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