PRIME MINISTER FICO RESPONDS TO EU PRESSURE ON

C O N F I D E N T I A L SECTION 01 OF 03 BRATISLAVA 000191 SIPDIS STATE FOR EUR/CE, INL/C AND EUR/PGI E.O. 12958: DECL: 04/23/2019 TAGS: PREL PGOV LO SUBJECT: PRIME MINISTER FICO RESPONDS TO EU PRESSURE ON ILLEGAL TENDER Classified By: Charge Keith A. Eddins, reasons 1.4 b and d ¶1. (C) Introduction and Summary: After months of investigations, broad media coverage and multiple inquiries from the European Commission, Prime Minister Fico has ordered the cancellation of an illegal 119.5 million Euro tender let by the Construction Ministry (a Slovak National Party ministry). Fico's ultimatum seems designed to oust Construction Minister Stefanov (in office for nine days), because it must be accomplished within two weeks and result in no financial loss to the state, a reportedly impossible outcome due to the contract's provisions. The so-called "bulletin board" tender has already resulted in the April 14 resignation of former Construction Minister Janusek. Although until now PM Fico largely has dismissed the scandal as a media and opposition creation, it appears that receipt of a letter from the European Commission on April 22 inspired a volte face. ¶2. (C) Comment: Although Fico's ultimatum is woefully late, it demonstrates that outside pressures -- particularly from the EU -- may force Fico to weed out some of most obvious practitioners of corruption in his government, i.e., Jan Slota's SNS. In fact, despite the lengthy kabuki theater involved, we wager that this was the intent all along, because it was the Smer-led Finance Ministry which first uncovered the irregularities in August 2008 and later shared its findings with the media. We believe that we can provide Fico -- through Foreign Minister Lajack -- with additional leverage for this endeavor. An important first step would be for Secretary Clinton to raise our concerns about corruption, in particular regarding one American firm (septel) with Lajcak during their May 7 meeting. End Summary. The Bulletin Board Tender -------------- ¶3. (U) In December 2008, the press reported that the Construction Ministry, then led by Jan Slota's close friend Marian Janusek, had signed a contract for legal and interpretation services with a consortium of companies connected to Slota. The sole "publication" of the tender was on a bulletin board located in a corridor of the Construction Ministry not open to the public. Given the high value of the tender and the well-known ties between Slota and the companies (Zamedia and Avocat),Slovak watchdog groups, opposition politicians and the press turned on the heat. SNS's first (and only) tactic was to stonewall and counter-attack. Poloff attended a press conference by Slota and Minister Janusek in which both refused to answer any questions, but hurled angry insults at the reporters in attendance. ¶4. (U) Janusek and Slota also suggested that Fair Play Alliance, a watchdog NGO, had obtained documents relating to the tender in violation of the law. Janusek told the journalists: "I don't know what your agenda is. You are throwing dirt at our Ministry, which doesn't deserve it at all." PM Fico played it cool, making it clear that he, too, thought the media and NGOs were on a witch hunt against the government. He did say, however, that, if investigations into the tender by the Office of Public Procurement and the National Audit Office confirmed transgressions on Janusek's part, he would be dismissed. That was last December. The Endless Investigations -------------- ¶5. (C) Thus began -- at least as far as the public knew -- a lengthy kabuki which appears to be only now, as May approaches, crawling toward its denouement. Although the outlines of the deal -- and what was rotten about it -- were clear, it was not until April 8 that the Office of Public Procurement (UVO) finally issued its opinion confirming that the Ministry had made serious errors in violation of the Public Procurement Act. During the intervening period, the head of UVO, Bela Angyal, a holdover nominee of the Hungarian National Party (and who also serves on SMK's presidium),was accused of manipulating results at the behest of SMK Chairman Pal Csaky. In early March, Angyal fired the original lead investigator into the tender because of her unwillingness to conclude that the Ministry had violated procurement laws. We met with Angyal on February 4. During the meeting, he told us that his report (which had been substantially complete for some time) would be issued the following week. BRATISLAVA 00000191 002 OF 003 ¶6. (C) But, as circumstances or luck would have it, the report could not be issued because it lacked the signature of the lead investigator, who was on sick leave. Meanwhile, the National Audit Office (NKU) claimed it could not complete its inquiry because UVO had not been sufficiently responsive to questions. By contrast, Fair Play Alliance concluded within 3 days of receiving documents (via the Freedom of Information Act) pertaining to the tender, that they were non-transparent, chaotic and disorderly. It was, in fact, Fair Play Alliance's meeting with EU Regional Commissioner Daniela Huber in March that many believe helped play a role in pushing the EC toward a more active stance. (Comment: the head of Fair Play Alliance, Zuzana Wienk, was our nominee for the 2009 International Women of Courage Award. End Comment.) ¶7. (C) There was probably another, more salient reason for the snail-like pace of UVO and NKU: the Presidential elections. Slota -- whose support President Gasparovic needed -- was fighting tooth and nail against Janusek's firing. To have lowered the boom against Janusek before the elections apparently was deemed an unnecessary electoral risk for Gasparovic. Indeed, Slota's "get out the anti-Hungarian vote" effort may well have been decisive in Gasparovic's re-election. So, it was only after Gasparovic was handily re-elected (and only days after),that UVO issued its finding. Denial Ain't Only a River -------------- ¶8. (U) On the same day that UVO issued its finding, Construction Minister Janusek stated that UVO hadn't found any violation of the Public Procurement Act while carrying out its inspection regarding the so-called bulletin board tender. Notwithstanding Janusek's creative reading of the UVO judgment, by April 10, Fico was calling for his resignation. Janusek responded that, although "I am still convinced no error was made," he would step down out of respect for the PM. ¶9. (U) Much to no one's surprise, PM Fico announced on April 14 that Janusek's successor would be Igor Stefanov, a general director of the Ministry's Regional Development Support Agency. Stefanov has been dubbed by the press as the "spoluvinnik," or co-conspirator, in the bulletin board tender and by Ministry insiders as the power behind Janusek's throne. Back in December, when Janusek's dismissal seemed imminent, sources close to the Ministry said that even if Janusek were to be dismissed, it wouldn't matter because "he is just a puppet here; the Ministry is run by Stefanov." In fact, Stefanov's presence at a December press conference regarding the tender surprised some, as it fell outside the scope of Stefanov's official duties. Perhaps, but Stefanov's name appears along with that of Janusek on the contract for the tender. Stefanov continues to deny any involvement in the tender. ¶10. (U) Stefanov's appointment outraged the opposition and good governance groups. Opposition parties wasted no time in mounting an (unsuccessful) recall vote against Stefanov on April 21. Although Fico decried the opposition for its method of "lies, half-truths and destruction," claiming that they were fabrications aimed at worsening the economic crisis, only two days later he issued his ultimatum: Stefanov must cancel the tender at no cost to the state within two weeks or be fired. According to those familiar with the contract, it contains a stipulation that, in event of cancellation, the consortium will receive the full value of the tender -- 120 million Euro -- without having provided service. On April 23, after having received a letter from the EC the previous day requesting Slovakia to remove any doubts about the tender, PM Fico stated that "the effective flow of EU funds is more important that 'intra-coalition relations.'" Epilogue...and Prelude -------------- ¶11. (C) SNS is in silent shock, although former Minister Janusek has already told the media that PM Fico "must have bad advisors" to have made such an ultimatum. In the end, of course, as long as SNS remains in government, even if yet another SNS Minister goes, he will be replaced by more of the same. Although we hear differing accounts of just which BRATISLAVA 00000191 003 OF 003 coalition partner Fico would most like to jettison, we wager that, at this point -- and particularly now that SNS has played its role in getting President Gasparovic re-elected -- SNS is it. Foreign Minister Lajcak, in a sidebar with Charge at a recent event, commented that "we have to get rid of SNS." It's instructive to recall that the entire "bulletin board" tender scandal actually began with an inspection by the Smer-led Finance Ministry. ¶12. (C) Although we harbor no illusions that the Smer side of the house is clean -- it is patently not -- getting rid of the most brutal practitioners of corruption, SNS -- would be a step forward for Slovakia. Minister Lajcak has asked us to bring any specific, documented instances of corruption involving U.S. companies to his attention. We plan to do so in the near term. We also understand that he has said the same thing to EU partners, including UK Foreign Minister Milliband during a recent meeting. We believe that by doing so, we can strengthen Fico's ability to clean up at least part of the government. In our "take them at their word" mode, we will explore how we might test Fico's stated desire to address governmental corruption. An important first step would be mention by Secretary Clinton of our concerns in her upcoming meeting with Lajcak. EDDINS