ECONOMY MINISTER RESIGNS OVER ETHICS VIOLATIONS;

C O N F I D E N T I A L SECTION 01 OF 02 VILNIUS 000636

SIPDIS

STATE FOR EUR/NB

E.O. 12958: DECL: 06/16/2015
TAGS: PGOV PREL LH
SUBJECT: ECONOMY MINISTER RESIGNS OVER ETHICS VIOLATIONS;
GOVERNMENT COALITION INTACT

REF: VILNIUS 504 AND PREVIOUS

Classified By: Political-Economic Officer Nancy Cohen
for reasons 1.4 ( b,d).

--------------
Summary
--------------


1. (C) Lithuania's Minister of Economy Viktor Uspaskich
tendered his resignation June 16, following the announcement
of a Government Ethics Commission finding that he had
violated the laws regarding conflicts of interest. Uspaskich
will reportedly relinquish his position in Government and his
seat in Parliament, but appears intent on maintaining his
leadership of the Labor Party. For now, it appears that
Labor will remain in the ruling coalition, and speculation
focuses instead on whom among its ranks will assume
Uspaskich's place as Minister. End Summary.

-------------- -
Commission Confirms Violations, Investigations
Continue
-------------- -


2. (U) The Public Service Ethics Commission, by a 4-1 vote,
determined on June 16 that Uspaskich had violated national
laws regulating conflicts of interest on the part of public
officials. The Commission found that Uspaskich had conducted
private business during meetings with Moscow municipal
officials while on an official trip in March. A second
finding on another less publicized charge states that
Uspaskich's efforts as Economy Minister to transfer
management of Lithuania's regional information centers to the
Lithuanian Business Employer's Confederation (of which he is
a former president) created a conflict of interest.
Uspaskich is also under investigation by three parliamentary
commissions for alleged unethical or otherwise illegal acts
while in public office (reftel).

--------------
Uspaskich Resigns
--------------


3. (U) After the Ethics Commission ruling, Uspaskich
reportedly called Prime Minister Brazauskas -- in Brussels
for the EU summit -- to tender his resignation. Brazauskas
told reporters he would accept the resignation immediately
upon returning to Vilnius. Despite resigning, Uspaskich has
indicated he disagrees with the Commission's finding and will
appeal the decision in court.

--------------
Business as Usual
--------------


4. (U) One day after Uspaskich's resignation, the corridors
of the Seimas are quiet and its business normal, according to
a senior Liberal Party advisor. Labor Party press attache
Orijana Jakimauskiene told us June 17 that Uspaskich plans to
remain head of the Party and that it will remain in the
Government (despite earlier threats by Party Deputy Viktoras
Muntianas that Labor would pull out of the ruling coalition
if Uspaskich resigned). Media speculation is focusing on the
early list of possibles to replace Uspaskich as Minister of
Economy, with MP Jonas Lionginas, a former long-time Finance
Ministry official and current chair of the Budget and Finance
Committee, a strong contender. (Jakimauskiene denied that
Lionginas is the frontrunner.)

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


5. (C) Political parties in Lithuania tend to emphasize
personalities rather than ideologies or programs. The Labor
Party is no different. Only eight months ago, it won more
votes than any other party in the parliamentary elections,
and opinion polls earlier this month showed that it remains
the most popular party in Lithuania. But it now faces the
challenge of demonstrating that it can play a leading role in
political life without its charismatic leader in office.
Uspaskich's resignation at this point was the best option for
him to retain political influence. His ethical lapses (which
appeared only to deepen this week with allegations that his
college degree is fake) would have made it impossible to
survive as Minister against the onslaught of criticism in the
press and parliament. His tight grip on the Labor Party --
based on his autocratic control and substantial financial
investment in its operations -- should allow him to continue
his considerable influence on the government.


6. (C) Many observers believe the scandals surrounding
Uspaskich were born of internal coalition jockeying for
control of the billions of dollars of EU funds headed for
Lithuania. Uspaskich had openly trumpeted his intention to
use EU funds to reward his followers throughout the country.
His departure from government will calm the waters for a
short time, but there is no doubt he will continue to wield
his considerable influence as Labor Party chief in internal
government deliberations to benefit his party. Consequently,
internal squabbling is likely to continue within the
coalition. But it will unlikely be fatal in the near term --
there continues to be no realistic alternative to the current
unwieldy arrangement.
Mull