Identifier
Created
Classification
Origin
05QUITO2049
2005-09-02 14:18:00
CONFIDENTIAL
Embassy Quito
Cable title:  

SCANDAL TARNISHES PALACIO GOVERNMENT

Tags:  PGOV PREL EC 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 02 QUITO 002049 

SIPDIS

E.O. 12958: DECL: 09/01/2015
TAGS: PGOV PREL EC
SUBJECT: SCANDAL TARNISHES PALACIO GOVERNMENT

Classified By: PolChief Erik Hall, for reason 1.4 (b&d).

C O N F I D E N T I A L SECTION 01 OF 02 QUITO 002049

SIPDIS

E.O. 12958: DECL: 09/01/2015
TAGS: PGOV PREL EC
SUBJECT: SCANDAL TARNISHES PALACIO GOVERNMENT

Classified By: PolChief Erik Hall, for reason 1.4 (b&d).


1. (C) Summary: President Palacio has moved quickly to
stem the damage caused by a widening forgery and
position-selling scandal by firing implicated advisors inside
the office of the presidency. Coming on the heels of
damaging strikes, the scandal has weakened the Palacio
government's image and emboldened Congress. That could have
negative consequences for Palacio's embattled Government
Minister, and Palacio's political reform proposals, which
must pass through Congress. Palacio is clearly not willing
to concede to his detractors--VP Serrano told the Ambassador
on August 31 that the reforms are on track to pass through
the Congress shortly, and be put to a referendum by the end
of November. End Summary.

Plenty of Smoke
--------------


2. (U) The influence-peddling allegations center on the
activities of presidential advisors and their support staff,
who allegedly forged the president's signature on documents
involving government positions, which were sold to
individuals for personal gain. The story broke over a week
ago, when a disgruntled Esmeraldan, Jose Velasquez, told the
press that jobs were being sold by presidential advisors.
Velasquez was upset because the job he sought to purchase for
Miguel Robalino, as director of a state health enterprise,
Modersa, had not been delivered. Gustavo Pacheco, the
husband of PRE congressional deputy Silvana Ibarra, is also
under investigation.


3. (U) On August 26, eight lower-tier presidential advisors
(Homero Cervantes, Julio Cisneros, Damian Velasco, Juan
Antonio Lopez, Yuri Baque, Andres Falquez, Raul Ledesma and
Enrique Ponce--none Embassy contacts) were rapidly suspended
pending an official investigation. Two other presidential
advisors Gustavo Mino and Eduardo Armijos, subsequently
resigned. Miguel Robalino, a Gutierrez appointee to
Petroecuador, was taken into custody by authorities on
September 1 after giving testimony in the case. The
president's military aide de camp, Fausto Bravo, also
implicated in the scheme, immediately fled across the border
to Peru. He later returned to face discipline for abandoning
his duties (nine days in the stockade) and investigation of

his role in the scandal.


4. (C) Presidential sibling Gustavo Palacio told DCM on
September 1 that those implicated in the scandal were junior
staffers, not bona fide presidential advisors. He was
emotional when admitting that their corruption was real and
would damage his brother's reputation. He acknowledged that
this was not the first example of corruption in his brother's
administration (he cited the resignation of the former
Solidarity Fund chief, Marcelo Arcos).

Congress Sniffs Opportunity
--------------


5. (C) With Palacio's touted personal credibility under
fire, coming on the heels of disastrous strikes in two
oil-producing provinces, members of the always-discredited
Congress sense an opportunity to make gains at the
president's expense. Their first target is unpopular
government minister Mauricio Gandara, blamed for mishandling
the strikes in Manabi, Sucumbios and Orellana. Fringe-left
MPD deputies have launched an impeachment attempt, which has
been joined by the Democratic Left (ID) party. The Social
Christian party recently announced its support, but on
different grounds to be determined. (Note: impeachment is
today a symbolic, non-binding process--only the president has
authority to dismiss his Cabinet.) Presidential sibling
Palacio admitted that Gandara was likely to be asked to leave.

Battle Brewing over Political Reforms
--------------


6. (C) Vice President Alejandro Serrano told the Ambassador
and DCM in a courtesy call on August 31 that the number one
reform suggestion among the 48,000 received though his
citizen outreach program is to reduce the size of Congress,
reflecting the low repute in which that institution is held
by the public. At the president's urging, the referendum
process would be speeded up; he planned to send an initial
version of referendum questions to the president the first
week of September.


7. (C) The referendum would go to Congress for an up or down
vote, Serrano first claimed. He subsequently acknowledged
that Congress could also individually reject objectionable
questions within the proposed referendum. ID congressional
bench leader Jorge Sanchez told PolChief on August 30 that
with Palacio wounded by scandal and inept handling of the
strikes, Congress would act independently to pass consensus
reforms, and not be a passive participant in the president's
reform proposals.

Supreme Court Selection Process Vulnerable
--------------


8. (C) In addition to a question about the size of Congress,
Serrano believed it essential to include one ratifying the
extra-constitutional process to conform a new Supreme Court.
That process was moving forward, albeit haltingly, but
required additional protection from possible challenge by a
future government or Congress. (Comment: We have heard the
same argument from UN Rapporteur Leandro Despuy, whose
recommendations have been heeded by the GOE and the selection
committee thus far.)


9. (C) OAS international judicial experts visiting Ecuador
told the DCM on August 26 that their week in Ecuador had
"seemed like a year." Costa Rican human rights expert Sonia
Picado and Chilean Senator Jose Antonio Viera Gallo said
their assistance had helped overcome opposition by the
National Judicial Council, which had blocked funding for the
committee out of self-interest (once a new court is selected,
the Council will be replaced). After intervention by the
Solicitor General and Finance Minister, $500,000 was provided
for the committee, which hopes to select the new court by the
end of October.

Comment
--------------


10. (C) With details of the scandal still emerging it is too
early to tell whether the net will eventually snare the
president himself. Key advisors have been released and
others, including presidential secretary Luis Herreria,
damaged by association. How badly the scandal hits the
presidency is largely in the hands of the attorney general, a
sometime ally of PSC leader Leon Febres Cordero. At this
point, we have no indication that LFC intends to bring down
the Palacio government. Gandara, a longtime rival of Febres
Cordero, is the more likely casualty. Political reforms are
also likely to be conditioned on compromise with PSC and the
ID, Palacio's current lifelines.
JEWELL