KOSOVO: ASSEMBLY INVESTIGATES FORMER SPEAKER DACI,

C O N F I D E N T I A L SECTION 01 OF 03 PRISTINA 000180 SIPDIS SIPDIS DEPT FOR DRL, INL, AND EUR/SCE, NSC FOR BRAUN, USUN FOR DREW SCHUFLETOWSKI, USOSCE FOR STEVE STEGER E.O. 12958: DECL: 03/08/2017 TAGS: PGOV PREL PHUM KDEM UNMIK YI SUBJECT: KOSOVO: ASSEMBLY INVESTIGATES FORMER SPEAKER DACI, RESULTS BOTH PROMISING AND DISAPPOINTING REF: 06 PRISTINA 933 Classified By: COM TINA KAIDANOW FOR REASONS 1.4 (B) AND (D). ¶1. (C) SUMMARY: The Kosovo Assembly's ad-hoc Investigative Committee presented its report on financial wrongdoing to the full Assembly, which dutifully adopted it on February 22. The report was essentially a watered-down version of the Auditor General's earlier findings, and was even less firm in placing blame on the murky procurement practices of former Assembly President Nexhat Daci. Daci's newly formed, six-member "Democratic League of Dardania" caucus voted against adopting the report, and the ruling LDK party did little to put the blame on Daci. Daci loyalist Besa Gaxherri was on the committee, and other committee members cited her presence as the excuse for wanting to come up with a "consensus based" report. The committee recommended some constructive but inadequate changes in Assembly financial controls and noted changes in Assembly personnel that have resulted in better oversight practices. Several opposition MPs criticized the committee's timidity. At the same time, an international prosecutor's investigation into criminal allegations in the Auditor General's report continues and criminal charges against Daci resulting from this investigation are possible. Nevertheless, the fact that the Assembly investigated one of its own is a promising development. END SUMMARY. Opposition Criticize Whitewash of Daci ¶2. (SBU) On November 3, 2006, the Kosovo Assembly established an ad-hoc Investigative Committee (IC) to look into the Auditor General's (AG) factual findings on financial impropriety in the Kosovo Assembly during 2005. (NOTE: Nexhat Daci, former ruling LDK member and now head of an LDK breakaway faction, served as Assembly President from December 2001 until March 2006. His tenure was marked by murky procurement practices. END NOTE.) On February 22, 2007 the IC presented its report to the Assembly. MPs discussed the report and voted to adopt it with only five votes against and one abstention. The main thrust of the report was to verify that the majority of the AG's findings were accurate. The report criticized the Assembly for its lack of transparency; �A;abuse of public funds; illegal procurement practices; violation of official hierarchy; manipulation and concealing of official documents; individual and collective irresponsibility; and lack of a legal infrastructure and internal control. The IC also criticized the illegal actions of the Public Procurement Regulatory Committee (PPRC) and the Ministry of Economy and Finance. ¶3. (SBU) The IC report also made several recommendations, including stregthening oversight by the Budget and Finance Committee and increasing its monitoring and reporting capacities. It also recommended a new legal infrastructure for the Assembly, including revamping the Presidency's Rules of Procedure; creation of an internal audit body; improvement of internal procedures; a new law on investigative committees; the review of the PPRC responsibilities; and a new law on general auditing. It placed responsibility for implementing its recommentations with the Assembly Presidency. ¶4. (C) Several MPs from the opposition Reform Party ORA and the Democratic Party of Kosovo (PDK) criticized the report for stopping short of a real indictment of Daci. PDK MP Xhavit Haliti hit the report for its mild nature and oblique conclusions when "political responsibility lies with Nexhat Daci, the Assembly Presidency, the Ministry of Economy and Finance, and the administrative authorities of (former Assembly Secretary) Isuf Demaj and the PPRC." No Democratic League of Kosovo (LDK) MPs took to the floor to criticize Daci; those who spoke just supported the committee's work, with little reference to Daci. MPs of Daci's Democratic League of Dardania (LDD) group defended Daci, accusing others of similar malfeasance. (Comment: ORA MP and member of the IC and the current Assembly Presidency Gazmend Muhaxherri PRISTINA 00000180 002 OF 003 admitted to us the language of the condemnation was not as strident against Daci as many had expected, but only because the committee had agreed to reach a cross-party consensus, and Daci loyalists were on the committee. End Comment.) UNMIK's Role ¶5. (C) Aside from this Assembly role, responsibility for holding wrongdoers legally accountable for their crimes lies with the international judges, prosecutors, and investigators of UNMIK's Department of Justice (DoJ) and the Financial Investigations Unit (FIU). The FIU began its work shortly after the July 2006 completion of the AG's report, which alerted it to possible crimes and defined the scope of its Assembly investigation. Alleged Assembly financial impropriety falls into three specific categories: an armored car ordered for Daci (but never delivered),the construction of the Villa Germia conference center without proper authorization, and misuse of petty cash. ¶6. (C) The FIU has thus far only completed investigation of the armored car - that file now moves to new Canadian prosecutor Andrew Mayes, who will decide if and when to issue indictments and move the case forward. Former Assembly budget director Jusuf Nikqi, Daci advisor Ahmet Alishani, and businesswoman Shefka Shasivari (who apparently failed to import the vehice in question) were arrested in connection with this part of the case, but all were released pending investigation. According to FIU sources, former Assembly secretary Isuf Demaj may face charges as well, but Daci, who SIPDIS scrupulously kept his fingerprints off the armored car deal, will likely not. (NOTE: Shasivari, who pled poverty to ward off a high bail determination, was eventually released after paying the 100,000 euro bail in cash. As a result, she is now also under investigation for money laundering. END NOTE.) FIU Says Daci Could Eventually Face Criminal Charges ¶7. (C) However, Daci may face criminal charges eventually. FIU sources told us that since they already seized from Assembly premises the evidence related to the Villa Germia construction, that part of the case will keep well. Therefore, they are focusing next on the petty cash portion, where alleged illegal expenditures included watches from the Zurich airport, various perfume and cologne purchases, new porcelain teeth for Daci, and clothing and ski lessons for his staff. FIU claims to have a sufficient paper trail and other evidence (for example, the porcelain teeth remain on Daci's person) to support criminal charges against the former Assembly speaker. Though the amount of money in question is dwarfed by the Villa Germia expenses, Daci's role as ringleader could conceivably put him on the high end of any possible sentence. In the FIU's assessment, budget director Jusuf Nikci, former secretary Isuf Demaj, former logistics officer Burim Latifi, and Daci aide Alishani are also vulnerable to being charged in this section of the case. ¶8. (C) Only four Assembly staffers have lost their jobs in the wake of the AG's report; many more were likely involved in Daci's schemes or at least illegally received his largesse. These people may be eligible for administrative disciplinary procedures which have not yet been undertaken. ¶9. (C) COMMENT: The "glass half-full" interpretation of these events is that the Kosovar Assembly initiated and conducted an inquiry into allegations of malfeasance, one that featured prominently in local press reporting and became an oft-cited parable of official corruption. The "half-empty" analysis is that the Assembly reacted fecklessly to the investigation and continues to rely on internationals. Our judgment is that it is a positive development and a useful precedent that the conduct of a former senior official was subjected to this scrutiny. While many ordinary Kosovars undoubtedly want to see senior officials doing the "perp-walk", this is at least a start. END COMMENT. PRISTINA 00000180 003 OF 003 ¶10. (SBU) U.S. Office Pristina clears this cable in its entirety for release to U.N. Special Envoy Martti Ahtisaari. KAIDANOW