US embassy cable - 05BRASILIA3051

UNCLAS SECTION 01 OF 02 BRASILIA 003051 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV, PREL, ECON, BR, Domestic Politics 
SUBJECT:  BRAZIL CORRUPTION SCANDAL UPDATE, WEEK OF 14-18 
NOVEMBER 2005 
 
REF.:  A) BRASILIA 3001  B) BRASILIA 3043  C) BRASILIA 3008 
 
1.  INTRODUCTION.  On Monday, November 14, the political 
crisis that has engulfed the Lula administration and 
hindered the work of the Brazilian Congress reached the 
six-month mark.  From the day a Postal Service employee was 
caught receiving bribes in the name of a federal deputy, 
various corruption scandals have emerged, leading to the 
removal or resignation of dozens of government officials, 
from ministers to heads of state companies, and to the 
installation of three Congressional Inquiry Committees 
(CPIs) to investigate the allegations.  Nonetheless, many 
questions are still unanswered, 12 federal deputies are 
awaiting trial by the Chamber - including former Chief of 
Staff Jose Dirceu -- and two of the CPIs (Postal Service 
and Vote-Buying Scheme) reached the deadlines established 
by congressional rule without coming to a final conclusion. 
The governing coalition struggled to prevent the extension 
of the CPIs in an attempt to abbreviate the crisis, but 
were only successful in the case of the Vote-Buying Scheme 
CPI, which expired without voting on a final report. 
 
 
 
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Postal CPI Extended, Vote-Buying CPI Expires 
-------------------------------------------- 
 
2.  On November 11, the Postal Service CPI was able to 
achieve the necessary number of signatures in order to 
extend its deadline until April 11, 2006 (Note: the minimum 
required is 171 deputies and 30 senators).  However, soon 
after the Senate announced the extension of the CPI's 
mandate -- and reportedly after the government liberated 
funds for various programs supported by various deputies' - 
- many deputies removed their signatures from the petition, 
leaving it with only 170 names.  The opposition requested a 
recount of the signatures and achieved the 171 required, 
but two deputies from the government coalition are still 
appealing to the Chamber's board, stating that they also 
requested the withdrawal of their signatures.  If the 
deadline is not extended, the final report must be voted on 
by December 11; however, the Chamber's board is likely to 
reject the appeal of the two deputies and extend the work 
of the CPI. 
 
3.  In the case of the Vote-Buying Scheme CPI, whose 
deadline was reached on November 17, the government won the 
struggle against the opposition to prevent the extension of 
its mandate.  In fact, the government coalition also wanted 
to end the Postal Service CPI, which is the most active in 
bringing to light new revelations about the corruption 
scandals.  In contrast, the Vote-Buying Scheme CPI, whose 
final report was dealt leniently with corrupt congressmen, 
had failed to come up with hard evidence of the alleged 
vote-buying scheme. 
 
4.  Without the necessary number of signatures to approve 
the continuation of its investigations, the Vote-Buying 
Scheme CPI ended without even voting on the final report 
prepared by Deputy Ibrahim Abi-Ackel (PP-MG), which 
concluded that, although many congressmen received money 
from Marcos Valerio, there was no evidence to prove the 
existence of a bribes-for-votes scheme in Congress.  The 
final report recognized the electoral crimes committed by 
the deputies that illegally financed their campaigns, but 
did not name names.  In sum, the CPI terminated after four 
months of investigations without presenting any substantial 
conclusion. 
 
5.  Since it was the last one to be established, the Bingos 
CPI, responsible for investigating the use of bingo houses 
for money laundering and corruption allegations in 
Brazilian municipalities, has not yet reached its deadline. 
During this past week, it once again dedicated its sessions 
to the case of Celso Daniel's murder.  On November 17, the 
CPI heard the testimonies of Ronan Maria Pinto and Klinger 
Sousa, accused of participating in the corruption scheme in 
Santo Andre, and Sergio Gomes da Silva, known as "Sombra", 
supposedly the person that ordered Daniel's assassination. 
Sombra, who had been arrested for Daniel's murder, denied 
all the accusations against him and stated that he was 
another "victim" of the case.  In addition, Senator Suplicy 
found two additional witnesses to the case.  A woman, whose 
identity is being kept secret, was interrogated by the 
police on November 16, and affirmed that she saw Mayor 
Daniel arguing with the kidnappers before being taken, and 
that Sombra was not menaced by the bandits and was talking 
on the phone during the kidnap. 
 
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CHAMBER MAY AGAIN POSTPONE VOTE ON DIRCEU'S IMPEACHMENT 
--------------------------------------------- ---------- 
 
6.  The Chamber's Constitution and Justice Committee (CCJ) 
may approve on November 22 a petition presented by Deputy 
Jose Dirceu requesting the postponement of his impeachment 
vote in the Chamber, originally scheduled to take place on 
November 23.  On November 7, Dirceu appealed to the CCJ 
arguing that he had not been given adequate chance to 
defend himself and, therefore, his case should not be voted 
on by the plenary until all of his appeals had been 
considered either by the Chamber or by the Supreme Court. 
Deputy Sergio Miranda (PDT-MG), responsible for analyzing 
Dirceu's request, suggested that the Committee approve 
Dirceu's request on November 22.  If that happens, the 
final impeachment vote may only take place on November 30. 
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FINANCE MINISTER TESTIFIES BEFORE SENATE COMMITTEE 
--------------------------------------------- ----- 
 
7.  On November 16, Finance Minister Antonio Palocci 
testified before the Senate's Economic Affairs Committee. 
Palocci was scheduled to testify before the Committee on 
November 22, but moved his appearance up in the wake of an 
increase in rumors that he might be forced to resign 
because of new accusations of corruption, involvement in 
the irregular financing of the 2002 Lula presidential 
campaign and policy disagreements with Lula's chief of 
staff, Dilma Rousseff.  Those rumors had had a negative 
effect on Brazilian financial markets.  Following his 
appearance, the markets regained the ground lost in the 
days before his testimony. 
 
8.  While Palocci had previously threatened to resign if he 
was called to testify by the Bingos CPI, which has been 
investigating corruption schemes in Brazilian 
municipalities such as Ribeirao Preto, where Palocci served 
as mayor, during his testimony before the Economic Affairs 
Committee, he said he was available to appear before any 
Congressional body.  Refs B and C examine Palocci's 
situation in more depth. 
 
 
CHICOLA