AN - TSJ SHOWDOWN MASKS FIGHT FOR SPOILS, CONTROL,

C O N F I D E N T I A L SECTION 01 OF 03 CARACAS 000709 SIPDIS SIPDIS HQSOUTHCOM ALSO FOR POLAD DEPT PASS TO AID/OTI RPORTER E.O. 12958: DECL: 04/09/2027 TAGS: PGOV KDEM VE SUBJECT: AN - TSJ SHOWDOWN MASKS FIGHT FOR SPOILS, CONTROL, AND REVENGE REF: 06 CARACAS 01661 CARACAS 00000709 001.2 OF 003 Classified By: POLITICAL COUNSELOR ROBERT DOWNES FOR REASON 1.4 (D) -------------- Summary -------------- ¶1. (C) A dispute between the National Assembly (NA) and Supreme Tribunal of Justice (TSJ) began in late March when the NA condemned a controversial TSJ Constitutional Chamber decision to modify an article of the Venezuelan tax law and opened an investigation that could lead to the justices' impeachment. The conflict is not a separation of powers issue, but rather an intra-Chavista scramble for influence, revenge, and corruption opportunities within the judiciary, as it coincides with changes in the lower court system and a rumored effort to reduce the number of TSJ justices. The NA appears to have backing from Chavez, who accused the justices of "betraying the Revolution" by its ruling. -------------- Round 1: The TSJ Decision -------------- ¶2. (C) The Constitutional Chamber of the Supreme Tribunal of Justice (TSJ) issued a ruling February 27 modifying Article 31 of the Venezuelan tax law by exempting bonuses and other income supplements from taxation. The decision was in response to a 2001 petition to nullify parts of the Venezuelan tax law as unconstitutional. Article 31 was not one of the articles listed in the petition, but the chamber invoked its authority to review laws for their compatibility with the constitution as the basis for the ruling. Venezuelan tax authority (SENIAT) President Jose Vielma Mora has said the decision could potentially cost the government USD 300 million in revenue. However, Mora said on March 28 that Seniat would comply with the decision, which will go into effect in 2008. -------------- Round 2: The NA Rejection -------------- ¶3. (C) The National Assembly (NA) unanimously passed a resolution March 22, nearly a month after the ruling, that "categorically rejects" the Constitutional Chamber's ruling, calling it "unconstitutional and in violation of social and collective rights, and social ethics." The accord, introduced by Second NA Vice President Roberto Hernandez, specifically accuses the Constitutional Chamber of usurping the NA's legislative function, overstepping its constitutional authority, and jeopardizing the BRV's budget and social programs by reducing government revenue. It also calls on Venezuelan citizens and Seniat to ignore the ruling, and establishes an investigative commission whose report will go to the Attorney General for follow-up action. If the Commission finds that any of the justices committed an inexcusable error, the NA could initiate impeachment proceedings. ¶4. (U) Legislators railed against the justices and their decision during discussion of the resolution. NA Deputies Carlos Escarra and Iris Varela denounced various TSJ justices by name, alleging they were running "mafias" to serve special interests. Escarra went so far as to say the justices should go to jail for corruption, charging that their decision was biased by their desire to lower their own tax bill, as many of them benefit from extraordinary perks, such as government cars, drivers and other stipends, that would NOW be excluded in tax calculations. Escarra also lamented the potential loss in government revenue, which he said would have particularly grave repercussions for the government. NA Deputy Calixto Ortega warned that the ruling could open a loophole legalizing tax evasion as employers would then choose to increase employees' bonuses instead of their salaries to reduce the business' tax burden. ¶5. (SBU) The Investigative Commission was installed March 27 and includes Hernandez, Escarra, Ortega, and Varela. The deputies have requested minutes from the TSJ's February 27 session during which the decision was made. Hernandez said the Commission will also investigate complaints about other TSJ rulings, implying that their focus could go beyond the SIPDIS CARACAS 00000709 002.2 OF 003 Constitutional Chamber. During a March 24 swearing-in of over 2,000 promoters of the United Socialist Party of Venezuela (PSUV),Chavez accused the TSJ of "betraying the Revolution," which suggests that the deputies have his backing. In a preliminary report presented March 29, the Commission called on the NA Finance Committee to reform the law, including a reaffirmation of the disputed article 31. -------------- TSJ Counters, Demanding Respect SIPDIS -------------- ¶6. (U) The justices have held firm to their decision. Chief Justice Luisa Estella Morales came out forcefully April 2, admonishing the legislators for disrespecting the judiciary as an institution, and said that all TSJ sentences should be complied with. She noted that even Chavez has criticized the Court's decisions, such as the August 2002 decision acquitting eight generals accused of rebellion for their role in the April 2002 coup, but he nevertheless respected its rulings. Morales called on the NA to follow his example. In addition, an unnamed justice was cited in a local "El Universal" newspaper article March 24 warning the legislators that encouraging noncompliance with TSJ rulings brings jail time and a hefty fine. Another unnamed justice in the same article also reminded the NA that the Constitutional Chambers has several cases before it that could affect the deputies and the government. -------------- The Real Story? -------------- ¶7. (C) The Caracas rumor mill has it that this intra-Chavista spat masks a struggle for power and illicit enrichment opportunities. Former judge Monica Fernandez and lawyers Antonio Rosich and Alfredo Romero told Poloffs that they believe the fight is between Chavez-backed justices and a group of judges and political prosecutors linked to ex-Vice President Jose Vicente Rangel and Foreign Minister Nicolas Maduro that are suspected of running an extortion ring (the "Band of Midgets" denounced in 2006 by deposed TSJ Justice Luis Velazquez Alvaray - reftel). They note that the move coincides with a number of changes in the lower courts since Morales was installed as Chief Justice. Several of the judges Alvaray named from this group, for example, have been removed and NOW face corruption or administrative charges. They also interpret the recent, arbitrary rotation of Caracas Appeals Court judges and changes in the distribution of court cases as an attempt to further dilute the group's influence. Columnist Nelson Bocaranda and others say, however, that it is a power play by ex-Chief Justice Omar Mora. ¶8. (C) Revenge may also be a factor. Escarra, a former TSJ justice, has had a personal feud with TSJ Justice Cabrera, who wrote the decision in the tax case. Varela may also be motivated by the chance to get back at her long-time nemesis and current NA President Cilia Flores, to whom Chief Justice Morales is reportedly linked. The NA may also be using the ruling as a pretext to reduce the number of justices on the TSJ, a move that has been rumored to be in the works for SIPDIS several months and is expected to be proposed in the ongoing revision of the 2003 TSJ Law. Another theory (circulating mainly in opposition circles) is that Chavez is trying to remove Cabrera and fellow Constitutional Chamber Justice Luis Rondon Haaz for fear that they may challenge his attempts to eliminate presidential term limits and ram through other significant constitutional changes without convoking a constituent assembly as many believe is required by law. (Comment: This later theory seems pretty far-fetched, considering Chavez' domination of the TSJ.) -------------- The Peanut Gallery -------------- ¶9. (C) The opposition is using this opportunity to try to exacerbate the divisions within Chavismo and question the BRV's socialist credentials. During a March 24 press conference, Fernando Barrientos, labor leader for opposition party Un Nuevo Tiempo (UNT),said that if the NA were truly socialist it would support the ruling, since it would actually benefit workers and settle a long-time labor grievance. Barrientos also said the decision harmonized several decisions previously approved by the TSJ's CARACAS 00000709 003.2 OF 003 Administrative Chamber. He said that if the NA re-establishes the contested provision, UNT would petition the TSJ to nullify the provision. Opposition parties Copei and Movement Toward Socialism (MAS) have defended the justices and encouraged them to stand up to Chavez' attempts to force constitutional changes. Copei leader Roberto Enriquez called on Attorney General Rodriguez to investigate the deputies for inciting delinquency as he has done with opposition leaders who have made similar or even lesser criticisms of BRV policies. -------------- Comment -------------- ¶10. (C) Chavismo consists of many divergent groups that have always competed for influence and favor from the mercurial Chavez. The current dispute will certainly not weaken Chavez' control of the Court, as he hand-picked the current Chief Justice and the twelve justices added in 2004, and holds substantial influence over the other justices. Allegations of internal jockeying as the root cause of the NA-TSJ spat seem as plausible as any explanations we've heard. Several legal experts, including former Chavista Attorney General Javier Elechiguerra, have pointed out that the TSJ has previously overstepped its bounds and modified laws without drawing NA criticism. Moreover, NA deputies, who also receive substantial, NOW untaxed, benefits (though not as hefty as the TSJ justices),would have benefited from the TSJ ruling and would have had little incentive to contest it. It is also curious that Cabrera also wrote the decision dismissing two key political judges. The theory that Chavez is worried about possible Constitutional Chamber decisions has wide currency with the opposition, but it is difficult to believe that any of the justices of a court that stood and chanted, "Uh, Ah, Chavez no se va," ("Ooh, Ah, Chavez is not going!") would block one of Chavez' top priorities--staying in power forever. BROWNFIELD