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Cablegate: Central Bank Scandal

VZCZCXYZ0027
PP RUEHWEB

DE RUEHLP #1877/01 1911906
ZNR UUUUU ZZH
P 101906Z JUL 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 9894
INFO RUEHAC/AMEMBASSY ASUNCION 5988
RUEHBO/AMEMBASSY BOGOTA 3306
RUEHBR/AMEMBASSY BRASILIA 7155
RUEHBU/AMEMBASSY BUENOS AIRES 4412
RUEHCV/AMEMBASSY CARACAS 1695
RUEHPE/AMEMBASSY LIMA 1701
RUEHMN/AMEMBASSY MONTEVIDEO 3908
RUEHQT/AMEMBASSY QUITO 4326
RUEHSG/AMEMBASSY SANTIAGO 8883
RHEHNSC/NSC WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS LA PAZ 001877

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/AND
TREASURY FOR SGOOCH
ENERGY FOR CDAY AND SLADISLAW

E.O. 12958: N/A
TAGS: ECON EFIN KJUS BL
SUBJECT: CENTRAL BANK SCANDAL

REF: A. LA PAZ 732

B. LA PAZ 1842

1. (SBU) Summary: Two MAS congressmen recently accused
former government and finance ministry officials of illegally
withdrawing USD 153 million from the Central Bank in October
2003, just before the fall of former President Gonzalo "Goni"
Sanchez de Lozada. Prosecutor Milton Mendoza is
investigating a lesser claim that the officials violated bank
procedures while withdrawing USD 2.5 million from GOB slush
funds; former Central Bank President Juan Antonio Morales
denied the charges. While we support the GOB,s attempts to
crack down on corruption, it seems that "fighting corruption"
may be turning into a witch-hunt that seeks to get "Goni's
cronies" and undermine MAS opposition (reftels). End summary.

2. (SBU) In late June, two MAS congressmen, Rene Ramos and
Humberto Iquiapaza, accused former government and finance
ministry officials of illegally withdrawing 1.2 billion
bolivianos (USD 153 million) from the Central Bank between
October 13-16, 2003, just before the fall of former President
Gonzalo "Goni" Sanchez de Lozada. The congressmen based
their accusations on a video showing former government
officials withdrawing funds. Prosecutor Milton Mendoza told
Econoff on July 7 that he is investigating irregular
withdrawals from the GOB slush fund maintained at the Central
Bank. In December 2005, the Supreme Court and Congress
withheld approval for the investigation. On May 3, 2006, the
Supreme Court annulled its earlier resolution and gave
Mendoza the green light.

3. (SBU) Mendoza said that he could not substantiate the
congressmen's accusations that 1.2 billion bolivianos (USD
153 million) were withdrawn, and described the
above-mentioned video as "sensationalist." Mendoza explained
that his investigation was based on "other proof" that
breaches of security and falsification of documents occurred
in conjunction with Finance Ministry officials' withdrawal of
20 million bolivianos (USD 2.5 million) from the GOB's slush
fund. (Note: In contrast, Central Bank records show the
withdrawal to be 13.8 million bolivianos (USD 1.7 million).
End note.) Mendoza said the slush fund withdrawal was
conducted on a bank holiday and that security was contrary to
norms. He added that the money was carried away in
suitcases, and that the required paperwork was not filled out
at the time of the transaction. Mendoza said that he would
not detain the responsible officials unless he had sufficient
proof against them, des}Bb34_F~rales added that
the Central Bank did not manage GOB slush funds, but was
simply the depository of the Treasury Account which contained
those funds.

5. (SBU) Comment: The GOB's purpose appears to be political
-- to go after "Goni's cronies." Juan Antonio Morales
expressed concern about the GOB,s systematic destruction of
respected institutions and people through false accusations.
In contrast to the MAS deputies' claims, Mendoza's case
against former GOB officials seems less radical and appears
to be focused on proving that former GOB officials violated
procedural rather than substantive norms. We support the
GOB,s attempts to crack down on the country's many corrupt
officials, but worry that the MAS' efforts may be turning
into a witch-hunt that seeks to undermine MAS opposition
(reftels). End comment.
GREENLEE

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