ALLEGED DRUG LORD CHALLENGES U.S. TO PROSECUTE HIM

Assets Frozen: Peruvian Businessman Says Rivals Are Trying To Ruin His
Name

LIMA - One of Peru's top businessmen has challenged the United States to
start legal proceedings against him in U.S. courts after the White House
placed him on its list of overseas drug kingpins.

"I'm sending a letter to the President of the United States asking that
they open a trial in the United States so that I can present my case and
the American justice system can decide if I am guilty or innocent," said
Fernando Zevallos, founder of Aero Continente, Peru's largest airline, who
also faces legal proceedings in Peruvian courts.

Mr. Zevallos, 46, has been the subject of more than 30 U.S. Drug
Enforcement Administration (DEA) investigations, but has never been
convicted of a crime. He denies any wrongdoing.

He lived as a legal permanent U.S. resident in Florida for a decade before
returning to Peru in 2001 to face drug trafficking charges, for which he
was acquitted.

On Tuesday, the U.S. government announced it had placed him on its list of
overseas drug kingpins and frozen the U.S. assets of Aero Continente and
several related companies.

The White House announcement came hours after a Lima court began retrying
Mr. Zevallos on cocaine trafficking charges.

The airline mogul says he is the victim of character assassination by
convicted drug dealers turned prison informers, corrupt police, overzealous
U.S. drug agents and business rivals.

Under the 1999 Drug Kingpin Act, people placed on the U.S. list of drug
traffickers and their related businesses are denied access to the U.S.
financial system and any transactions involving U.S. companies and individuals.

That could cripple the Peruvian airline since it means U.S. companies that
sell Boeing airplane parts are now banned from providing them to Aero
Continente to maintain its jets.

In April, the U.S. Federal Aviation Administration banned the airline from
flying to the United States after it discovered a pattern of safety
violations, including the use of unauthorized motor parts and falsified
maintenance records, a U.S. official said.

As part of the kingpin program, the U.S. Treasury Department has frozen
U.S. assets belonging to Mr. Zevallos, five other people and seven
companies linked to him, including Aero Continente.

"The U.S. government has reason to believe that the six individuals and
seven entities ... either assist in or provide financial or technological
support for or to the international narcotics trafficking activities of
Fernando Zevallos," said a U.S. embassy spokesman in Lima.

Mr. Zevallos is the most prominent and powerful of a dozen defendants
facing charges over the 1995 seizure of 3.3 tonnes of cocaine in the
northern Peruvian city of Piura that broke up the Nortenos drug gang.

He moved to the United States after the 1995 bust and immediately
transferred his ownership of Aero Continente to relatives.

The airline mogul returned to Peru in 2001 to face charges of complicity
with cocaine traffickers from the Nortenos gang and was acquitted in 2002.

A year later, Peru's Supreme Court annulled the acquittal and ordered a
retrial, which began in September, 2003. In January, the case was thrown
out on a technicality by a lower court, which then ordered the new retrial.

Mr. Zevallos is charged with "aggravated illicit drug trafficking." The
original 1997 indictment alleged he "systematically" used Aero Continente
to launder US$43.5-million of cocaine money to buy a fleet of 12 jets in
1992-95.

The key witness is convicted Nortenos drug boss Jorge Lopez Paredes, who
claims he gave Mr. Zevallos US$1.5-million in 1991 to buy a Boeing 727
cargo jet to ship cocaine to Guadalajara, Mexico.

Peruvian investigators and the DEA believe the cocaine seized in Piura in
1995 was about half of a seven-tonne shipment destined for Mexico and the
United States, according to an internal U.S. law enforcement memo.

In recent months, Mr. Zevallos has launched several lawsuits against
authors, journalists and U.S. diplomats he says have smeared his name.

The businessman started a small-plane air taxi service in Peru's Amazon
jungle in 1980 and founded Aero Continente 12 years later. Its fleet
includes two dozen planes, with about 40 domestic and international flights
each day.