The region’s well-documented trade in contraband cigarettes, smuggled over borders and resold without paying taxes, also made his tobacco companies a target of congressional and criminal investigations in Brazil. His family’s total wealth is unknown; Paraguay does not enforce transparency laws and Cartes has avoided providing detailed answers. However, US officials said they were concerned enough to infiltrate his companies with undercover Drug Enforcement Administration agents to disrupt what they believed was an organized crime operation that banked drug profits made in the Tri-Border Area, or TBA, a smuggling hotbed where Paraguay meets Argentina and Brazil.
“Agents have infiltrated Cartes’ money-laundering enterprise, an organization believed to launder large quantities of US currency generated through illegal means, including the sale of narcotics, from the TBA to the United States,” the 2010 US cable said.
Another cable, sent in 2007, reported that Paraguay’s anti-drug chief, Hugo Ibarra, had told a US embassy official that the country’s anti-money laundering chief was really working for Cartes and his bank.
Cartes drew more attention once he began selling Palermo cigarettes across the US in 2008, at prices the company said were 20 percent below the competition.
Phillip Morris, Reynolds, British-American and Imperial tobacco company officials met with agents from the DEA, the US Bureau of Alcohol, Tobacco, Firearms and Explosives and the Justice and Treasury departments in a Panama City hotel in December 2009 to coordinate an undercover attack on Cartes, code-named “Operation Heart of Stone,” the 2010 cable said.
Former CIA agent Frank Holder, whose mission included Paraguay, sees Cartes’ political career as an effort to buy a sort of insurance policy against interference in his businesses.
“He had zero involvement in politics until 2008, when he goes into it in a big way,” Holder said. “And that’s when the Operation Heart of Stone case, which came out in WikiLeaks, starts going full swing.”
US embassy spokesman Christopher Istrati said he cannot discuss classified documents or investigations.
However, a current law enforcement official in the US said Cartes has been under scrutiny by US and international law enforcement for years. The law enforcement official, speaking on condition of anonymity, was not authorized to speak on the record about the matter.
Cartes insists he sought the presidency to improve Paraguay’s economy, and has no criminal ties.
After opponents complained about conflicts of interest, Cartes said he transferred his ownership in all his companies. His sister Sarah Cartes now runs Grupo Cartes.
Lugo’s 2008 victory interrupted more than five decades of Colorado Party rule, which included the 35-year reign of dictator Alfredo Stroessner, but he lacked the money and votes to accomplish much.
“Before, you had Lugo who had no support,” Holder said. “This guy can say, ‘You’re in, you’re out’ and make it stick. This guy will have real power in Paraguay.”