USPASKICH RETURNED FROM RUSSIA, RUNNING FOR

C O N F I D E N T I A L SECTION 01 OF 02 VILNIUS 000742

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/17/2017
TAGS: PGOV KCOR LH RS
SUBJECT: USPASKICH RETURNED FROM RUSSIA, RUNNING FOR
PARLIAMENT

REF: A. VILNIUS 104

B. 05 VILNIUS 444

C. 06 VILNIUS 814

Classified By: Ambassador John A. Cloud for reasons 1.4 (b) and (d).


1. (C) Summary. On September 26, Viktor Uspaskich --
businessman turned politician, former Economy Minister, and
fugitive for his alleged fraudulent use of campaign funds --
returned from Moscow to Lithuania. He was immediately
detained and is currently under pre-trial house arrest for
six months. At the same time, he is the Labor Party
candidate in the October by-election for an open MP seat. If
he wins, he will receive immunity from prosecution, unless
the Parliament votes to cancel it. His return will give a
much needed boost to diehard supporters of Labor, but it will
likely not be enough to return the party to its former
popularity. End summary.

Return from Moscow
--------------


2. (U) Viktor Uspaskich spent almost 18 months in Moscow as a
fugitive from Lithuanian authorities, who charged him with
fraudulent use of campaign funds. From Moscow, he has had
several video and telephone appearances at Labor Party events
and recently at a press conference; he was part of the party
list for the municipal elections in February (ref A); and he
applied for political asylum to the Government of Russia,
claiming publicly that there were plans for his assassination
if he returned to Lithuania. Media reports allege that the
Labor Party's improper accounting of campaign funds hid 10
million USD and its unpaid taxes could be as high as 1.5
million USD. Because of these alleged infractions, the Labor
Party has not received about 1.5 million USD in public
funding that it otherwise would have received this year.


3. (U) On September 26, Uspaskich returned to Lithuania and
was immediately detained at the airport. While charges are
pending, a court committed him on September 27 to six months
of house arrest in his adopted hometown of Kedainiai, where
he made his fortune and was a force to be reckoned with in
the political and business worlds for more than a decade (ref
B). Uspaskich cannot leave the city of Kedainiai and must be
in his house from 8 p.m. to 8 a.m. Uspaskich's lawyers
challenged the pre-trial home arrest, saying it is unduly
restrictive and hinders Uspaskich's participation in the
election in Alytus, but lost their appeal.

Chances to win MP seat: Not bad
--------------


4. (U) Uspaskich is running for an open MP seat for the
Alytus city region. Labor did well in this district during
its brief peak of popularity, but still lost the 2004
parliamentary election to a Conservative candidate. (The
winner from 2004 gave up his seat to become mayor of Alytus
in February, prompting the current by-election.) In the 2007
municipal elections, Labor garnered only 4 percent of the
vote, below even their poor showing nationwide of 7 percent.
Uspaskich has high name recognition, however, and local anger
over the recent bankruptcy of a large textile firm
complements the Labor Party's populist rhetoric. MPs receive
immunity from prosecution, and this would apply to Uspaskich
if he won (any prosecution would be on hold as long as he
remained an MP, unless the Parliament cancelled his immunity
with a three-fifths vote).


5. (U) In a field of ten candidates for the empty seat,
Uspaskich garnered 20.3 percent of the first-round vote,
trailing only Kestutis Cilinskas, the Conservative Party
candidate, at 30.3 percent. Voter turnout was only 26
percent. Cilinskas and Uspaskich will participate in a
run-off election on October 21. Cilinskas is a member of the
board of the Human Rights Monitoring Institute (one of
Lithuania's leading NGOs) and was Chancellor of the
Government under Prime Minister Gediminas Vagnorius
(1996-1999). He is a successful attorney currently known for
representing the wife of Vytautas Pociunas, a State Security
Officer who fell from a balcony in Belarus and died in August
2006 (ref C). He also represents a worker at one of
Uspaskich's factories who protested "under the table" salary
payments (a common practice by employers in Lithuania to
avoid paying social security and other taxes) and was
subsequently fired. The lawsuit is against the factory
manager and not Uspaskich himself, but it serves to highlight
the differences between the candidates. Neither candidate
lives in Alytus. Cilinskas lives in Vilnius, Uspaskich in
Kedainiai.

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

VILNIUS 00000742 002 OF 002




6. (C) If Uspaskich becomes an MP he will use that and his
"persecuted" status -- underdogs and victims are popular in
Lithuania -- to help his party in the October 2008 general
elections for Parliament. His party, however, has fallen far
from its peak in 2004 when Labor won 39 of 141 seats in
parliament, the biggest share of any single party. Even with
a victorious return to parliament by Uspaskich, it will be a
long shot for Labor to win even half that many seats in 2008.

CLOUD