COMMISSION FORMED: KNAB CHIEF'S FUTURE IS DIM

C O N F I D E N T I A L SECTION 01 OF 02 RIGA 000338 SIPDIS E.O. 12958: DECL: 06/11/2018 TAGS: PGOV KCOR KJUS LG SUBJECT: COMMISSION FORMED: KNAB CHIEF'S FUTURE IS DIM REF: A. 07 RIGA 825 B. RIGA 292 C. RIGA 304 Classified By: CLASSIFIED BY CDA STUART SELDOWITZ FOR REASON 1.4(b) ¶1. (C) Summary. Following Prosecutor General Janis Maizitis' submission of his report on the KNAB (ref b),Prime Minister Godmanis asked Anti-Corruption Bureau (KNAB) Chief Aleksejs Loskutovs to step down, which he refused to do. According to Latvian law, a Commission has been formed to determine whether Loskutovs should be dismissed. It is widely believed he will be. This satisfies the Coalition's desire to get rid of Loskutovs, unrealized last fall (ref a),and calls in to question who will replace him; an effective leader and manager who will pick up the torch of fighting corruption in high places, or an official who is sympathetic and malleable to political interference. Even some KNAB supporters agree that Loskutovs should go because he has failed in management of his agency. Unfortunately, opponents of KNAB will take his likely dismissal not as setting a new and better standard for all public officials in Latvia, but as a vindication of their ham-handed attempts last fall to remove Loskutovs. End Summary. ¶2. (C) In an expected move, on May 11 PM Godmanis asked Loskutovs to resign and he refused. The decision to request his resignation was made pursuant to Prosecutor General Maizitis' submission of his report on the investigation of the missing money at the KNAB (ref b). Maizitis specified that he did not believe Loskutovs was criminally liable for the stolen money but acknowledged that management controls were lacking at KNAB. According to Saeima legal procedure, a Commission has been formed to determine whether Loskutovs will be dismissed. This Commission includes Prosecutor General Maizitis, Security Police Chief Reiniks, Constitution Protection Bureau Chief Kazocins, Parliamentary National Security Commission Head Jaundzeikars and Defense Minister Veldre (representing the coalition). The Commission's decision is due by June 16 and the imminent dismissal is projected for within the next week and a half - before the Saeima's summer recess. Although it has not yet gone to vote, the press reports that the coalition has decided to dismiss Loskutovs. (Comment: We presume that Jaundzeikars and Veldre will vote to remove and Kazocins told us privately weeks ago that he thought the charges of poor management were credible and Loskutovs was likely done. End Comment.) Benefiting the Political Elite -------------- ¶3. (C) Valts Kalnins, the head of the anti-corruption NGO Providus, told us that it is undeniable that there have been management deficiencies at the KNAB and there is no other remedy than to dismiss its Chief. Admittedly, however, the political elite have been waiting for this opportunity to dismiss Loskutovs and replace him with someone who is more "friendly" to politicians. Kalnins stated that the opportunity of the missing money has given them the argument they needed to get rid of Loskutovs that they lacked last fall (ref a). ¶4. (C) Dina Spule, of the KNAB International Relations Department, also stated that the timing of the investigation was serendipitous for the enemies of the KNAB. Spule intimated that some ongoing investigations are far more involved and widespread than anyone anticipated, and much broader than the general public realizes. The investigation of the Riga City Council, which was already very deep, is even more significant than the KNAB initially thought. More high-level suspects seem to be implicated and the occurrence of bribery is staggering. The investigation of the Riga City Council was nearing its completion before the scandal, and is now stalled, with people missing appointments to speak to the KNAB, and KNAB investigators suffering personal property damage in the interim. (Note: As we reported in ref C, we have heard that the Riga City Council case is the one that most worries the oligarchs. End Note.) ¶5. (C) The press has stated in several instances that Loskutovs is not the only person the Commission could recommend for dismissal. Juta Strike, Loskutovs' Deputy, is also under the gun. Spule stated that Loskutovs believes that Strike will also be asked to leave, as she is in charge of KNAB investigators. ¶6. (C) The remaining question is who will be the next KNAB Chief. PM Godmanis has already named Andris Vilks as the Deputy who will take the position in the short term. Kalnins stated that Wilks is not corrupt, is qualified by experience (Vilks was Acting Chief last fall when Loskutovs was suspended),and can be expected to act independently of outside political influence. However, he is very balanced and cautious in his decision making and Kalnins does not know how proactive Vilks will be in the fight against corruption. Two RIGA 00000338 002.2 OF 002 other candidates are under discussion in the press: Security Police Chief Reiniks and Criminal Police Arturs Lulaks. ¶7. (C) Comment: This situation is different from last fall. Then, there was a rush to generate facts to ensure Loskutovs' dismissal. This time, a methodical procedure, outlined in law, has been followed. As we have reported, Loskutovs did not grasp that there were real management issues here. Even if, as he alleges, he was set up, a lack of management controls made it possible for nearly 300,000 USD to go missing -- including some money that was physical evidence. That is a serious problem. Unfortunately we don't think that a likely decision to remove Loskutovs will do anything to increase accountability in government. Instead, it will be taken as vindication of efforts last fall to remove Loskutovs and could spur further bad behavior to undermine the rule of law. With Loskutovs likely lost, we need to focus our attention on who will replace him; a noncorrupt official who has the potential to grow into a strong KNAB leader, or a weak figurehead who acts in the interests of the oligarchs. We also need to keep an eye on possible next steps, such as attempts to remove Prosecutor General Maizitis. End Comment. SELDOWITZ