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### Viewing cable 05BRASILIA3001, BRAZIL CORRUPTION SCANDAL UPDATE, WEEK OF 07-11

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05BRASILIA3001 | 2005-11-10 17:32 | 2011-07-11 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Brasilia

`

    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.

    ¶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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