US embassy cable - 05VILNIUS504

C O N F I D E N T I A L VILNIUS 000504 
 
SIPDIS 
 
STATE FOR EUR/NB 
 
E.O. 12958: DECL: 05/12/2014 
TAGS: PGOV, PREL, LH, HT3 
SUBJECT: ECONOMY MINISTER USPASKICH UNDER FIRE BY THE 
OPPOSITION 
 
REF: VILNIUS 444 AND PREVIOUS 
 
Classified By: POL/ECON OFFICER GREGORY L. BERNSTEEN FOR REASONS 1.4(B) 
 AND (D) 
 
1. (U) SUMMARY. Victor Uspaskich, Economy Minister and leader 
of the upstart Labor Party, landed in hot water this week. He 
stands accused of two ethics violations - for using an 
official trip to Moscow in March to advance his personal 
business interests, and for excess EU funds received by his 
businesses.  The Seimas will vote next week on proposals to 
create three separate adhoc commissions to investigate these 
allegations.  END SUMMARY. 
 
2. (U) Lithuania's second largest daily, the 
conservative-leaning Respublika, has broken two stories 
regarding alleged ethical violations by Uspaskich in the last 
two weeks.  The first centers on a trip Uspaskich took to 
Moscow in mid-March.  In a meeting with Russian officials, he 
allegedly proposed a stock transfer from Krekanavos 
Agrofirma, a Lithuanian agriculture company in which 
Uspaskich's family has an interest, to a Moscow meat 
processing business, with the aim of creating a joint 
venture.  In meetings last month in Lithuania with Russian 
officials this topic, Uspaskich allegedly raised this 
proposal again.  Respublika printed on the front page of its 
May 12 edition a memorandum of the March meeting in Moscow 
that it purported to be an internal Russian Government 
communication.  Unnamed members of the opposition parties 
provided the memo to the press and to the Parliamentary 
Speaker, Arturas Paulauskas.  Uspaskich and Labor Party 
leaders quickly denounced the document as a forgery, and 
suggested the opposition Liberal Centrist party is behind the 
plot.   President Valdas Adamkus, through an adviser, said 
that if the charges are true, he will take a "strong stand." 
The Russian Foreign Ministry refused to confirm the 
authenticity of the letter, but one official was quoted as 
saying he "had heard something about it." 
 
3. (U) The second allegation is that Uspaskich-controlled 
companies received EU structural funds in excess of the 
amount they were eligible to receive.  The alleged 
impropriety involves two Uspaskich interests: Krekanavos 
Agrofirma and Krekanavos Mesa.  This charge stems from a 
report that the State Auditor, Rasa Budbergyte, delivered to 
the Parliament analyzing activities of the National Payment 
Agency, which is charged with overseeing disbursement of the 
funds.  News reports say that President Adamkus urged 
Budbergyte to publicize the report.  The Agency approved EU 
funding for both of these companies, despite the judgment by 
its own internal audit department that they are related, in 
which case they must be counted as one recipient.  The 
combined monies received by the companies exceed the ceiling 
set by the EU, thus jeopardizing future funding for 
Lithuanian businesses. 
 
4. (C) Three temporary commissions have been proposed to 
investigate the charges.  The Labor Party has proposed a 
commission aimed at determining the veracity of the letter 
printed by Respublika.  They have also proposed a separate 
commission to investigate the issues surrounding the National 
Payment Agency and excess EU funds.  The opposition Homeland 
Union and Liberal Centrists proposed a commission to review 
the general allegation that Uspaskich used his position to 
promote his business interests.  MP Roma Zakaitiene of the 
Social Democratic Party, a coalition partner, told us that 
Parliament will likely vote on May 17 to approve the 
establishment of these commissions.  She said that all 
parties will be represented on each body, and that at the end 
of their investigations the Parliament's standing ethics 
commission will decide if the evidence merits further 
investigation.  She declined to speculate on long-term 
implications of the charges, saying that the information 
about the incidents was still too new a 
nd incomplete to be judged. 
 
5. (C) COMMENT:  The issue of public ethics resonates in 
Lithuania, as evidenced by the mortal effect that charges of 
impropriety had on impeached President Rolandas Paksas last 
year.  We do not expect, however, that these charges will 
bring the Russian-born Uspaskich down.   The allegations do, 
however, provide his opponents, within and beyond the 
governing coalition, with an opportunity to score some points 
against him, with the ultimate objective of containing the 
influence of the coalition's top vote-getter. 
 
Mull