KMT MA YING-JEOU SADDLED WITH INDICTMENT, STILL

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 000356

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/13/2032
TAGS: PGOV TW
SUBJECT: KMT MA YING-JEOU SADDLED WITH INDICTMENT, STILL
RUNNING FOR PRESIDENT


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


1. (C) Summary: On January 13, KMT Chairman Ma Ying-jeou was
formally indicted for corruption. Prosecutors charged Ma
with unlawfully pocketing more than NT $10 million in mayoral
office funds during his eight-year stint as Taipei mayor. In
a follow-up press conference, Ma disputed the charges,
resigned as KMT chairman, and declared his intention to run
for president despite the indictment. The KMT has pinned its
hopes of regaining the presidency on Ma and his reputation
for integrity. Those hopes are now jeopardized. The KMT
must next decide whether to stick with Ma, or dump him in
favor of another candidate. This will be a painful process
that will reveal divides within the party at a time when Ma
and others had hoped to begin building a campaign juggernaut
for the 2007 legislative race and the 2008 presidential
election. The ruling DPP has to be buoyed by this serious
setback to their fiercest rival, which makes the 2008
presidential race a wide open contest again. End Summary.

Ma Indicted for Corruption
--------------


2. (U) On January 13, the Taipei District Prosecutor's
Office publicly announced the indictment of KMT Chairman and
former Taipei mayor Ma Ying-jeou for corruption, alleging
that Ma had improperly diverted NT $11.17 million (US $361
thousand) of mayoral office funds to personal accounts. Five
staffers from Ma's mayoral office were also indicted for
corruption and forgery. If convicted, Ma faces a minimum of
seven years in prison and a fine of up to NT $60 million (US
$2 million). The prosecutor recommended a reduced sentence
in light of Ma's decision to donate most of the disputed
funds to charity. At a subsequent press conference, the KMT
task force investigating Ma's alleged wrongdoing announced
its conclusion that Ma had not intended to embezzle any
funds, but had been tripped up by confusing financial rules.


Ma Vows to Fight, Run for President
--------------


3. (C) At his own press conference, Ma denied any wrongdoing,
and vowed to clear his name. Ma also announced his decision
to immediately resign as chairman, as is required under party
guidelines. At the same time, he declared his intention to
run for president, despite the indictment. The KMT is
holding a special meeting of the Central Standing Committee
the evening of January 13 to discuss Ma's resignation. The
CSC is expected to designate Vice-Chairman Wu Po-hsiung to
serve as acting chairman until a new chairman is elected
within the next three months.

Lien Favors Wait and See
--------------


4. (C) KMT Honorary Chairman Lien Chan told the Director on
February 12 that an indictment could harm Ma enough to derail
his presidential nomination. Lien predicted the KMT will use
polls to decide whether Ma, despite the indictment, is still
the KMT's best presidential candidate. If he isn't, another
candidate will be chosen to replace him. If he is, however,
the party could remove the ethics rule barring him from
receiving the nomination. Lien explained that when he was
chairman, only a conviction would bar a candidate from
receiving a party nomination. When Ma became chairman in
2005, he wanted stricter rules, and the KMT Central Standing
Committee (CSC) agreed with his proposal to bar indicted
members from receiving party nominations. Ma's new rules
also require suspending an indicted member's party membership
and privileges until the member has cleared his name.
According to Lien, the rules changes are not yet final
because the Party Congress has yet to approve them. The
Party Congress could convene an extraordinary session to
reject the changes, restoring the rules to their Lien-era
state. Ma could then stand for the nomination, Lien
surmised, despite his indictment.

Wang Predicts Ma is Finished
--------------

TAIPEI 00000356 002 OF 002




5. (C) KMT LY Speaker Wang Jin-pyng, on the other hand, told
the Director that Ma's political career was over. The
Director saw Speaker Wang on January 13 (in a previously
scheduled meeting) just after news of Ma's pending indictment
had broken. Wang said the trial process would take at least
six months. Ma cannot represent the party in any capacity
with the indictment over his head, and there was insufficient
time for Ma to vindicate himself before the KMT had to choose
a presidential candidate. Ma's considerable public support
will be useless to him now, Wang contended, since public
support makes no difference to party ethics rules. Wang
suggested that Ma knew or should have known that his decision
to divert public funds for his private use was improper,
regardless of what the regulations said. Ma is finished,
Wang insisted, because President Chen has been watching his
every move and keeping track of all of his mis-steps.
Honorary Chairman Lien Chan is interested in assuming the
party chairmanship again, Wang told the Director, but does
not want to run for president. It may be difficult for the
KMT to choose a candidate to replace Ma, Wang conceded, but
the party should choose someone like himself who can attract
strong support from voters in the South.

KMT LY Caucus Leaders Back Ma
--------------


6. (C) A week before Ma's indictment, KMT legislators Pan
Wei-kang (KMT deputy whip) and Wu Yu-sheng (former KMT
spokesman) told AIT in separate meetings that Ma was "far and
away" the party's best presidential candidate. LY Speaker
Wang is a "traditional KMT politician representing local
interests," Wu opined, while Ma is "a symbol of integrity"
who has a vision for the future of the KMT and Taiwan. Pan
asserted that the KMT would do "whatever it takes" to
preserve Ma's eligibility, including but not limited to
amending the party's ethics rules. Neither legislator
expected the indictment to undermine public support for Ma,
since most voters believe in Ma's integrity, and would
recognize the indictment for the "political tactic that it
is." Wu said the KMT would try to use the indictment to
boost Ma's popularity, by portraying him as a victim of DPP
dirty tricks.

DPP Leaders Rub it In
--------------


7. (U) Premier Su Tseng-chang and DPP Chairman Yu Shyi-kun
said they respect the prosecutor's decision to indict Ma on
corruption charges. Yu added that he was not surprised by
Ma's indictment since Ma contradicted himself several times
explaining how the money had been used.

Comment:
--------------


8. (C) Six months ago, Ma Ying-jeou seemed a shoo-in to win
the presidency in 2008. Now, he has been forced to resign
the KMT chairmanship under a cloud, which, if certain
naysayers are to be believed, could bring an end to his
political career. Ma is down, and will be fighting for his
political life in the coming weeks. But with the
presidential race more than a year away, he isn't out yet.
Ma has reform-minded allies within the party who will rally
to his side as long as he remains popular with the public.
The other unknown is the outcome of ongoing investigations
into the "special accounts" of other prominent politicians,
including the DPP's leading presidential contenders, Vice
President Annette Lu, Premier Su Tseng-Chang, former Premier
Frank Hsieh, and DPP Chairman Yu Shih-kun. If prosecutors
catch DPP leaders in this dragnet, the issue could lose its
political sting. For now, however, the DPP has to be
celebrating this fortuitous turn of events which makes the
2008 presidential sweepstakes a wide open race again.
YOUNG