliens as well, the Embassy seeks Department support in 
expeditiously expelling these individuals on foreign policy 
grounds.  END SUMMARY. 
 
--------------------------- 
A Tangled Web of Corruption 
--------------------------- 
 
 4.  (C) Filanbanco, Ecuador's largest bank, began 
experiencing severe liquidity problems in 1998, owing to the 
poor quality of its loan portfolio.  The Central Bank 
extended a $440 million liquidity support loan on the 
condition the bank undertake no new lending activity.  As 
Filanbanco's health worsened, President Roberto Isaias and 
Executive Vice President William Isaias orally instructed the 
bank's head accountant to begin a series of transfers to an 
offshore trust in the Caymans.  On December 3, 1998, with 
Filanbanco perilously close to running out of liquidity, the 
GoE intervened in the bank's operation, ceding control to the 
AGD, Ecuador's Resolution Trust Corporation-equivalent.  The 
Isaias brothers were removed as directors.  Subsequent 
bailouts totaling over $1 billion were unable to restore 
financial health, and in June 2001 the GoE shuttered 
Filanbanco, freezing over 350,000 individual accounts in the 
process (Ref E). 
 
 5.  (C) Throughout 1999, allegations surfaced regarding 
William and Roberto Isaias' negligent, even criminal 
management of Filanbanco.  Feeling the heat, they left 
Ecuador for Florida in late December 1999, where they remain 
today.  From Coral Gables, the brothers continue to 
administer a business empire which includes Ecuador's sole 
cable television operator, seventy radio stations, three 
television stations, Ecuador's largest sugar processor, and a 
yogurt brand; not one firm is registered in their names. 
Among Ecuador's wealthiest expats, they also wield political 
power, with strong ties to Coast-based parties the PSC 
(center-right) and PRE (populist). 
 
------------------------------------ 
Their Power Over the Judicial System 
------------------------------------ 
 
 6.  (C) No records exist in Ecuador's migration system to 
document the brothers' December 1999 exit.  The Attorney 
General's Office began investigating the brothers shortly 
thereafter, and eventually recommended bank fraud charges in 
a report presented to Attorney General Mariana Yepez.  Yepez, 
whose PSC ties were widely known, immediately departed on an 
unannounced trip to Bogota where she allegedly met with PSC 
stalwart Xavier Neira (confidential Embassy sources claim 
Neira paid her a $2 million bribe).  On her return from 
Colombia, Yepez refused to sign the indictment and disbanded 
the financial crimes investigative unit.  An indictment 
eventually came two months later, but much of the evidence 
earlier uncovered had disappeared. 
 
 7.  (C) A year passed between the indictment's issuance and 
its June 2001 delivery to the USG as part of a GoE 
extradition request.  Upon receipt, it was apparent the 
charging document and supporting files were insufficient to 
bring the Isaiases' case before a U.S. extradition judge. 
Following up, DoJ attorneys visited Ecuador in 2003 for 
meetings with Embassy staff, financial investigators, and 
government officials (the latter refused to engage).  They 
concluded that the lack of evidence showing the Isaias 
brothers had benefited personally from the illegal transfers 
would prevent the extradition case from progressing (we since 
learned the Isaises' domestic employee, in the Caymans, 
signed for the $107 million wire transfer).  Yepez 
subsequently insulated the brothers further, reducing bank 
fraud charges to civil fraud, a non-extraditable offense 
(Ecuador's then-Supreme Court president later overturned her 
ruling, however).  Bank fraud changes remain active against 
the brothers. 
 
--------------------------------------------- 
Why Self-Flagellate When You Can Gringo-bash? 
--------------------------------------------- 
 
 8.  (C) The United States Government did not bankroll the 
Isaises, co-sign their bad loans, embezzle government bailout 
funds, smuggle them across the border in a car trunk, bury 
evidence, or pressure prosecutors to reduce charges against 
them.  Yet by reading the press in Ecuador you would think it 
had.  As news of the brothers' thievery went public, 
headlines like "U.S. Lays Out Welcome Mat to Pension Fund 
Robbers" and "Bush's Words, Actions Differ on Corruption" 
became commonplace.  Local temperatures peaked in 2003, when 
Ecuadorian media carried Miami society pages' coverage of 
Roberto's daughter's wedding, a million-dollar affair held at 
the Versace Mansion. 
 
 9.  (C) Media indignation fed public discontent and 
eventually drove GoE policy.  Lucio Gutierrez, a former Army 
colonel and 2000 coup leader, won Ecuador's presidency in 
November 2002 by rallying the underclasses with a populist, 
far-left platform; a key plank was his promise to "bring the 
'corruptos' home to face justice."  In early meetings with 
USG officials, a Washington call on President Bush included, 
he reiterated his interest in successful banker 
repatriations.  Subsequently, Gutierrez linked the return of 
the Isaiases and others of their ilk to Ecuadorian support 
for key U.S. initiatives, from Article 98 to hemispheric free 
trade. 
 
 10.  (C) Physical separation from Ecuador has not blunted the 
Isaises' influence nor their capacity to do harm.  In 
September 2004, TeleAmazonas TV, owned by the Egas family, 
financial rivals of the Isaiases, broadcast a series of 
reports on Ecuador's 1999-2000 bank collapse.  One segment 
concerned Roberto Isaias and his activities during the 
period.  TeleAmazonas officials claimed that Roberto 
contacted them before the show aired, threatening retaliation 
if it did.  In retaliation, the Isaias-owned TV TC broadcast 
a piece alleging the insolvency of Egas-owned Banco de 
Pichincha, the nation's largest bank.  Contacts told us that 
a dangerous bank run ensued, threatening the Ecuadorian 
financial system's solvency.  Only after Church leaders 
brokered a "truce" did depositors begin to re-invest their 
savings in Banco de Pichincha, hitherto Ecuador's most solid 
financial institution. 
 
---------------------- 
USG Not Standing Still 
---------------------- 
 
 11.  (C) In 2003, prospects for extraditing the Isaias 
brothers looked hopeless -- whether from intimidation or 
subornment, Ecuadorian officials simply were unable/unwilling 
to provide the necessary supporting documentation.  A 
politically weak Gutierrez had turned for support to the PSC, 
whose leaders, many with business ties to the Isaises and 
fearing implication in future trials, wanted the brothers as 
far from Ecuador as possible.  Regardless of the president's 
overtures to his former political enemies and his 
administration's sub-par extradition performance, his public 
commentary remained unchanged, promising he would move heaven 
and earth in delivering the bankers to Ecuadorian courts. 
 
 12.  (C) Deportations require less GoE input than 
extradition.  Convinced the brothers were involved in 
financial crimes but unable to gather sufficient information 
to prove they had personally benefited -- an imperative for a 
successful extradition --  DHS began working to establish 
both administrative (misrepresentation) and criminal (money 
laundering) grounds for the brothers' removal.  Their 
investigations on the latter bore fruit, and in September 
2003, the Department of State, invoking Immigration and 
Nationality Act (INA) Section 212 (a)(2)(I), revoked "any and 
all visas issued to or held by William and Roberto Isaias" on 
money laundering grounds (Refs F, G).  DHS special agents in 
Miami assumed responsibility for notifying the brothers. 
 
------------- 
Not There Yet 
------------- 
 
 13.  (C) Possessing a U.S. visa does not guarantee entry into 
the United States, nor does losing one mean immediate 
removal.  Employing the finest attorneys their millions 
allow, the Isaises have successfully fought deportation for 
years, despite State's revocations of their E-2 and other 
visas.  In December 2004, however, a deeply-buried section 
(5304) of the 2004 Intelligence Reform/Terrorism law made 
prior revocation of an alien's nonimmigrant visa a grounds 
for removal (the Intel Reform law actually updated the INA's 
"Classes of Deportable Aliens" provisions).  As State's 2003 
revocation had covered "any and all" visas, the brothers 
appeared removable. 
 
 14.  (C) Subsequent DHS Miami inquiries revealed, however, 
that immigration adjudicators had approved change-of-status 
applications for William and Roberto Isaias, from E-2 to 
H-1b.  It remains unclear whether the processing occurred 
before or after the revocation, but in either case, it 
appears that State's actions would trump the adjudicators' 
(if the DHS changes occurred beforehand, the revocations' 
"any/all" provision would take precedent; if the changes 
occurred afterward, we imagine the adjudicators' likely 
lacked access to system "hits" and feel justified in 
requesting review).  Despite this, the brothers still enjoy 
valid H1-b status in the United States, as the DHS Service 
Center has not yet reconsidered the case. 
 
---------------------------- 
Why We Don't Want Their Kind 
---------------------------- 
 
 15.  (C) In November 2004 remarks in San Antonio, U.S. 
Permanent Representative to the OAS John Maisto asserted that 
corruption was the single biggest inhibitor to economic 
growth in the developing world.  "At the Monterrey Summit of 
the Americas," Maisto explained, "OAS member states, the 
United States included, pledged to deny safehaven to corrupt 
officials, those who corrupt them, and their assets." 
President Bush put force behind the anti-corruption mantra in 
Proclamation 7750, which suspends the entry of corrupt 
persons into the United States. 
 
 16.  (C) The gravity of the Isaiases' graft, and the 
bilateral damage their U.S. domicile has caused, make the 
case more than one of simple corruption, however.  Congress 
deposed Gutierrez on April 20, citing as justification his 
"dictatorial" bent and inability to govern, not the Isaiases. 
 In the post-mortem, however, former allies and commentators 
argued that Gutierrez's abandonment of his base and inability 
to meet campaign promises, extraditions included, contributed 
greatly to his downfall. 
 
 17.  (C) "Deepening Democracy's Roots" and "Promoting 
Economic Growth" rank one-two on the Embassy Mission 
Performance Plan's list of strategic goals (which effectively 
translate into U.S. foreign policy objectives in Ecuador). 
The Isiases' corruption and influence-peddling compromise our 
efforts to reach both.  Further, their continued presence in 
the U.S. provides grist to Ecuador's yankee-bashers who seek 
to drive our nations apart.  Despite early, expected 
pandering to these ultra-nationalists, Ecuador's new 
president, Alfredo Palacio, has expressed desires for close 
relations with the United States.  Expelling the Isaias 
brothers might provide Palacio a useful deliverable and quiet 
the restive left, boost rule of law here at a critical 
moment, and confirm the USG's anti-corruption bark has bite. 
 
 
 18.  (C) We therefore seek Department support in 
expeditiously removing these individuals on foreign policy 
grounds. 
KENNEY