US embassy cable - 02KATHMANDU2060

UNCLAS SECTION 01 OF 03 KATHMANDU 002060 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR SA/INS AND INL 
LONDON FOR POL - RIEDEL 
JUSTICE FOR OPDAT - CRAWFORD 
 
E.O. 12958: N/A 
TAGS: PGOV, KCRM, SNAR, NP 
SUBJECT: NEPAL CORRUPTION AUTHORITY TAKES ON EX-MINISTERS 
 
REF: A. (A) KATHMANDU 1618 
     B. (B) KATHMANDU 0800 
     C. (C) KATHMANDU 0418 
     D. (D) KATHMANDU 1964 
 
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SUMMARY 
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1.  (SBU) Despite the recent change in government, the 
Commission for Investigation into the Abuse of Authority 
(CIAA), the autonomous constitutional body charged with 
prosecuting corruption, is continuing to pursue a number of 
high-profile cases against several former ministers and 
prominent civil servants.  The CIAA can employ sweeping 
powers of investigation and prosecution unparalleled by other 
government agencies, and its zeal dovetails with the interim 
government's emphasis on good governance.  A public long 
disenchanted by flagrant and widespsread corruption at the 
highest levels of government has so far overwhelmingly 
welcomed the probes.  A Department of Justice program to 
train prosecutors for corruption cases, scheduled to take 
place in Kathmandu from November 18-22, is particularly well 
timed. To maintain the credibility and reputation for 
independence it now enjoys, the CIAA must remain careful to 
keep its investigations non-partisan and balanced.  End 
summary. 
 
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CORRUPTION QUERIES CONTINUE 
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2.  (U)  When the Commission for the Investigation into the 
Abuse of Authority (CIAA), the autonomous constitutional body 
charged with prosecuting official corruption, began 
investigating corruption charges against 22 mid-level civil 
servants--most from the Department of Customs and Ministry of 
Finance--in August (Ref A), many observers hoped that 
inquiries into the activities of even more prominent 
personalities would follow.  Since then the agency, armed 
with the interim goverment's mandate to tackle corruption and 
restore good governance, has followed up these initial probes 
with a series of inquiries aimed at several high-ranking 
officials in previous administrations, including at least 
three ex-ministers in former Prime Minister Sher Bahadur 
Deuba's Cabinet. 
 
3.  (U)  The Commission is questioning former Minister for 
Information and Communications Jaya Prakash Gupta; former 
Minister for Home Affairs Khum Bahadur Khadka; and former 
Minister for Physical Planning and Works Chiranjibi Wagle 
(all from Deuba's Nepali Congress government).  Also called 
in for questioning has been Ram Krishna Mainali, a member of 
the Communist Party of Nepal - United Marxist Leninist (UML), 
who had been Minister of Communications in a 1998 coalition 
government. 
 
4.  (U) So far the inquiries into these former members of 
Deuba's Cabinet have focused on actions they took while 
Ministers in previous Nepali Congress governments.  Gupta is 
under investigation for a mobile telephone deal he authorized 
as Communications Minister in 1999 (Mainali is being 
questioned for beginning the deal during his tenure as 
Minister the year before); Khadka for having awarded several 
unbid contracts for projects during his time as Water 
Resources Minister from 1995-1997; and Wagle, along with his 
unemployed son, for having amassed wealth not commensurate 
with the level of his official remuneration.  Also under 
investigation is General Manager of the state-owned (and 
largely bankrupt) Royal Nepal Air Corporation, Ramagya Prasad 
Chaturbedi, for possible corrupt dealings during a previous 
incarnation as General Manager of the state-owned National 
Construction Company; and Ananda Khanal, a former Director 
General for road construction in the Ministry of Physical 
Works. 
 
5.  (U)  Paralleling CIAA's investigations is the work being 
done by yet another independent body, the Judicial 
Investigation and Probe Commission on Property (JIPC), 
appointed by former PM Deuba in March to assess the value of 
personal assets acknowledged by more than 40,000 current and 
former politicians, Members of Parliament, Ministers, and 
civil servants who have held office since 1990 (Ref C). 
Sources at the JIPC, which has no prosecutorial powers of its 
own, have already indicated to the press that they plan to 
question a multi-partisan group of former ministers, as well 
as Sujata Koirala, the daughter of former Prime Minister G.P. 
Koirala.  If sufficient evidence against the subjects is 
found, the cases will be referred to CIAA for prosecution. 
6.  (SBU)  Former Prime Minister Deuba has told the 
Ambassador that he welcomes CIAA's pro-active stance, 
commenting that he "would be relieved" if any former members 
of his Cabinet implicated in corrupt activities were to end 
up being indicted (Ref D).  He added that he considers 
passage of tougher anti-corruption legislation during his 
most recent administration one of his proudest achievements. 
 
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POLITICAL APPOINTEE HEADS OF STATE-OWNED ENTERPRISES AXED 
--------------------------------------------- ------------- 
 
7.  (U) On October 28 the interim government fired all the 
general managers of the 39 state-owned enterprises.  So far, 
no replacements have been named.  GM positions at the head of 
the state-owned enterprises, most of which are operating in 
the red, have long been regarded as lucrative sinecures for 
well-connected political allies of the party in power, who 
have often treated those corporations as cash cows to fund 
personal and partisan activities.  Although a report by the 
National Planning Commission in 2000 recommended that the SOE 
directors be chosen on the basis of merit and competence, 
rather than patronage and paybacks, no action was taken to 
revamp management. 
 
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CIAA:  BROAD POWERS, KEY MANDATE 
--------------------------------- 
 
8.  (SBU)  The CIAA adopted its more vigorous and visible 
public stance after Parliament passed more stringent 
anti-corruption legislation in April (Ref B), including an 
act that established a Special Court to try corruption cases. 
 The new legislation gives the CIAA sweeping authority to 
investigate; conduct searches; examine bank accounts; freeze 
and/or impound assets; charge; and prosecute cases against 
public officials.  The Commission may decide to "pick up 
cases from anywhere," according to Chief Commissioner Surya 
Nath Upadhyay--even an anonymous e-mail, phone call, or 
letter.  At least two of the three Commissioners must decide 
that there is sufficient initial evidence against a suspect 
to begin an investigation. (Note:  CIAA's authority does not 
extend to members of the judiciary, the Royal Nepal Army, 
and, of course, the Royal Family.  End note.)  Suspects in a 
CIAA case may be detained for up to six months without 
charge.  The 18 suspects arrested in CIAA's initial sweep at 
the Department of Customs and Ministry of Finance in August 
(Ref A) have been held for more than two months. 
 
9.  (SBU)  The probes seem to have gained in breadth--as well 
as in the height of the positions targeted--since King 
Gyanendra appointed the interim government under Prime 
Minister Lokendra Bahadur Chand with a special mandate to 
clean up corruption.  Besides the former Ministers now under 
investigation, the CIAA is contemplating bringing charges 
against a host of other prominent figures from different 
political parties, Upadhyay told the Ambassador in an October 
22 meeting.  For example, the CIAA is examining allegations 
against a former Nepali Congress Home Minister, who 
attributes his excessive wealth to money sent him by his son, 
who now lives in the U.S.  Since the son has apparently been 
out of school for only one year, however, Upadhayay says he 
questions this story.  He asked for U.S. Embassy assistance 
in verifying the son's income in the U.S.  (We understand the 
British received a similar request regarding a former UML 
Minister's son.)  The Ambassador undertook to extend all 
appropriate assistance. 
 
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DOJ WORKSHOP TIMELY 
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10.  (U) The U.S. Department of Justice Office of Overseas 
Prosecutorial Development, Assistance and Training (OPDAT) 
will conduct a one-week workshop in Kathmandu November 18-22 
aimed at training 35 prosecutors, judges, and policemen in 
dealing with corruption cases.  While this training was 
planned well before these corruption cases hit the front 
pages, the timing of the workshop--just as CIAA appears to be 
gearing up to bring a number of cases before the Special 
Court--is particularly fortuitous. 
 
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COMMENT 
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11.  (SBU)  Most Nepalis believe that corruption, while 
discreetly present during the autocratic Panchayat regime, 
has burgeoned into a free-wheeling growth industry in the 12 
years since the restoration of democracy.  Whether that 
perception is correct or not, many disenchanted citizens 
associate democracy with the democratiziation of 
rapaciousness and venality.   Demonstrating that a 
constitutional government can stem this pervasive and 
commonplace vice after more than a decade of neglect is a 
near-gargantuan task.  CIAA, at long last, appears to be 
exercising powers broad enough--almost too broad--to meet the 
challenge.  So far, we see no evidence that CIAA intends to 
abuse this power, and are encouraged that it is adopting a 
multi-partisan approach--especially since there seems to be 
ample evidence of guilt on both sides of the aisle. 
Safeguarding this impartiality is obviously key to 
maintaining CIAA's credibility, and thus to the success of 
its goals.  As outlined in our Mission Program Plan, the 
Embassy wants to supplement long-delayed Government of Nepal 
efforts to tackle corruption with programs similar to the 
timely OPDAT prosecutoiral training course. 
MALINOWSKI