LATVIAN ANTI-CORRUPTION CHIEF SUSPENDED

UNCLAS RIGA 000723 SIPDIS SIPDIS E.O. 12958: N/A TAGS: PGOV KCOR KCRM LG SUBJECT: LATVIAN ANTI-CORRUPTION CHIEF SUSPENDED Ref: RIGA 107 ¶1. Summary: Prime Minister Kalvitis has suspended and initiated a disciplinary case against Aleksejs Loskotovs, the head of the Latvian Anti-Corruption Bureau (KNAB). The charges stem from the alleged discovery of "continued and serious violations concerning the use and accounting of operative financial resources" resulting from the State Auditor's Office 2006 audit of the KNAB. The GOL and the Prosecutor General's office have launched a total of three separate inquiries to determine whether Loskotovs will keep his position and also whether the allegations against him are legitimate. While the Prime Minister insists this is a serious situation, most outside observers believe that Loskotov's suspension is part of a larger effort to block the work of the KNAB. End summary. ¶2. In 2006 the respected State Auditor's Office performed an annual audit of both of the KNAB's public budget and classified operating budget. Loskotovs' suspension is in response to findings from the operating budget audit. State Auditor Inguna Sudraba stated that politicians have never reacted so strongly to State Audit Office's findings. She said that the response is inconsistent with government reaction to previous audits, and is concerned it may appear that the Prime Minister is using the Auditor's office to attain political goals. ¶3. Kalvitis received the Auditor's report in June, but only now reacted. He reviewed the issue at the National Security Council meeting on September 19, including the President, FM, DefMin and other, before making the decision to proceed with the suspension and inquiries. Kalvitis claimed that he has observed misuse of this budget for years and was "fed up" with it. ¶4. In press interviews, Loskotovs has speculated that his suspension is related to the personal interests of businessman and People's Party (TP) founder Andris Skele and Ventspils Mayor Aivars Lembergs, and "a revenge for the successful work of KNAB." Kalvits reacted strongly against this allegation. ¶5. Loskotovs is suspended indefinitely as Kalvitis oversees the management of the KNAB, but Loskotovs can only be removed by a majority vote of the parliament. To study whether Loskotovs is fit to maintain his position the GOL has launched two inquiries; one through the Prosecutor General's office and one through the State Civil Administration. The Prosecutor General's office has launched a separate investigation to determine the validity of the findings in the Auditor's report. Once the Saeima receives the Commissions' findings it will vote on whether Loskotovs will keep his position. Currently there is no time frame for completion of these investigations. ¶6. The more liberal press and many NGO's have been very critical of the move. Transparency International Latvia (TI) stated on September 24 that the suspension of Loskotovs is "an unacceptable political attack against the (KNAB)." TI underlined that the timing of the government's action is also suspect, the KNAB's decisions in cases of alleged overspending in the October 2006 parliamentary elections, are due in October. TI called the actions the "last step in the anti-KNAB policy." ¶7. Comment: The KNAB has been on the political hit list of leading political figures in Latvia for some time. While we have no ability to judge the veracity of the charges against Loskotovs (and do not deny that there could be financial problems),certainly the appearance is of safeguarding the interests of Latvia's most corrupt political figures. We will continue to watch the conduct and outcome of the inquiries, future Government actions, and the identity of possible replacements should Loskotovs be removed. Current signals are far from encouraging. Bailey