BRAZIL CORRUPTION SCANDAL UPDATE, WEEKS OF 19-29

UNCLAS SECTION 01 OF 02 BRASILIA 003382

SIPDIS

E.O. 12958: N/A
TAGS: PGOV PREL ECON BR
SUBJECT: BRAZIL CORRUPTION SCANDAL UPDATE, WEEKS OF 19-29
DECEMBER 2005

REF.: BRASILIA 03286 AND PREVIOUS


1. (U) Introduction: A controversial decision to call an
extraordinary session of Brazil's congress during the
traditional holiday recess facilitated the continued
investigation of Brazil's interlocking political scandals,
now approaching their seven month in the headlines (ref).
Prime developments follow below.

CPI REPORT CONFIRMS BRIBE SCHEME
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2. (U) On December 21, the rapporteur of the Post Service
CPI (the lead congressional committee investigating
Brazil's illegal election finance/bribery scandals),Deputy
Osmar Serraglio, released a preliminary report confirming
the existence of the vote-buying scheme in the Brazilian
Congress. The 411-page document concludes that PT moneyman
Marcos Valerio was favored by the government in public
contracts, and, in return, used the money from these public
contracts to finance the party-switching and vote-buying
schemes that the PT party and GOB used to shore up its
congressional base. Serraglio publicly stated that he is
convinced that a corruption system was implemented in the
Congress and presented a list of payments regularly made by
Valerio as evidence to support his claims. However,
members of the governing coalition criticized his report:
the Minister of Institutional Relations, Jacques Wagner,
and the President of the Chamber of Deputies, Aldo Rebelo,
continued to insist that the scheme's existence had not
been proven. President Lula da Silva also stated that
there is no proof that the vote-buying scheme existed. In
response, the President of the Postal Service CPI, Senator
Delcidio Amaral, said that the President should read the
committee's report.

CONGRESS CALLED INTO SPECIAL SESSION: PLENARY REMAINS EMPTY
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3. (U) The Brazilian congressional recess period begun on
December 16 and will last until February 14, but for a cost
of almost 100 million reais (approximately 40 million
dollars),both houses called their congressmen into special
session. The purpose of the "extraordinary convocation"
was to allow the functioning of the House Ethics Committee,
the Postal Service CPI, the technical committees, and the
Joint Budget Committee. Only after January 13 will the
plenary start voting on pending bills and impeachment
processes. According to congressional rules, deputies and
senators will receive two extra salaries during the period
of special sessions; however, those who miss sessions
forfeit their pay, and those who miss a third or more of
the sessions are liable to loss of mandate. Nonetheless,
during the first two weeks of the special session, few
congressmen worked and, for the first time since 1999, the
government will start the year without approving the annual
budget. In addition, the Ethics Committee decided to go on
recess until January 9. Salaries have not been forfeited.

CPI INVESTIGATES LIST OF 700 PEOPLE INVOLVED IN THE VOTE-
BUYING SCHEME
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4. (U) On December 28, Postal Service CPI rapporteur
Osmar Serraglio announced that the committee is
investigating a new list with 700 names of current and
former congressional aides that established telephone
contacts with Marcos Valerio or withdrew money from his
accounts in the past 5 years. According to Serraglio, the
CPI will not release the list, as currently there is no
evidence that listed were involved in the corruption
scheme. However, Serraglio said that other congressmen are
likely to be implicated in the vote-buying scheme, and
their cases will be forwarded to the Ethics Committee.

BROTHER OF FORMER PT PRESIDENT ACQUITTED OF CORRUPTION
CHARGES
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5. (U) On December 20, the Legislative Assembly of the
State of Ceara decided to fully absolve State Deputy Jose
Guimaraes (PT) of corruption accusations. Guimaraes is the
brother of former PT president Jose Genoino -- who was
forced to step down because of the corruption scandal --
and was himself accused of receiving illegal funds after
his aide was arrested by the police in a Sao Paulo airport
hiding 100 thousand dollars in his underwear. In addition,
Guimaraes was cited as one of the beneficiaries of Marcos
Valerio's illegal campaign financing scheme. Guimaraes
stated that he requested money from former PT treasurer
Delubio Soares and was not aware that its source was
illegal. The Assembly's Ethics Committee recommended
Guimaraes' impeachment, but the plenary contradicted its
verdict and decided to fully absolve him.
CHICOLA