GOVERNMENT SCRAMBLING TO BUILD A CASE AGAINST

C O N F I D E N T I A L SECTION 01 OF 04 BANGKOK 007594

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/26/2016
TAGS: PGOV PHUM KDEM KJUS KCRM TH
SUBJECT: GOVERNMENT SCRAMBLING TO BUILD A CASE AGAINST
THAKSIN

REF: A. BANGKOK 7484 (CAPITAL CONTROLS)

B. BANGKOK 1301 (SNAP ELECTION)

C. BANGKOK 788 (THE GREAT SALE)

D. 05 BANGKOK 7529 (LUNCH WITH THAKSIN)

E. 03 BANGKOK 2832 (MEETING WITH CHAVALIT)

Classified By: Political Officer David R. Greenberg, reason: 1.4 (b) an
d (d).

SUMMARY
--------------


1. (C) Since the September 19 coup d'etat, Thai public
figures have haphazardly indicated various possible grounds
for the prosecution of deposed Prime Minister Thaksin
Shinawatra. It remains unclear which of Thaksin's alleged
offenses can provide the basis for his future exclusion from
political life, which some in the current administration
appear to see as a precondition for returning to normalcy.
Offenses that government officials have considered pursuing
include:

- Involvement in the disappearance of Muslim lawyer Somchai
Neelaphaijit and other extra-judicial killings;

- Instituting an illegal government lottery; and

- Facilitating the purchase of government land by Thaksin's
wife at a below-market price.

Despite public statements by various officials on the above
and other offenses, such as tax evasion by Thaksin's close
relatives, the government has yet to make public strong
evidence of Thaksin's direct involvement in illegal conduct.
Thaksin's lawyer told us privately that the land purchase may
present the greatest threat to Thaksin. Thailand's
Constitutional Tribunal, ruling on charges of fraud in the
April 2006 election, may dissolve the Thai Rak Thai party and
determine Thaksin is ineligible to stand for election for a
five year period, but it is unclear whether such a ruling
would leave the coup leaders feeling they can safely permit
Thaksin's return to Thailand. Despite the eagerness to find
a basis for Thaksin's prosecution, we have not seen that the
former Prime Minister has been denied due process. End
Summary.

PROSECUTION PROVES TOUGHER THAN COUP
--------------


2. (U) When top military officers seized power on September
19, they cited social divisions, corruption, politicization
of independent agencies, and lese majeste as factors
motivating their coup d'etat. In November, the Thai
authorities issued a white paper with a longer list of
reasons for overthrowing Thaksin, ranging from human rights
abuses to "conversion of mobile phone concession royalties
into excise tax." Investigative bodies have begun
scrutinizing Thaksin-era government practices.


3. (C) Various contacts have described top officials as
worried if not outright paranoid about Thaksin continuing to
exert influence in Thailand, and perhaps staging a political
comeback in the near future. Talk of "undercurrents" against
the government continues, as martial law remains in place.
Blunders such as the sudden imposition of capital controls
(ref A) surely contribute to the insecurity of Thailand's
current leadership. (Some speculated Thaksin might somehow
have exacerbated the December 19 plunge in the stock market.)



4. (C) A strong legal indictment against Thaksin would help
reassure the coup leaders that they could ease political
controls and transition to democratic governance without
having to worry about Thaksin returning and wreaking
vengeance. So far, however, the government has criticized
its predecessor's policies and hinted at legal culpability
without presenting publicly an evidentiary basis for charging
the former Prime Minister. It is noteworthy that, while the
government aggressively seeks a basis for Thaksin's
prosecution, there are no indications that government
officials are fabricating charges or otherwise denying him
and his associates due process -- despite eagerness from many
quarters to see Thaksin "held accountable" for the "excesses
of his administration." On the contrary, one of the biggest

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complaints against the current government is that it has been
too slow to hold Thaksin accountable for the transgressions
which he is widely believed to have committed.

EXTRA-JUDICIAL KILLINGS
--------------


5. (U) The most serious charges floated against Thaksin link
the former Prime Minister to extra-judicial killings by the
security forces. In November, Somchai Homlaor, Vice Chairman
of a National Human Rights Commission subcommittee on legal
affairs and disappearances, revived criticism of the
2003-2005 anti-drug campaign, during which thousands of
people died violent deaths at the hands of either the
authorities or fellow criminals. Somchai, along with former
Senator Kraisak Choonhavan, called publicly for Thailand to
ratify the Rome Statute of the International Criminal Court,
so that Thaksin might be tried for crimes against humanity.


6. (C) In December, Justice Minister Charnchai Likhitjjitta
told the Ambassador that his Ministry had a limited capacity
to investigate killings that took place during the anti-drug
campaign. Days later, following a meeting chaired by Prime
Minister Surayud Chulanont, the Department of Special
Investigations (DSI) determined it would establish special
teams to examine four select cases involving the deaths or
disappearances of people seemingly unconnected to the
narcotics trade. It appears highly unlikely that these
investigations will uncover evidence implicating Thaksin.
(Note: During Thaksin's time in office, the Embassy
repeatedly expressed concern to top level RTG officials,
including Thaksin himself, over the perception that the RTG
systematically carried out extra-judicial killings -- see,
for example, refs D and E. End Note.)


7. (SBU) Critics have also accused Thaksin of involvement in
the 2004 disappearance of Muslim lawyer Somchai Neelaphaijit.
On October 31, Council for National Security Chairman Sonthi
Boonyaratglin told the press that he had "received
information from investigators that some individuals close to
former Prime Minister Thaksin were behind the disappearance
of Somchai." Days later, the Office of the Attorney General
announced that it had evidence that Somchai "may have died,"
and that suspects in the case would be charged with murder.
In response, Somchai's widow called for investigators to
delay issuing arrest warrants, expressing concern that
rushing ahead without adequate evidence would make it
impossible to secure convictions. Since then, the Somchai
case has faded from the headlines.

GOVERNMENT-RUN LOTTERY
--------------


8. (U) In 2003, the Thaksin administration issued a cabinet
resolution that established a government-run lottery program.
In late November, Finance Minster Pridiyathorn Devakula,
when advocating new legislation to regulate government
lottery programs, argued that Thaksin and his cabinet had
violated the Government Lottery Act by introducing the
lottery through a cabinet resolution, rather than a law.
Consequently, Thaksin and his ministers could face criminal
charges, Pridiyathorn threatened.


9. (C) Thaksin-era Finance Minister Suchart Jaovisidha,
citing clearance from government lawyers, said in
mid-December that the cabinet had made "an honest mistake" by
initiating the lottery program without a legal basis.
Nevertheless, it is difficult to envision the government
zealously prosecuting Thaksin on related charges. First, the
lottery program was genuinely popular, both with those who
play the lottery and with the organizations for disabled
persons, since people with disabilities often make a living
as ticket vendors. Second, there was compelling logic behind
the scheme -- that the government should capture revenues
that otherwise would go to underground lottery operators.
Third, it is difficult to link the government's establishment
of the government lottery program to Thaksin's personal
financial interests. (By contrast, some have told us that
the current suspension of the government lottery is enriching
the underground operators, who -- like many in organized
crime -- may be presumed to have ties to officials in the
security forces.) However, there have been concerns
expressed that the monies raised through the government
lottery program were not properly accounted for and comprised

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a slush fund of sorts for political purposes. At this point,
though, we are not aware of serious efforts to investigate
the use of these funds.


10. (C) After blasting Thaksin, Pridiyathorn lost face when
the government's bill encountered vocal opposition in the
National Legislative Assembly, and he withdrew the draft law.
Given the political firestorm that this issue sparked, few
officials -- politicians or prosecutors -- may be eager to
involve themselves with it.

LAND PURCHASE
--------------


11. (U) The Asset Examination Commission (AEC) has begun
examining dozens of transactions that may involve Thaksin-era
corruption. The case that may pose the most direct threat to
Thaksin involves the 2003 purchase for 772 million Baht
(approximately 19 million USD) of land by Thaksin's wife,
Potjaman. Potjaman purchased the land from the Financial
Institutions Development Fund (FIDF),an independent agency
created by the Bank of Thailand to assume the cost of
nonperforming assets, among other functions.


12. (U) AEC members have assessed that the land purchase
violated the 1999 Counter Corruption Act, which prohibits
state officials and their spouses from entering into
contracts with the state agencies over which they have
authority. Violations are punishable by up to three years'
imprisonment. However, Noppadol Pattama, Thaksin's lawyer
and unofficial spokesman, has publicly disputed the idea that
the Prime Minister had formal authority over the FIDF. On
December 25, an AEC spokesman expressed the opinion that
Thaksin acted improperly in this case, and the AEC would take
legal action if requested by the FIDF.


13. (C) When we met recently with Noppodol, he told us he was
devoting resources to countering all the charges that have
been floated publicly (creating an illegal lottery,
extrajudicial killings, etc.). He acknowledged, however,
that prosecution for the land purchase represented the most
serious threat. Because the Counter Corruption Act was
relatively recent, the concept of authority in this law's
context remained unclear. The criteria employed by the
courts would be extremely subjective, Noppadol said.

TAX EVASION
--------------


14. (U) Meanwhile, the AEC has indicated that Thaksin's
children (Panthongtae and Pinthongta),and his wife's
step-brother, evaded taxes on large transactions. When the
Shinawatra family arranged its politically disastrous sale of
Shin Corp to Singapore's Temasek Holdings, Thaksin's two
children purchased a total of 329 million shares of Shin Corp
stock from an offshore holding company for 1 Baht each, then
resold those shares to Temasek for over 49 Baht apiece, with
no tax liability. (Ref C reported this transaction, and the
applicability of RTG tax laws, in greater detail.) With a
new determination that these profits should be subject to
taxation, the two may face a combined tax bill of over 160
million USD.


15. (U) In the case of Bannapot Damapong, Potjaman
Shinawatra's stepbrother, the AEC skeptically challenged the
claim that Potjaman's maid in 1997 provided Bannapot with
corporate shares worth 738 million Baht (over 18 million USD)
as a tax-free gift. (Note: The Shinawatras appeared to have
placed substantial assets in the names of their domestic
employees in order to conceal their wealth. The
Constitutional Court, in a controversial 2001 ruling,
acquitted Thaksin on charges of asset concealment, however.
End Note.) The AEC determined Bannapot had to pay 273
million Baht in back taxes, with an additional 273 million in
penalties, totaling approximately 15 million USD.


16. (U) In his defense, Bannapot explained that he had
received a letter from the Finance Ministry exempting him
from taxation on the above transaction. Investigators
confirmed the letter was authentic and, consequently,
determined that Finance Ministry Revenue Department Director
General Sirote Swasdipanich and four others should face
criminal and disciplinary charges.


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17. (C) Noppadol, Thaksin's lawyer, told us that both
Bannapot and Thaksin's children are prepared to provide bank
guarantees to cover their tax liabilities in the above cases,
although they also plan to exhaust all available appeals.
While these tax evasion cases are unlikely to provide a legal
basis for a case against Thaksin, they would seem to provide
substantial leverage in the event that Thailand's current
leaders decide to negotiate a deal with the deposed Prime
Minister.

THAI RAK THAI UNDER FIRE
--------------


18. (C) The September 19 coup leaders surely hope to find a
basis for filing criminal charges against Thaksin. However,
a less powerful but still significant step would entail
stripping Thaksin of political rights. Even prior to the
coup, the Office of the Attorney General had recommended that
the Constitutional Court dissolve Thaksin's Thai Rak Thai
party (TRT)for fraudulently promoting weak competitors in
April's election. (Ref B explains TRT's motive for doing
so.) This case is proceeding under the newly established
Constitutional Tribunal. After seizing power, the coup
leaders announced that members of the executive board of a
party subject to punitive dissolution would lose their voting
rights for a five year period. (The 1997 Constitution
disallowed those without voting rights from election to
parliament, and, therefore, from cabinet positions as well.
We suspect the next constitution will also contain similar
provisions.)


19. (C) Stripping Thaksin of his voting rights should impede
his ability to regain high political office, although the ex
post facto nature of the coup leaders' revised penalties
could be subject to legal challenge under a more
accommodating successor government. Also, Thaksin's
continuing popularity in certain areas and his immense wealth
would enable him to pose an extremely significant political
threat to the coup leaders, even if he were subject to a
formal ban on holding political office. Thus, the
Constitutional Tribunal's ruling against TRT would fall short
of providing Thailand's current leaders with the same sense
of security that they might feel if Thaksin's options were
either to remain abroad or sit in a Thai prison cell.

OUTLOOK
--------------


20. (C) Now more than three months since the coup d'etat, the
interim administration has yet to pull together a strong
legal case against Thaksin. Although the former Prime
Minister demonstrated a penchant for arrogant and impolitic
statements, it appears he was quite clever and sophisticated
in his financial arrangements, and government sources
acknowledge it will be difficult to find clear evidence of
corruption. The case with the best prospects for success --
the land deal -- may bog down in the courts for an extended
period. We strongly doubt Thaksin can be proven to have
orchestrated extra-judicial killings, the most serious charge
against him. But Thailand's current leaders are well aware
that, in the face of increasing criticism over their ability
to run the country, a successful prosecution (or even just a
compelling indictment) against Thaksin would bolster their
legitimacy and popularity.
ARVIZU