ITALY MAY ESCALATE OECD BRIBERY WORKING GROUP

C O N F I D E N T I A L ROME 002011 SIPDIS AMEMBASSY PARIS PLEASE PASS TO USOECD MORELLA, MELISSA HOROWITZ, PAUL BROWN DEPT FOR EB ACTING A/S DONNELLY AND EB/OIA WSCHOLTZ; EUR A/S FRIED AND EUR/WE KALLEGRONE, JADAMS NSC FOR KVOLKER E.O. 12958: DECL: 06/13/2015 TAGS: ECON EFIN IT OECD SUBJECT: ITALY MAY ESCALATE OECD BRIBERY WORKING GROUP ISSUE TO PRESIDENT BUSH REF: A. BROWN/REDDY EMAILS ¶B. ROME 1967 ¶C. ROME 1695 Classified By: A/Ecmin Couns Kathleen Reddy for Reasons 1.4 (b),(d). ¶1. (U) This is an action request. Please see paras. 1 and 6 below. SUMMARY AND ACTION REQUESTED -------------- ¶2. (C) Italy continues to press to delay the election of the Chairman of the OECD "Working Group Against Bribery of Foreign Public Officials in International Business Transactions" (WGB) and to seek other candidate(s) for the position, other than the current chair Mark Pieth. Italy alleges that Pieth has made broad innuendos, both before the WGB and in public, questioning Italy's commitment to combat bribery of foreign public officials and the integrity of Italy's Ministers, including Prime Minister Berlusconi. Italy claims these allegations are not only false and have never been proven in a court of law, but are outside the purview of the WGB and Chairman Pieth. Italy does not want to oppose the election (now scheduled for tomorrow),lest Chairman Pieth make public/press statements that Italy opposed his reelection because Italy could not take the heat on the bribery (and not for the reasons Italy believes are legitimate (reftels and 5 below)). If Italy cannot have the election postponed to give all WGB members time to find other suitable candidates, PM Berlusconi will raise the issue immediately with President Bush. We understand Italy's Ambassador Vento will also seek appointments on an urgent basis with A/S Fried, Acting A/S Donnelly, and/or NSC Volker. Action requested. If it has not already done so, request the Department issue instructions to USOECD Paris on whether the USG can vote to delay the election of a new WGB chair. End summary and action requested. ¶3. (C) Ambassador Marco Maresca, Diplomatic Advisor to Justice Minister Roberto Castelli, called Acting Economic Minister Counselor today to say Italy was frustrated in Paris by its efforts to try to delay the WGB reelection of Mark Pieth as WGB chair June 14. Italy's OECD Ambassador (Olivieri) had reportedly spoken both with the Secretary General and with Ambassador Morella on Italy's concerns about Pieth (reftels and para. 5 below) and the need to delay the election to find other suitable candidate(s). Reportedly, the Secretary General said that he himself could not alter the WGB agenda; only two-thirds of WGB members could do so. Italy would then need to mount the campaign to find the support it needed among member states. Reportedly, when Ambassador Olivieri approached Ambassador Morella, she said she had no instructions for the U.S. to support a delay. (Comment: Italy sees U.S. support here as necessary to win the support of the necessary two-thirds of WGB membership. End comment.) ¶4. (C) Maresca said that Minister Castelli, who had called in Ambassador Sembler last week on Italian concerns about Pieth, continues to follow this issue "at every turn." The Minister, in view of the lack of progress of Italy's Ambassador at OECD, may recommend that the Prime Minister now call President Bush. Reportedly, the Prime Minister would frame the issue in the following way: that Chairman Pieth has now served for seven years and is seeking two more (OECD rules reportedly limit chairmen's terms to no more than three consecutive years); that he has gone unchallenged and thus can act autonomously; that he makes "false" allegations about Italian Ministers and the Prime Minister without having to answer to anyone at OECD for his false charges; and that keeping Chairman Pieth in power during Italy's tough national elections next spring may embolden him to make false, unsubstantiated public allegations again about the Prime Minister's character - risking the Prime Minister to lose the election. ¶5. (C) In view of the imminent WGB election, Ambassador Maresca will call Ambassador Vento in Washington and instruct him to urgently request appointments with EUR A/S Fried, EB Acting A/S Donnelly, and/or NSC Kurt Volker to see if instructions could be issued to Ambassador Morella to support Italy's case to delay the elections. Ambassador Maresca underscored, even if the elections were to be postponed, Italy would view the postponement as an opportunity to search for other candidates. Under no conditions, he said, would Italy agree ever to support Pieth for reelection. TEXT OF ITALY'S NONPAPER ON CHAIRMAN PIETH -------------- ¶6. Below please find an informal translation of the nonpaper in which Italy outlines its concerns about the reelection of Chairman Pieth. Begin text of Embassy's informal translation. The most significant events of the Pieth Chairmanship, concerning Italy, can be summarized as follows: a) November 2001: Chairman Pieth made statements to the Working Group expressing serious concern about Italian laws on false accounting and letters rogatory and about the Italian Government's attitude in supporting the fight against corruption. The Chairman's remarks, according to him, were based on press articles, from talks with public prosecutors in Milan (whose names had also been made public),as well as on the biography and background of P.M. Silvio Berlusconi. b) January 2002: During the end of Phase I for Italy, (relative to the laws referred to in "a" above),when Italy objected to (Mr. Pieth's) review of Phase I, (Mr. Pieth's) justification was that the Italian "exceptional situation" required an effective response. c) June 2002: Both the British and the Mexican reviewers were fully convinced that Italy had passed the Phase I review. Nevertheless, Chairman Pieth claimed that there needed to be a mention in the final report of the existence of "perplexities," perplexities expressed only by the Chairman himself and despite the favorable opinion of the examiners. d) June 2003: There was a decision to hold the Phase II review for Italy in the second half of 2003. e) September 2003: Chairman Pieth solicited, and obtained from the OECD Secretary General, a note asking the U.S. Government to "encourage" Italy to accept the Phase II review during the Italian Presidency of the European Union, even though the magistrates involved in the review were already involved full-time with the Presidency. Italian delegates Iannini and Papa met a representative of the U.S. Embassy in Rome and clarified why Italy needed to postpone the Phase II review. f) April 2004: Phase II review for Italy was held ...without the presence of leaders in the OECD Secretariat. g) November 2004: Italy passed the Phase II review, but Chairman Pieth called a press conference and issued a press release (which has never happened for any other country) to state that the Chairman, despite the results of the review, was not fully satisfied with Italian legislation (against bribery of foreign public officials in international business transactions). h) November 2004. The Italian Government requested that Chairman Pieth change his position, but he never complied with this request. i) March 2002: A select study group (called the Lugano Group) was established and charged with changing WGB procedures, and Italy is a member of this group. However, since November 2002. Chairman Pieth has not convened a meeting. j) January 2005: Negative results of Phase II review for Japan. The U.S.A. and Italy, the examining countries, expressed a negative judgment of Japan's regulatory system (against bribery of foreign public officials in international business transactions). Chairman Pieth, as an exception to the previous procedures for all other countries, inexplicably asked to postpone any decision (on Japan) after another visit to Japan that he, alone personally, decided must occur in February 2006. This has, in fact, prevented the conclusion of the Phase II review for Japan, and actually caused perplexities for many delegations. These facts demonstrate concretely that it is a problem for Italy to confirm its consensus for the Chairman,s re-election. End text of informal translation. COMMENT AND ACTION REQUESTED -------------- ¶6. Italy's views on Chairman Pieth are entrenched at all levels of the government. While Italy appreciates USG-supported moves to give Italy more of a say in managing the WGB and its work (ref A),the real issue is the election of a new chairman. Request that Department issue instructions to USOECD Paris on whether the U.S. can support the delay for the election of a new chairman. Department's assistance is appreciated. End comment and action requested. SEMBLER NNNN 2005ROME02011 - Classification: CONFIDENTIAL