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Cablegate: Brazil Corruption Scandal Update, Week of 07-11

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 BRASILIA 003001

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: PGOV PREL ECON BR
SUBJECT: BRAZIL CORRUPTION SCANDAL UPDATE, WEEK OF 07-11
NOVEMBER 2005

REF.: BRASILIA 02951 AND PREVIOUS

1. (SBU) INTRODUCTION. There have been a number of
developments in different venues this week. Overall,
the various corruption scandals are merging into an
increasingly contentious, across-the-board struggle
between the Lula government and its opposition in the
run-up to next year's general election campaign. In
addition, fewer of the previous rules of the road are
being observed -- especially by the opposition. It
remains to be seen whether some new guidelines to
prudent conduct can be established or the deterioration
of constraints will continue. END INTRODUCTION.

PRESIDENT LULA INTERVIEWED ON NATIONAL TELEVISION
--------------------------------------------- -------

2. (U) On November 7, for the first time since the
corruption scandals erupted in June, President Lula was
interviewed on national television and spoke about the
crisis that has subsequently engulfed his party and
administration. During this session with a panel of
respected journalists, which was pre-recorded in the
Presidential Palace, the President condemned the use of
unaccounted campaign funds (Note: Lula had said previously
that the use of unaccounted money in political campaigns
was part of the Brazilian political tradition. End Note.),
and acknowledged that his former right-hand man, Jose
Dirceu, is likely to be expelled from the Chamber --
although further averring that this will be for political
reasons, since there is no clear evidence against him.
President Lula also stated that he felt betrayed but, when
asked by whom, responded that he would not name names. At
the same time, however, he denied the existence of any
comprehensive vote-buying scheme in Congress, as well as
allegations that the PT had received money from the Cuban
government, as recently alleged by Veja news magazine
(ref). When asked about the future of the Workers' Party,
President Lula said he was certain that it would survive
the crisis and recover its standing with the Brazilian
public. Moreover, he affirmed that he had not finally
decided on whether he would run for re-election next year.
And, with respect to the Celso Daniel murder case, Lula
defended the thesis that it was most likely a common crime
(ref). According to the news channel that organized the
event, negotiations with the presidential staff had taken
six months. Indeed, this was the first time President Lula
conceded such an interview since taking office.

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3. (U) Reactions to President Lula's interview were varied
and divided along predictable political lines. On one hand,
members of the Workers' Party noted that the President was
spontaneous, focused and calm. Former minister Luiz
Gushiken labeled the interview "clear and honest" and
affirmed that it established an important connection
between the President and Brazilian society. According to
the PT's new chief, Ricardo Berzoini, the President had
taken effective advantage of a good opportunity to state
his version of the facts and deny the many false
accusations against him. On the other hand, in subsequent
conversations with polofs the leaders of the main
opposition parties in the Chamber harshly criticized Lula's
performance. "It was the worst interview I have ever seen;
he lied in order to defend himself" said Deputy Rodrigo
Maia (PFL-RJ). And "empty, banal, small -- that was the
Lula I saw and heard", opined Senator Arthur Virgilio
(PSDB-AM). The president of the Brazilian Bar Association,
Roberto Busato, characterized President Lula's line of
argument as "unacceptable" and betraying a complete
unawareness "of the political reality". Former President
Fernando Henrique Cardoso also weighed in with the opinion
that Lula had put itself at greater risk by appearing to
defend the indefensible actions of fellow PT members, such
as Jose Dirceu and Delubio Soares: "He took responsibility
in solidarity with his "companheiros", which may be nice in
human terms, but is also very dangerous" for him as head of
the government and president of the country.

DIRCEU APPEALS TO CHAMBER'S JUSTICE COMMITTEE
--------------------------------------------- ---

4. (U) Also on November 7, the lawyer of Deputy Jose
Dirceu filed another appeal within the Chamber's
Constitution and Justice Committee -- once again requesting
the suspension of his client's judgment in the Ethics
Committee. The lawyer argued that Dirceu had not been
given an adequate chance to defend himself. More to
particular legal points, he questioned the procedure
adopted by former Speaker of the House, Severino
Cavalcanti, when he decided on his own to submit Dirceu's
case to the Ethics Committee, without consulting other
members of the Chamber's formal leadership. (This case was
not brought to the Ethics panel after investigation by one
of the CPIs. Rather, it was referred directly to that
Committee by the Speaker after initial accusations by
Roberto Jefferson and the PTB.) But Dirceu's fate so far
remains scheduled for definitive resolution by a floor vote
on November 23.

THIS WEEK IN THE CPIs
-----------------------

5. (U) On November 8, the Bingos CPI (convoked to
investigate money-laundering in illegal gambling houses and
municipal governmental corruption) heard testimony from
Roseana Morais Garcia, the widow of Antonio da Costa Santos
(Toninho do PT), and Ivone Santana, Celso Daniel's ex-
girlfriend. Both Santos and Daniel were PT mayors of
municipalities in the state of Sao Paulo, who were murdered
under mysterious circumstances in September 2001 and
January 2002, respectively. Santos' widow claimed that his
killing was politically motivated because he was denouncing
irregularities committed within the city's administration.
She also alleged connections between her husband's death
and that of Daniel. The formal investigation of this crime
had concluded that Santos was murdered during a simple
robbery. On the other hand, Ivone Santana's testimony
favored the thesis of common crime in the case of her late
boyfriend and went out of the way to absolve people in the
government from any responsibility. This directly
contradicted the views of Daniel's brothers, who were heard
by the panel last week (ref). Indeed, she averred that
President Lula had actually suggested Daniel hire
bodyguards two months before he was killed. She also denied
that Gilberto Carvalho, Lula's personal chief of staff, had
tried to coach her subsequent statements to public
prosecutors (confirming Carvalho's testimony, also heard
last week) or that she had received any form of assistance
from the PT since Daniel's murder. Opposition members of
the committee were openly skeptical of her veracity on all
of these points.

6. (U) On November 9, the Chamber's plenary (in a 340-108
vote) definitively ratified the recommendation of the
Ethics Committee to fully absolve Deputy Sandro Mabel (PL-
GO). Mabel had been accused by Roberto Jefferson of having
received money from Marcos Valerio and by Deputy Rachel
Teixeira (PSDB-GO) of offering her R$ 1 million to switch
party affiliation to the PL. The argument for Mabel's
acquittal was lack of concrete evidence against him to
sustain those charges. On that same date, however, the
Ethics panel approved a contrary finding against Dep. Romeu
Queiroz (PTB-MG), by a 12-2 margin. Queiroz's case will now
go to the floor sometime after the November 23 balloting on
the Jose Dirceu case and there currently remain another 11
deputies still awaiting judgment.

7. (U) In testimony before the Mensalao CPI (convened
specifically to investigate the comprehensive vote-buying
scheme originally alleged by Congressman Roberto
Jefferson), former Transportation Minister and current
mayor of Uberaba (MG), Anderson Adauto, openly admitted his
receipt of R$ 410,000 in unreported funds from former PT
Treasurer, Delubio Soares. Furthermore, he averred that the
use of unaccounted campaign funds is inevitable in Brazil
and that he had employed them in all of his 11 political
campaigns. (In fact, he went on to say that any elected
officials who deny having had recourse to such practices
are being "cynical" -- that is to say, are lying
hypocrites.) The subsequent view of most of the panel's
opposition members was simply that Adauto had confessed to
a crime and ought to be punished. Some members aligned with
the government, however, seemed more willing to make
allowances -- indeed, crediting him with candor enough to
at least take "responsibility for actions that others tend
to deny".

COMMENT
--------------
8. (SBU) Pressure has been building for some time now to
break an unstated understanding between the government and
its adversaries that Finance Minister Antonio Palocci would
not be called before Congress to testify, in spite of
persistent allegations about possible wrongdoing during his
tenure as mayor of Riberao Preto. This tacit accord had
been strengthened by his purported threat to resign if
required to defend himself before the legislature. But more
recent charges about the PT's possible receipt of money
from Cuba (when Palocci was chairman of Lula's presidential
campaign) and money from the Bank of Brazil having gone
directly into Marco Valerio's slush-fund (when Palocci was
already Finance Minister) have made it increasing difficult
to sustain. Moreover, Palocci has been under increasing
fire from within the government -- first from the left of
the PT in general and more directly this week from Casa
Civil chief, Dilma Rousseff -- over his ongoing fiscal
stringency as government officials begin to think about
next year's general election campaign. For now, a
compromise seems to have been reached, under which Palocci
will testify before the Senate's Economic Affairs Committee
(CAE) -- not one of the Chamber's investigatory panels --
to speak about the state of Brazil's economy. But, it seems
to be generally understood that he will face some
questioning on corruption-related themes as well. Whether
this compromise is enough to satisfy the opposition -- and
public opinion, more generally -- or is just the first
breech in the dam of his immunity remains to be seen.
(Septel to follow will examine Palocci's situation in more
depth.)

CHICOLA

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