MA YING-JEOU TARNISHED BY MAYOR'S OFFICE

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 003890

SIPDIS

SIPDIS

E.O. 12958: DECL: 11/17/2031
TAGS: PGOV TW
SUBJECT: MA YING-JEOU TARNISHED BY MAYOR'S OFFICE
ACCOUNTING SCANDAL


Classified By: AIT Director Stephen M. Young,
Reason(s): 1.4 (B/D).


1. (C) Summary: Taipei Mayor and KMT Chairman Ma Ying-jeou
finds himself unexpectedly under investigation for the
alleged misuse of a mayoral office expense account. An
assistant responsible for handling Ma's reimbursement
requests has admitted to swapping high-dollar receipts of his
own for Ma's smaller ones, purportedly to reduce paperwork
and simplify accounting. At present, it appears that the
assistant acted on his own, without Ma's knowledge or
instruction, and there is no evidence at this point that
either of them embezzled funds. Predictably, DPP opponents
have called for Ma's resignation. Ma characterized the
incident as "administrative negligence," not corruption, and
said that he would not step down. Nonetheless, Ma's
reputation for competence has been tarnished. Comment:
Barring further revelations, this storm will pass, and will
probably not affect Ma's 2008 presidential chances. Taiwan
voters have short memories, and by the time the KMT chooses
its presidential candidate, this story should largely be
forgotten. End Summary.

Sloppy Accounting Lands Ma in Trouble
--------------


2. (U) Taipei mayor and KMT Chairman Ma Ying-jeou, long known
for his squeaky-clean image, is under fire for allegedly
misusing funds from a mayoral "special allowance" expense
account. Taipei city prosecutors questioned Ma for four
hours on Tuesday, November 14. DPP legislators prompted the
inquiry by filing complaints in August charging that Ma had
improperly transferred money from a mayoral expense account
to his personal bank account.


3. (U) The assistant responsible for handling Ma's expense
account submissions, Yu Wen, was interviewed by prosecutors
for six hours on November 15. According to press reports, he
admitted to replacing small dollar-amount receipts with large
dollar-amount receipts of his own, in an attempt to reduce
his paperwork. Taipei City Government Secretariat Director
Lee Shu-te told the press on November 15 that Ma typically
spent between NT$10,000-20,000 (US$300-600) each month on
fruit, newspapers, and other small items, generating between
50 and 100 receipts per month. Instead of submitting a
reimbursement request for each individual receipt as
required, Yu substituted fewer, larger receipts from himself
and others to simplify the submission process. Lee insisted
there is no evidence that Yu had embezzled any money.
Nonetheless, prosecutors forbade Yu from leaving Taiwan, and
he may face prosecution for falsifying documents. Ten others
have been questioned by prosecutors as part of the
investigation. No charges have been filed. (Comment: DPP
critics predictably rejected this explanation, arguing that
the average of four receipts per day over the past two years
could not be considered onerous for Yu. End Comment.)


4. (U) According to Lee, Yu saved all of Ma's original
receipts, worth a total of NT$1.4 million (US$45,000). Those
receipts have already been turned over to the prosecutor's
office. Press reports say that from 2003-2006, Yu replaced
NT$800,000 (US$26,000) of Ma's receipts with Yu's own
larger-value invoices to obtain reimbursements from the
mayor's special allowance account. The remaining NT$600,000
(US$19,000) was reimbursed from another, separate account.
Mayoral Office Director Cheng An-kuo, who supervised
reimbursement accounts, tendered his resignation, which Ma
accepted.

Ma Takes Responsibility, Not Blame
--------------


5. (U) During a press conference on November 15, Ma
apologized for Yu's misconduct, which he characterized as
"administrative negligence," not corruption. Ma denied
knowledge of Yu's wrongdoing until it was unearthed by the
prosecutors' investigation, asserting that he typically did
not follow the details of how expenses were reported for the
mayoral "special allowance" account. Although he was
"ashamed" of the mistakes in his office, Ma insisted that all

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funds had been used for official purposes, and that he did
not need to resign over Yu's "clerical errors" because he was
not directly involved. Ma has less than 40 days remaining in
his second and last four-year term as mayor.

DPP: Ma's A Hypocrite, Should Resign
--------------


6. (U) DPP Chairman Yu Shyi-kun and several DPP legislators
were quick to draw parallels between Ma's current imbroglio
and President Chen's alleged involvement in the submission of
others' receipts to withdraw funds from a special
presidential expense account. In an oblique call for Ma's
resignation, Yu demanded that Ma judge himself by the same
standard he used to judge President Chen. (Note: Prosecutors
stated publicly that they have found no evidence to suggest
that Ma knew of or was involved in Yu Wen's submission of
fraudulent receipts. End note.)

Ma Will Survive, But Not Unscathed
--------------


7. (C) KMT Taipei mayoral candidate Hau Long-bin's deputy
campaign manager Sam Wu (Hsiu-kwang) told AIT on November 16
that because Ma has trumpeted the very high ethical and
professional standards he has set for himself, he is
vulnerable to attack for the slightest misstep. If any other
politician had this problem, Wu remarked, it wouldn't be
worth reporting, but with Ma, it's front-page news. Wu told
AIT that, having worked with Ma personally for a "long time,"
he did not believe that Ma knew of, or was involved in, the
accounting misconduct giving rise to the scandal, and was
certain that Ma did not embezzle money.


8. (C) Although Ma's reputation for honesty will probably not
be harmed, Wu observed, his reputation for competence has
already been damaged. Voters may question Ma's capability to
govern the country if he is unable to competently manage the
mayoral office. There is still a slight chance that Ma could
be indicted, Wu added, because Taiwan's prosecutors are not
immune to political pressure from the central government.
Within the next three weeks, just before voters go to the
polls for mayor, prosecutors could determine whether to
indict Ma. (Comment: Separately, veteran DPP legislator Hung
Chi-chang told AIT that Ma's current troubles would fade
quickly and have little effect on his long-term political
prospects. End Comment.) Wu, however, feared the short-term
effects of this scandal on Hau Long-bin's mayoral campaign,
which are reported septel.

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


9. (C) Unlike President Chen, Ma did not admit to knowing of
or instructing others to submit fraudulent receipts to obtain
funds from a discretionary account, and so far no evidence to
the contrary has been presented to the prosecutors.
Unfortunately for Mayor Ma, for political purposes he is
required to accept managerial responsibility for the
misconduct of those working for him. The public, at Ma's own
urging, has come to expect more from him than the "average"
Taiwanese politician. Those inclined to distrust the KMT may
view this scandal as proof that Ma is corrupt, but even those
pan-Blues who support Ma may begin to question his competence
as a manager. Barring any revelation that he was actively
involved in the accounting shenanigans, Ma will probably
survive, and hold on to his mayorship and KMT chairmanship.
But the media and Ma's pan-Green opponents continue to dig
relentlessly for damning evidence. Ma's perfect track record
and maybe even his "Mr. Clean" image have been sullied, but
this incident alone probably won't be enough to cost him the
presidential nomination in 2008, though it could cost him
support from some swing groups, including women and young
people. On another level, this investigation of Ma over an
accounting practice most political figures also use, could
lead to a scramble to check on the records of other prominent
officials as Taiwan's endless political season marches on.
YOUNG