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.

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2005ROME02011 - Classification: CONFIDENTIAL