NICARAGUAN GOVERNMENT RENEWS LEGAL ACTION AGAINST OPPOSITION

C O N F I D E N T I A L MANAGUA 000603 USDOC FOR 4332/ITA/MAC//WH/MSIEGELMAN TREASURY FOR SARA SENICH E.O. 12958: DECL: 06/16/2029 TAGS: PGOV EFIN ECON NU SUBJECT: NICARAGUAN GOVERNMENT RENEWS LEGAL ACTION AGAINST OPPOSITION REF: A. A. 08 MANAGUA 880 ¶B. B. 08 MANAGUA 450 ¶C. C. 07 MANAGUA 2446 Classified By: Ambassador Robert J. Callahan for reasons 1.4 b & d. ¶1. (C) Summary: A Managua judge announced on June 11 that he would hold hearings June 22-26 regarding accusations that 39 people committed "crimes against the economy of the country, fraud, and influence peddling" in connection with the 2001 government bailout of four Nicaraguan banks. The list of those accused includes opposition leader Eduardo Montealegre and La Prensa President Jaime Chamorro. Montealegre believes the government's case is intended to pressure him and his deputies in the National Assembly to support Ortega's top legislative priority, constitutional reform to perpetuate FSLN rule. There also exists the possibility that Montealegre, if he is stripped of immunity and convicted, will have to chose between spending time in jail or fleeing the country. End summary. ¶2. (U) Judge Julio Cesar Arias of the Fifth District Criminal Court of Managua announced on June 11, 2009, that he would hold hearings June 22-26, 2009, regarding accusations that 39 people committed "crimes against the economy of the country, fraud, and influence peddling" in connection with the 2001 government bailout of four Nicaraguan banks. The list of those accused includes Eduardo Montealegre, prominent opposition leader and former Finance Minister, and Jaime Chamorro, President of the Board of Directors of "La Prensa" (center-right daily). Also accused are former Finance Minister Esteban Duque Estrada, former Central Bank Presidents Noel Ramirez and Mario Alonzo, and many other current and former Central Bank and Finance Ministry employees. ¶3. (U) Public Ministry Special Prosecutor Armando Juarez filed the case on July 7, 2008, on behalf of the government. The Ortega administration claims that during the Bolanos administration, when these bank bailouts were orchestrated, government officials conspired with employees of BanPro, BanCentro, and Banco de Finanzas (BDF) -- the banks that took on the failed banks' nonperforming assets -- to intentionally undervalue those assets. As a result, Special Prosecutor Juarez claims that the Central Bank overcompensated these banks, with bonds known as CENIs (now called "bonos bancarios"),for these nonperforming assets. Curiously, Ramiro Ortiz Sr., President of BanPro; Roberto Zamora, President of BanCentro; and Juan Sacasa, President of BDF, do not appear on the list of those accused. ¶4. (C) Montealegre believes the government's case is intended to pressure him and his deputies in the National Assembly to support Ortega's top legislative priority, constitutional reform that would permit presidential re-election and create a semi-parliamentary system. Montealegre told the Ambassador on June 15 that under no circumstances would he be bullied into supporting Ortega's ploy to perpetuate FSLN rule, which requires a super-majority of 56 votes (Ref C). Alternatively, Montealegre posited that the FSLN may be hoping he will flee the country to avoid arrest. As a member of the National Assembly, Montealegre is immune from prosecution. Should his immunity be lifted, he told the Ambassador he would not participate in the hearings and would challenge the government to compel his participation. ¶5. (C) A simple majority of 47 votes is needed to strip a legislator's immunity. Currently, the FSLN has 38 votes. However, two smaller groups, the Nicaraguan Liberal Alliance (ALN) -- Montealegre's former party, now led by his nemesis Eliseo Nunez -- and the Bancada for Unity (BUN) -- an FSLN front group comprised of ex-FSLN, ex-ALN and ex-PLC deputies -- have five and eight votes, respectively. Both groups tend to vote with the FSLN, though sources claim the FSLN has to pay for each vote. Combined, they have 50 votes, enough to strip immunity. The Fifth District Court has already submitted a request to the National Assembly's Executive Committee to strip Montealegre's immunity. Sources suggest that the committee, dominated by the FSLN and its allies, is prepared to take action on the request before recess begins on July 7, 2008. ¶6. (C) Some local media have reported that ex-President Arnoldo Aleman's Constitutional Liberal Party (PLC) would vote with the FSLN to strip immunity, hoping to rid the PLC of their primary rival. On June 12, PLC Deputy and Justice Committee Chair Jose Pallais told Poloff that he did not believe the FSLN would come up with the votes, because stripping immunity would threaten too many others. Currently, there are pending requests to strip two ALN and two PLC deputies of their immunity, for unrelated issues. No one, he said, wants to shoot first, because there will be no stopping once it starts. ¶7. (U) Meanwhile, bank officials confirm that the Central Bank continues to make payments on the CENIs, according to the terms that the Central Bank negotiated with BanPro, BanCentro, and BDF in June and July 2008 (Ref A). The Ortega administration has ended calls for a repudiation of the debt associated with the bailout, which totaled $332 million when issued but has since been renegotiated several times (Ref B). ¶8. (C) Comment: Ortega must be tempted by this opportunity to rid himself of his most credible political opponent. However, FSLN and allied legislators may not in the end vote to strip Montealegre of his immunity. Instead, the accusations of wrongdoing have public relations value and may damage Montealegre's standing; he currently ranks at the top of all political polls. In addition, the threat of prosecution remains valuable to Ortega in his efforts to keep pressure on all legislators as he seek to come up with six more votes for constitutional reform. End comment. CALLAHAN