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Cablegate: Forbes Energy Cites Corruption in Ethanol Project

VZCZCXYZ0001
RR RUEHWEB

DE RUEHDG #1371/01 2421508
ZNY CCCCC ZZH
R 291508Z AUG 08
FM AMEMBASSY SANTO DOMINGO
TO RUEHC/SECSTATE WASHDC 1359
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHPU/AMEMBASSY PORT AU PRINCE 4854

C O N F I D E N T I A L SANTO DOMINGO 001371

SIPDIS

E.O. 12958: DECL: 08/27/2018
TAGS: ECON ENRG KCOR EINV DR
SUBJECT: FORBES ENERGY CITES CORRUPTION IN ETHANOL PROJECT
DELAYS

REF: A. STATE 85047
B. SANTO DOMINGO 1353

Classified By: Ambassador PRFannin for Reasons 1.4 (b) and (d)

1. (C) SUMMARY. Executives with Forbes Energy met with the
Ambassador regarding the company,s planned USD 700 million
sugarcane ethanol project straddling the Dominican
Republic-Haiti border. They said that while they have
already obtained all needed permits for the project, which
will be based in Manzanillo, Montecristi, Dominican Republic,
they continue to face unnecessary delays and moving goalposts
that they interpret as prompts for bribes from government
officials. They also described two overt solicitations from
high-level officials for cash payments. The project is
currently held up due to delays in finalizing a negotiated
land swap with a state entity; the Ambassador has sent a
letter to the top official of this entity requesting a status
update. END SUMMARY.

2. (U) On August 28, the Ambassador met with Forbes Group CEO
Lucien Forbes, Director of External Relations Josh Fenton,
and Chief Legal Counsel D. Edward Wilson . Also present were
DCM Bullen, EconChief, PAO, EconOff and FCSO. The meeting
followed a July 31, 2008 meeting between the company and WHA
Assistant Secretary Shannon (ref A).

3. (U) The Forbes executives said that the company has been
working since 2006 to establish operations in the northern
border region to produce ethanol from sugarcane stock
primarily for export to the U.S. market. Initially, the
plant would denature Brazilian &wet8 ethanol for the United
States. Subsequently, the company will produce ethanol from
locally-grown sugarcane stock for the domestic and export
markets as well as generate 50 MW of electricity from bagasse
(sugarcane waste) for sale to the Dominican electricity grid.
The major part of the project will operate under the Special
Duty-Free Zone tax incentive regime. The local affiliate of
the company, Forbes Energy Dominicana, S.A., has already
received a 20-year renewable permit for a duty-free zone.
The executives said that this will be one of the largest
private investments ever in the country and the largest
commercial venture of its kind in the world.

4. (U) The project would also impact Haiti. While the ethanol
and electricity production will all take place in the
Dominican Republic, Forbes plans to either cultivate land
that it buys or else buy feedstock from Haitian producers
directly across the border from its Dominican assets. Forbes
said he aims to make the project fully operable with an
entirely Haitian-Dominican workforce within five years of
launch.

5. (SBU) Although the Forbes executives said that the company
has obtained all necessary permits to begin the project and
negotiated a Power Purchase Agreement (PPA) for the sale of
electricity to the local grid, they are awaiting the
signature of Radhames Segura, the executive vice president of
the Dominican Corporation of State Electrical Companies
(CDEEE), on a land-swap agreement. Although Segura has told
Forbes that &It,s done8, weeks have passed without a
signed agreement.

6. (C) The executives said they feel that Segura is moving
the goalposts in an attempt to prompt a personal payment for
him to facilitate the project,s completion, but noted that
he has never directly solicited a bribe. &He knows this is
costing me money,8 Forbes said. Fenton said that the
company would absolutely not pay any bribes and asked the
Ambassador to support this position. The executives also
mentioned two overt requests for bribes from senior GoDR
officials. Forbes said that at the end of 2007 the former
Minister of Tourism Felix Jimenez offered to get all
necessary permits in exchange for USD 10 million. (Note:
Jimenez was removed from his post on August 16 in the
inauguration cabinet reshuffle (ref B ). However, Jimenez
recently told the CONGEN that he was going to be the next
Ambassador to Washington after he improves his English. End
Note.) They also noted a similarly explicit request for cash
from an assistant to the Secretary of Defense whose name they
did not recall.

7. (C) Forbes also described the project as a victim of a
political rivalry between Segura and Juan Temistocles Montas,
the Secretary of Economy, Development and Planning. He
criticized the Fernandez administration,s inability to
transcend the personal impasse between these two officials,
both of whom are rumored to have presidential ambitions. He
said that while &the problem is Radhames Segura8, he
wondered whether the true holdup lies with the President
himself. He urged the Ambassador to make contacts with key
GoDR officials on the company,s behalf.

8. (SBU) The Ambassador told Forbes that he appreciated the
corruption-related challenges that the company is facing in
the Dominican Republic, and described USG efforts to combat
the government corruption at the institutional level through
USAID programs and other efforts. The Ambassador agreed to
write a letter to Segura inquiring into the status of the
land swap agreement. The letter was sent on August 28.

9. (C) COMMENT. While the corruption issues that Forbes
raised are not new or surprising, it was disturbing to hear
of the audacity of certain GoDR officials in offering their
assistance in exchange for large bribes. It is even more
worrisome that Post has now heard from two different sources
that Jimenez could be appointed as the next Ambassador to the
U.S. Post will consider whether to request a revocation of
Jimenez's visa for corruption and looks forward to
coordinating with the Department on whether to accept
agreement for the former minister if he is nominated as
Ambassador to the U.S. END COMMENT.
FANNIN

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