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

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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