Peru airline founder faces third drug-related trial Documents allege Zevallos has used bribes, threats and intimidation By RICK VECCHIO, Associated Press LIMA, Peru -- After a 25-year career stained by allegations of drug trafficking, money laundering and contract murder, a Peruvian tycoon is facing a third trial on charges he used cocaine profits to help build a small jungle air taxi service into Peru's largest airline. U.S. law enforcement documents obtained by The Associated Press allege Fernando Zevallos has used bribes, threats and intimidation to scare off witnesses and manipulate Peru's justice system during his rise to the highest levels of the nation's business community. The 46-year-old Zevallos, who denies any wrongdoing and has never been convicted of a crime, says he's the victim of character assassination by drug dealers turned prison snitches, corrupt police, overzealous U.S. drug agents and business rivals. Zevallos, who lived in Florida for most of the 1990s, has been the subject of more than 30 investigations by the U.S. Drug Enforcement Administration as well as probes in Peru and Chile, law enforcement officials say. His U.S. residency was suspended in January and permanently revoked March 9. Zevallos said in a prepared statement faxed to AP that it was because of a technicality, but the U.S. Department of Homeland Security warned airlines they would face fines or possible seizure of aircraft if they flew him onto U.S. soil without permission. "Allegations linking Mr. Zevallos to narcotics trafficking, which have persisted for years, are a cause of serious concern," U.S. Embassy spokesman Michael Stanton told AP. In the new trial, the case against Zevallos hinges on the word of Jorge Lopez, the head of the Peruvian drug gang "Los Nortenos." Lopez was convicted for Peru's largest drug bust of the past decade -- the 1995 seizure of 3.3-tons of cocaine destined for Guadalajara, Mexico. Lopez alleges he and his partner gave Zevallos $1.5 million in 1991 to buy a Boeing 727 cargo jet to found Aero Continente the following year to transport drug shipments. Gang member Jose Mendiola claimed during his 1997 trial that Lopez and his brothers, were the owners of Aero Continente and said they paid Zevallos $1.4 million to transport cocaine. Mendiola, who received a 20-year sentence, later recanted the testimony. Lopez told investigators he will testify again against Zevallos but only after he received assurances of protection, according to a Peruvian law enforcement official, who spoke on condition of anonymity. Lopez, who is serving a life sentence, was attacked by three inmates and stabbed in 2001 in what he believed was an effort by Zevallos to shut him up, a U.S. law enforcement official said. Lopez is one of at least five convicted drug traffickers who have pleaded with authorities over the past 14 years for protection from Zevallos, according to Peruvian congressional, court and police records. Zevallos has said in interviews with Peruvian and Chilean news media that the allegations against him are unfounded, citing the facts that U.S. authorities let him live undisturbed in Florida in the 1990s and that Aero Continente was given a route to Miami. He also has argued that the DEA has nothing on him, noting two DEA probes of his activities were dropped in 1995 and 1997. Zevallos and his attorney, Elizabeth Lopez, declined repeated AP requests for an interview. So far, Zevallos has beat every charge against him. Terry Parham, director of the DEA's Lima office, told a Peruvian judge Zevallos was elusive because of the dis-appearance or destruction of court records and because of "Zevallos' ability to influence witnesses and officials through threats and reprisals," ac-cording to a letter obtained by AP. The Nov. 16, 2001, letter was first leaked to the Peruvian newspaper El Comercio. In the 1980s, Zevallos was twice accused of shipping coca paste, the raw material used to make cocaine, but was acquitted. Several years later, he was cleared of charges he ordered the 1987 murder of rival charter plane operator, Leonardo Gonzales, over an unpaid drug debt, according to police records and Peruvian and U.S. investigators. In 1997, Zevallos was indicted in Peru as part of the Nortenos case involving the 3.3-ton cocaine shipment, and Interpol issued an international arrest warrant for him the following year. But then, U.S. officials say, Zevallos' fugitive status was quietly downgraded to a court summons -- without public explan-ation -- and in October 2001 he returned to Lima to retake the reins of Aero Continente as a "corporate adviser." He was acquitted of the drug allegations leveled by Lopez in March 2002. His homecoming came during a period of upheaval in Peru's courts. Officials at every level of the judicial system were being arrested and charged with influence peddling and fixing cases during the 1990s under Peru's now-jailed ex-spy chief Vladimiro Montesinos, himself a former attorney for cocaine traffickers in the 1980s. In July 2002, a prosecutor cleared Zevallos of charges of "illicit association" with Montesinos. "Zevallos has continued to threaten witnesses, manipulate the media and the Peruvian judicial system to influence the ongoing investigations against him," according to the text of an internal DEA memo distributed to U.S. law enforcement agencies last year. A U.S. Embassy official confirmed that the text obtained by AP was authentic, and said U.S. law enforcement officials believe Zevallos influenced judges to eliminate or otherwise manipulate evidence and testimony, leading to his March 2002 acquittal. Peru's Supreme Court revived the 3.3-ton cocaine case against Zevallos last year, nullifying the 2002 not guilty verdict and ordering a retrial. The ruling was not released publicly, but a Peruvian official familiar with the decision confirmed media accounts that the Supreme Court faulted the lower court for not cross-examining Zevallos in the presence of the main prosecution witness -- Lopez -- a gross procedural error. The lower court also failed to adequately consider the prosecution's case that no financial explanation existed to legally account for Aero Continente's meteoric rise in Peru's aviation market, the official said. In a written complaint to the Supreme Court, Zevallos objected to a new trial in which he would be forced to face each of the convicted heads of the Nortenos drug gang in open court. Zevallos wrote that his accusers have no evidence to back up the testimony and that some of the cross examination would be with "persons who have stated they do not know me and who have never implicated me in illicit activity." A mistrial was declared the second time around in January after one of the magistrates fell ill, causing a lapse in hearings. The third trial is expected to begin sometime in the coming months, according to Peru's State Attorney's Office for Drug Enforcement. Zevallos faces 15 years in prison if convicted. Born in the northern jungle region of San Martin, Zevallos became a pilot in the mid-1970s as a cadet in Peru's air force. In 1980, he founded a charter plane company, Tausa, with a single Cessna valued at $96,000, in the Huallaga Valley, Peru's prime coca-growing region. He founded Aero Continente in 1992. By 2000, Aero Continente dominated Peru's domestic airline service, using extraordinarily low fares to help drive its main competitors out of business. The airline charged as little as $44 - $39, compared to the market fare of $70-$59 from Lima to all national destinations. The airline used the same tactic to become a growing force in Chile's domestic air market until Chilean authorities seized six Aero Continente planes and briefly locked up four of its executives in 2001 on suspicion of laundering drug money. Today, the airline no longer operates in Chile, but still flies from Peru to Colombia, Ecuador, Venezuela, Argentina and Miami. Zevallos' sister, Lupe, is president of the airline. There is no evidence Aero Continente is currently moving drugs, a U.S. law enforcement official said. Running approximately 40 flights a day with its 23 aircraft, Aero Continente had $140 million in sales in 2003 and controls about 60 percent of Peru's aviation market, a company spokesman said. Zevallos maintains the Chilean probes of his airline are a thinly veiled effort to benefit Aero Continente's archrival, Lan Chile. The money laundering case was dropped for lack of evidence less than two months after it started, but the criminal investigation was revived in 2002 when the DEA and Peruvian police shuttled five Peruvian drug traffickers to Santiago to testify about Zevallos' alleged criminal past. Two of the witnesses later recanted, accusing Chilean authorities, Peruvian police and the DEA of paying them each $10,000 to recite coached testimony. But while retracting his earlier statement, one of the drug dealers, Purificacion Marreros, told a Chilean judge he had been coerced by Zevallos. The admission led to Zevallos being charged last year with witness tampering and presenting false documents.Chilean news media reported in mid-March that Chile's State Defense Council said it plans to ask for Zevallos' extradition. A third accuser in the Chilean investigation, Cesar Angulo -- the gunman in the 1987 murder of Gonzales, the charter operator -- told Peruvian police Zevallos personally paid him $15,000 in January 2003 to sign a notarized statement recanting his testimony that Zevallos ordered the killing. Since, Angulo has repeatedly written to Peruvian authorities pleading for protection, saying Zevallos directed death threats to him in prison. Last November, a Peruvian prosecutor determined there was "no merit" to Zevallos' claim that Angulo's Chilean testimony was part of an elaborate $15,000 extortion scheme against him. Angulo was arrested on Zevallos' complaint outside Aero Continente's corporate headquarters with the $15,000 and a 9-mm pistol in his pocket. Zevallos told police Angulo was offered money to make similar allegations on a Peruvian television news program in 1997, but later recorded a videotaped retraction because the broadcaster didn't deliver the agreed-upon fee. Angulo claimed he was forced to make the videotaped retraction to ensure the safe return of his 4-month-old daughter after Zevallos had her kidnapped, although Angulo didn't file any such charges at the time. _________________________________________________________________ Is your PC infected? Get a FREE online computer virus scan from McAfee® Security. http://clinic.mcafee.com/clinic/ibuy/campaign.asp?cid=3963