US embassy cable - 05BRASILIA3001

UNCLAS SECTION 01 OF 03 BRASILIA 003001 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV, PREL, ECON, BR, Domestic Politics 
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