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Cablegate: Argentina: Update On Skanska Corruption Case

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RR RUEHWEB

DE RUEHBU #0086/01 0251400
ZNR UUUUU ZZH
R 251400Z JAN 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0117
INFO RUEHSM/AMEMBASSY STOCKHOLM 0068
RUCNMER/MERCOSUR COLLECTIVE
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RHMCSUU/FBI WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS BUENOS AIRES 000086

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV KCOR EPET EINV ASEC SNAR OECD AR
SUBJECT: ARGENTINA: UPDATE ON SKANSKA CORRUPTION CASE

REF: A. 07 Buenos Aires 2121
B. 07 Buenos Aires 1351
C. 07 Buenos Aires 978
D. 07 Buenos Aires 844
E. 07 Buenos Aires 687

1. (SBU) Summary. Judicial investigations continue into alleged
bribery and tax evasion by the local affiliate of Swedish
construction multinational Skanska in the expansion of Argentina's
northern and southern natural gas pipelines. The courts appear to
be approaching the indictment phase, despite delays generated by the
resignations of the judge and prosecutor handling the bribery
investigation. The Skanska case, once front-page fodder with the
potential to implicate a number of senior-level GOA officials, has
largely dropped off the political radar. Indictments could revive
the issue. The Swedish anti-corruption office announced it will not
initiate an independent investigation into the alleged
irregularities in Argentina unless new evidence against Skanska's
headquarters or Swedish nationals arise. End Summary.

-----------------------------
Slow moves towards indictment
-----------------------------

2. (SBU) There are two judicial investigations into apparent
over-invoicing, bribery and related tax evasion tied to the
expansion and modernization of Argentina's natural gas pipeline
network involving contractors, including the local affiliate of
Swedish construction giant Skanska. The investigations should yield
indictments once the courts resume work following the austral summer
holidays. The criminal judge for tax-related issues, Javier
Lopez-Biscayart, has reportedly collected the necessary evidence to
decide on the indictments of suspects, including the former manager
of Nacion-Fideicomisos (a public trust established to structure
private funding of public works projects) Nestor Ulloa, accused of
submitting false invoices from a shell company, Infinity Group. The
local press reports that judicial cross-checks of phone records
identified 77 phone calls between Ulloa and one of Skanska's
managers, communications that should not have occurred between the
trust fund manager and a contract bidder.

3. (SBU) The investigation looking into possible kickbacks/bribes is
not as far advanced and is more politically sensitive. The
supervising judge (Guillermo Montenegro) and the lead prosecutor
(Carlos Stornelli) resigned in late 2007 to accept positions in the
Buenos Aires city and Buenos Aires provincial governments
respectively. Before stepping down, however, Montenegro and
Stornelli had already questioned several suspects, including Ulloa
and Fulvio Madaro, the former President of Enargas (the GOA's
natural gas regulatory authority). Montenegro set bond at seven
million pesos (US$ 2.3 million) for both but had not rendered a
decision on their indictments. Stornelli had also asked judge
Montenegro to summon for questioning Secretary of Energy Daniel
Cameron, Madaro's boss. Local press reported that Cameron's office
instructed Madaro to move ahead with the contracts despite having
been notified by him that estimates from sub-contrators were
inflated.

4. (SBU) It is uncertain, given the political impact that
indictments are likely to cause, whether federal judge Sergio
Torres, who is temporarily handling the bribery/kickback case, will
choose to move the case ahead after the judicial holidays or leave
it to his successor, whenever a permanent judge is named.

--------------------
Political Influence?
--------------------

5. (SBU) The resignations of both the judge (Montenegro) and
prosecutor (Stornelli) in the bribery/kickback investigation to
accept high-profile political positions in the Buenos Aires City and
Provincial governments prompted some public speculation about
political interference. For conspiracy theorists looking for
Kirchner handiwork in thwarting the investigation, Stornelli's
appointment as Security Minister in Buenos Aires Province was fairly
straightforward, given that former Kirchner Vice President Daniel
Scioli is the new Governor. Montenegro, on the other hand, was
appointed City Security Minister by the Kirchners' principal
political opponent, Mayor Mauricio Macri. Political pundits
speculate that Macri made a deal with the Kirchners to appoint
Montenegro (and thus remove him from the Skanska investigation) in
return for something. Employing Occom's razor, however, the more
likely explanation for Montenegro's appointment lies in his close
friendship with Macri's deputy, Gabriela Michetti.
----------------------
Case Not a Concern in Sweden?
----------------------

6. (SBU) In June 2007, the Argentine Anti-Corruption Office
requested then-judge Montenegro to broaden his investigation and
seek the Swedish Government's cooperation in facilitating documents
from Skanska's headquarters. In parallel, Swedish Anti-Corruption
prosecutor Christer Van der Kwast asked Montenegro for information
about the case, which Montenegro provided in early August. Daily
paper La Nacion reported on January 18 that Van der Kwast recently
confirmed that the information provided was not sufficient to
warrant a separate Swedish investigation, as neither Swedish
nationals nor Skanska's headquarters appeared to be involved in the
alleged kickback/bribery scheme. According to an August 2007 report
by weekly paper Perfil, former local Skanska financial manager Jose
Alonso notified Skanska headquarters in 2006 of the irregularities.
Skanska's reported response was to let Alonso and other local
managers go, providing them with generous severance packages.
Alonso and these other managers are implicated in the parallel tax
evasion investigation.

------------------------------
"Corruption Among Individuals"
------------------------------

7. (SBU) In his last media interview as Argentine President in early
December 2007, Nestor Kirchner reiterated his government's position
that the Skanska scandal was an issue of alleged corruption among
individuals. Kirchner stated that his rapid dismissal of Madaro and
Ulloa once the scandal broke in April 2007 was aimed at "preserving
the State's integrity"" and that the judiciary, through its
investigations, will determine whether irregularities occurred. He
stated, however, that he did not expect the investigation to find
irregularities.

--------
COMMENT
--------

8. (SBU) The next step in the Skanska investigations is for the
judges to issue indictments, although more government officials
could be called in for questioning, something the Casa Rosada would
prefer to avoid. Any immediate action following the January
judicial holidays depends on whether temporary judge Sergio Torres
decides to move forward aggressively or sit on the bribery/kickback
case until a permanent judge is assigned. Judicial contacts report
that the process to replace Montenegro on the bench has not even
started. The regular process involves testing and public vetting
for qualified candidates, and the Council of Magistrates preparing a
list of candidates with the best marks in rank order for the
President's approval. The Council, while nominally independent, is
a politicized institution, with the Administration holding sway over
the majority of its members, thanks largely to controversial changes
pushed though the legislature in 2006 by then-Senator Fernandez de
Kirchner. Corruption-related investigations/trials in Argentina
tend to drag on until public (media and opposition) attention wanes
or fixates on the next scandal. This could very well be the case
with Skanska.

WAYNE

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