US embassy cable - 05ALGIERS1652

C O N F I D E N T I A L SECTION 01 OF 02 ALGIERS 001652 
 
SIPDIS 
 
E.O. 12958: DECL: 08/10/2015 
TAGS: ECON, EINV, PGOV, EPET, AG, Economic Reform 
SUBJECT: GOA MOVES TO STOP CORRUPTION 
 
Classified By: Ambassador Richard W. Erdman, reasons 1.4(b)(d). 
 
SUMMARY 
------- 
 
1. (C) A growing realization of the economic and development 
costs of pervasive corruption in Algeria, coupled with 
reported pressure from some key senior military figures, is 
prompting increased government efforts against corruption. 
Over the past several months, President Bouteflika has made a 
number of high profile statements highlighting the evils of 
corruption and indicating that no one, regardless of his 
position or rank, will be immune from government prosecution. 
 Prime Minister Ouyahia also launched his politically 
controversial "mains propres" (clean hands) initiative.  A 
new law on corruption was passed in June enlarging the 
definition of corruption to include any kind of "illicit 
enrichment", stiffening penalties for such offenses, and 
establishing a new government body to design and implement a 
national anti-corruption strategy.  While the government has 
only tackled the tip of the corruption iceberg, it has begun 
to send pointed messages about its seriousness in cracking 
down by: convicting senior government officials (the Wali of 
Blida and former Wali of Oran), a retired senior military 
officer, the transportation director of Oran; dismissing 55 
customs officers, including several senior officials; 
convicting, dismissing, or reprimanding several judges; and, 
most significant of all, suspending and prosecuting 20 
officials from Sonatrach, Algeria's hitherto sacrosanct 
cash-cow. (End Summary.) 
 
GOA CRACKS DOWN ON CORRUPTION 
----------------------------- 
 
2. (C) A source with close ties to the senior military 
recently told Ambassador that a key motivating factor behind 
increased Algerian leadership efforts against corruption over 
the last several months was a memo to President Bouteflika 
from Military Intelligence Director Tewfik Mediane.  In this 
memo, Mediane apparently expressed alarm over the dimensions 
of the corruption problem and the need to address it by 
sending a clear message to officials at all levels that 
corrupt practices will no longer be tolerated.  This same 
contact, who has advised the senior military on a number of 
issues and is in close contact with President Bouteflika, 
told the Ambassador over a year ago he was advising that the 
only way to address pervasive corruption was to go after some 
high profile targets in order to set an example and send a 
clear message to all officials.  This same source said that 
recent actions (see below) against mid-level managers in 
Sonatrach was part of a deliberate effort to warn more senior 
officials. 
 
BOUTEFLIKA: NO ONE WILL BE IMMUNE 
--------------------------------- 
 
3. (C) In this context, Bouteflika launched the 
anti-corruption campaign with a high-profile speech in March 
in which he highlighted the costs of corruption for national 
development and made clear that no one, regardless of his or 
her position, would be immune from prosecution.  Since then, 
there have been a number of high-profile investigations, 
prosecutions, and convictions.  The most prominent of these 
has been the suspension and investigation in June of at least 
20 managers of Sonatrach for suspected violations of contract 
awarding procedures.  While the daily El Watan broke the 
story June 25, claiming that 130 officials of Sonatrach and 
subsidiary firms like Naftec and Naftal, had been dismissed 
following an official audit, Energy Minister Khelil the same 
day told the Ambassador and subsequently the press that only 
20 employees were under investigation for contract award 
irregularities and had been suspended rather than dismissed. 
(Comment: At Khelil's initiative, Algeria in 2001 adopted the 
"Baosem rules" for oil and gas tenders, which provide for 
lowest-price automaticity and are supposed to increase 
transparency.  Press articles this week quoted Khelil as 
saying the number of suspended Sonatrach employees was 24.) 
 
4. (C) Oil industry sources separately told Ambassador that 
over-invoicing, leaking information to interested parties, 
and tailoring tender specifications in return for kickbacks 
were thought to be involved.  According to El Watan, one 
particular case under investigation involved over-invoicing 
the purchase of improper gaskets from an international firm, 
which the paper went on to speculate may have been a factor 
in the Arzew LNG plant explosion last year.  More recently, 
El Watan reported August 3 that Khelil sent a formal letter 
to Sonatrach Director Mohamed Meziane, who has notably made 
no public statements on the apparent scandal, demanding all 
documentation on recent sales.  Separately, an adviser to 
Privatization Minister Temmar recently acknowledged to Econ 
officer that "vested interests" who have benefited from 
corruption were themselves now trying to adapt to the new 
market-based economy in order to maintain the profitability 
of their operations.  The anti-corruption or "Clean Hands" 
campaign, as it has been labeled, has been criticized by some 
officials, including the President's Personal Representative 
Belkhadem, who see the crackdowns at local and Wilaya levels 
as unfairly targeting FLN officials involved in customs 
scandals, false invoicing, or illegal property transactions. 
 
ANTI-CORRUPTION LAW PASSES PARLIAMENT 
------------------------------------- 
 
5. (U) The Anti-Corruption Law passed Parliament in June and 
is expected to pass the Senate in September. (The law was 
expected to have passed the Senate in June, but did not make 
it onto the Senate's pre-vacation calendar.)  The law 
reinforces existing legislation to comply with the U.N. 
Convention against Corruption and contains provisions to 
promote transparency in government and public procurement. 
The legislation also contains new categories of crime (such 
as "illicit enrichment"), reinforces existing penal 
sanctions, and creates a new national organization to design 
and implement a national anti-corruption strategy.  The law 
legitimizes the GOA's "Clean Hands" campaign that, in the 
words of Head of Government Ouyahia, would spare no one in 
government, including local officials. 
 
ACTIONS AGAINST CORRUPTION IN 
ORAN AND BLIDA SEND A SIGNAL 
----------------------------- 
 
6. (U) Many high-profile cases surfaced in the past several 
months.  In April, a criminal tribunal delivered guilty 
verdicts on corruption charges against the ex-wali of Blida, 
Bachir Frik, and ex-director of the real estate development 
agency in Oran, Laoufi Tayeb.  Both were sentenced to 8 years 
in prison and a fine of 500,000 Algerian dinars (roughly 
$7,000).  In Oran, the ex-Wali was prosecuted on corruption 
charges.  Also in Oran, the wilaya's transportation director 
was taken into custody on charges of "abuse of authority," 
"abuse of public confidence," blackmail, and corruption. 
 
7. (U) In another case, Jutop beverage company's director 
Cherif Abderezzak was jailed July 8 for forgery, use of 
forged documents, and misappropriation of public properties 
and agricultural lands in Blida.  Abderezzak, using forged 
documents approved by the former Wali of Blida, allegedly 
took possession of three hectares of land, which he did not 
own, for development of a mineral water plant and a dairy 
products plant.  Abderezzak was also able to submit the 
paperwork and gain approval for the entire project within 41 
days, an amazingly short period of time, leading observers to 
question the transaction.  The Director of Construction and 
Urbanism from the Wilaya of Blida was also jailed for his 
alleged involvement. 
 
CORRUPTION IN CUSTOMS 
AND THE JUDICIARY 
--------------------- 
 
8.  (U)  Le Quotidien D'Oran, a respected French-language 
daily, reported in February that the senior Algerian customs 
official, Director General Sid Ali Lebib, said that 55 
customs officers, 11 of whom were senior officers, had been 
dismissed.  Lebib indicated the dishonest behavior was 
discovered as a result of thorough investigations into 
corruption and embezzlement and that the results were 
"solid."  He said the fight against corruption within the 
cadre of customs officers was very serious and that actions 
tarnishing the reputation of customs officers would not be 
tolerated.   For its part, the Ministry of Justice Inspector 
General led investigations in April against 40 judges and 
disciplined 20 others, eight of whom, according to press 
reports, were dismissed from their positions. 
 
ERDMAN