KOSOVO: ASSEMBLY AUDIT REVEALS FISCAL MALFEASANCE

C O N F I D E N T I A L SECTION 01 OF 02 PRISTINA 000561

SIPDIS

SIPDIS

DEPT FOR DRL, INL, EUR/SCE, AND EUR/SSA, NSC FOR BRAUN,
USUN FOR DREW SCHUFLETOWSKI, USOSCE FOR STEVE STEGER

E.O. 12958: DECL: 06/29/2016
TAGS: PGOV KCOR KDEM PREL UNMIK YI
SUBJECT: KOSOVO: ASSEMBLY AUDIT REVEALS FISCAL MALFEASANCE
UNDER FORMER SPEAKER NEXHAT DACI


Classified By: COM PHILIP S. GOLDBERG FOR REASONS 1.4 (B) AND (D).


1. (C) SUMMARY. An external audit of the Kosovo Assembly's
budget under former Speaker Nexhat Daci has revealed serious
fiscal irregularities. The audit states that Daci and his
Assembly staff used Assembly finances for expensive armored
vehicles, a convention/conference center in a suburb of
Pristina, and personal expenses such as dental work,
eyeglasses, clothes, and general maintenance at Daci's
private home in Pristina and lodge near a ski resort in
Brezovica. Current Assembly Speaker Kole Berisha, who gave
free rein to the auditors during May and June, provided COM a
draft copy of the report on June 22; its contents also
appeared in the local press on June 28. This leaking of the
report comes on the heels of the June 24 arrest of Daci's
former aide-de-camp, Ahmet Alishani, on unrelated bribery
charges represent a setback for Daci in his bid to become the
head of the Democratic League of Kosovo (LDK) in its autumn
party elections. END SUMMARY.

"DACI, WHERE'S MY CAR?"
--------------


2. (C) A June 15 draft external audit report on Assembly
finances from July 1, 2004 to April 24, 2006, revealed fiscal
malfeasance by former Assembly president Nexhat Daci and his
staff, particularly the Assembly's Secretary General, Isuf
Demaj. The draft report was leaked to the press and appeared
in the June 28 edition of the daily Zeri newspaper.
Significant findings included irregularity in the purchase of
a 236,500 euro armored vehicle for Daci that was never
delivered, and payments not approved by the Assembly
Presidency totaling 1,651,000 euros for construction of a
convention center in the Germia area of Pristina. Berisha
told COM June 22 that although Isuf Demaj signed a receipt
indicating that he had received the car on November 25, 2005,
its whereabouts are still unknown. The Germia convention
center is only half-finished, but on June 23 the Assembly
presidency unanimously decided to continue construction of
the complex since demolition of the building would cost more
than the funding already invested in the project, and the
Assembly could choose to rent or sell the facility after its
completion.


3. (C) The Democratic League of Kosovo (LDK),the largest
party in the Assembly, replaced Daci with the current
Assembly president, Kole Berisha, on March 10, 2006. Berisha
made cleaning up the budgetary and procedural mess Daci left
a priority and gave free rein to the auditors during May and
June. The Assembly presidency had already decided on March
31 that no legal provisions or grounds existed to grant
Daci,s request for two offices, a car, staff, protection,
and continued payment of a supplemental salary (i.e. beyond
his pay as a regular member of the Assembly),as are provided
to Kosovo's former prime ministers. Berisha told the COM on
June 28 that he "enjoyed the complete support of the Assembly
Presidency and its members from all political parties on this
issue."

FORMER ASSEMBLY STAFFERS IMPLICATED
--------------


4. (C) The report, which Berisha gave to COM on June 22,
identifies over 50 Assembly payments made in contravention of
the law on Public Procurement. All were signed by Isuf
Demaj, and involved invoices issued before contracts were
signed, instances in which multiple invoices showed multiples
of exactly 500 euros (the maximum amount allowed under the
law for a single purchase) to the same supplier for the same
goods, and payment for personal items for Daci and Assembly
staff. The latter includes expensive eyeglasses for Daci
(590 euros); dental work for Daci (950 euros); purchases of
clothes for former staff; and purchases of medication. For
example, purchases listed as aftershave, clothes, alcohol,
perfume, watches and cigarettes in Zurich airport, Ljublijana
airport and in France totalled 1,364 euros and purchases of
medication and medical services for Isuf Demaj totalled 3,141

PRISTINA 00000561 002 OF 002


euros. The report lists petty cash advances of over 48,000
euro in 2005. Berisha suspended Demaj as Secretary of the
Assembly on June 23.

A SETBACK FOR DACI
--------------


5. (C) Police arrested Ahmet Alishani, Daci's aide-de-camp
and head staffer in the Office of the Assembly President,
June 24 on unrelated charges for accepting a 20,000 euro
bribe in January 2003 from the son of Macedonian politician
Nevza Halili for his father's release from a Kosovo jail
after being charged with terrorism. Daci's hasty reaction
June 24 was to call a press conference during which he
proclaimed Alishani's innocence as the target of a
"conspiracy" and "personal attack" "just as (Daci) was
running for head of the LDK." A local judge extended
Alishani's detention by 30 days on June 28. In answer to a
weekly publication's question June 28 as to whether Daci
believes he will be arrested, Daci said "I don't think so,
but if justice needs me, a citizen, an MP, and a candidate
for the LDK chair, I'm obliged to obey."


6. (C) LDK vice-president Eqrem Kryeziu reacted to the audit
and Daci's comments to Alishani's arrest by saying June 29 to
the press: "I'm sorry if Mr. Daci interprets this arrest in
this way...no, absolutely not, this arrest has nothing to do
with politics." Even firm Daci supporter Sejde Tolaj, leader
of the LDK's influential youth wing, responded to the report
carefully by telling the media he cannot comment on the
report until he sees it.


7. (C) COMMENT. Although the lesser purchases outlined in
this draft audit do not necessarily rise to the level of a
criminal investigation, taken as a whole, they lend credence
to opposition party refrains of corruption in the government.
Daci has announced his candidacy for the powerful position
of head of Kosovo's largest party, the Democratic League of
Kosovo (LDK),and through LDK spokesperson Lulzim Zeneli,
said that he will not react publicly to the audit before a
July 8 LDK presidency meeting which will schedule the party's
long-overdue convention (after which Daci gave an extensive
interview to a local newspaper). The report and allegations
that Daci was somehow complicit in corruption -- and his
ill-advised comments charging political motives for the
allegations -- represent a setback in his efforts to become
LDK leader. END COMMENT.


8. (U) U.S. Office Pristina clears this cable for release in
its entirety to U.N. Special Envoy for Kosovo Martti
Ahtisaari.
GOLDBERG