This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 04 BRASILIA 001979 
 
SIPDIS 
 
TREASURY FOR PARODI 
STATE PASS TO USTR 
USDOC WASHDC 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON BR
SUBJECT: BRAZILIAN CONGRESS INVESTIGATES CORRUPTION 
ALLEGATIONS -- A PRIMER ON THE ROLE OF CPI'S 
 
REF: A. BRASILIA 1494 
     ¶B. BRASILIA 1544 
     ¶C. BRASILIA 1622 
     ¶D. BRASILIA 1631 
     ¶E. BRASILIA 1819 
     ¶F. BRASILIA 1867 
     ¶G. BRASILIA 1849 
 
¶1.  SUMMARY.  A series of interlocking and expanding 
corruption scandals (reftels) that have engulfed the 
Brazilian government and President Lula da Silva's Workers' 
Party (PT) since May has led to the establishment of three 
separate, but closely related, Congressional Inquiry 
Committees (CPIs): the Brazilian Postal Service CPI; the 
Bingo Houses CPI; and the vote-buying scheme CPI.  Although 
divided due to disagreements between the government and the 
opposition, the investigations conducted by the three 
committees have a common purpose and are expected to work 
concomitantly.  Post will track the developments of the CPIs 
and follow with regular updates on the corruption scandals. 
END SUMMARY. 
 
THE ROLE OF A CONGRESSIONAL INQUIRY COMMITTEE (CPI) 
--------------------------------------------- ------ 
 
¶2. The Congressional Inquiry Committee (CPI) is the only body 
within the Brazilian Congress that has subpoena powers when 
investigating allegations against its members.  A CPI has the 
same investigative powers as any judicial authority. 
However, it cannot establish penalties, and must route its 
final report to the appropriate judicial organ.   A CPI can 
be unicameral or bicameral and must investigate a specific 
issue over a set period of time, which can be extended until 
the end of the legislature within which the CPI was created. 
Each committee is composed of a president, vice-president, 
rapporteur, and a varying number of members from most of the 
parties, depending on the CPI's focus.  Herewith is a primer 
-- the CPIs involved in investigating current scandals: 
 
THE FIRST CPI: INVESTIGATING THE POSTAL SERVICE & MORE 
--------------------------------------------- --------- 
 
¶3. Purpose: To investigate the causes and consequences of the 
corruption allegations in the Brazilian Postal Service 
(reftels).  Even though the original purpose of this CPI was 
to investigate the corruption scheme in the Postal Service, 
in practice, it is investigating all corruption allegations 
that have emerged during the last few months.  This is 
largely due to its broad mandate and because it has been 
active longer than the other two CPIs. 
 
Background: The May 15 edition of Brazil's newsmagazine VEJA 
revealed a corruption scheme involving the head of the Postal 
Service's Contracting Department, Mauricio Marinho.  Caught 
on tape negotiating bribes, Marinho pointed out that he was 
politically connected to Deputy Roberto Jefferson, now former 
president of the PTB party (an ally in President Lula's 
governing coalition).  Soon after the publication of the 
article, the PTB-connected head of the Brazilian Reinsurance 
Institute (IRB) revealed that he had been pressured by 
Jefferson to skim money from the IRB and to funnel it to PTB 
campaign coffers (ref A). 
 
Type: Bicameral (16 Senators and 16 Deputies) 
 
Set up: June 9, 2005 
 
President: Senator Delcidio Amaral (PT-MS) 
 
Rapporteur: Deputy Osmar Serraglio (PMDB-GO) 
 
Latest developments:  In a television interview, former PT 
treasurer Delubio Soares acknowledged that he had received 
approximately U$16 million in loans from Marcos Valerio -- an 
advertising executive accused of being the party's "bagman" 
-- which were used to pay the PT's campaign bills for 2002 
and 2004.  The money was never recorded on the party's 
accounting books.  On July 18, Soares confessed to the 
violation of electoral regulations, but refused to admit to 
criminal allegations of corruption with money taken from 
state-owned companies and denied the existence of a 
vote-buying scheme.  However, bank records being examined by 
the CPI showed that the PT and other parties members withdrew 
more than U$12 million since 2003 from bank accounts 
belonging to Marcos Valerio (septel discussed this 
development in more detail). 
SECOND CPI: THE BINGO HOUSES 
---------------------------- 
 
¶4. Purpose:  To investigate the use of bingo houses for money 
laundering purposes, and the relationship of these houses 
with organized crime and illegal campaign financing. 
 
Background: In February 2004, a scandal involving Waldomiro 
Diniz, Casa Civil's Chief of Congressional Relations and one 
of former Presidential Chief of Staff Jose Dirceu's closest 
aides, broke out as a numbers racketeer, Carlinhos Cachoeira 
("Charlie Waterfall"), released a clandestine video tape of 
his conversation with Diniz in July 2002.  The tape revealed 
Diniz trying to extort a "side payment" bribe to maintain 
Cachoeira's bingo and lottery operations in Rio de Janeiro 
and soliciting illegal campaign contributions.  Last year, 
the PT refused to assign members to a CPI, arguing that this 
was solely a police matter.  Consequently, the CPI, though 
approved, was not established until recently when the Supreme 
Court ruled that parties must name members for an approved 
CPI. 
 
Type:  Unicameral (15 Senators) 
 
Set up June 29, 2005 
 
President: Senator Efraim Morais (PFL-PB) 
 
Vice-President: Senator Mozarildo Cavalcanti (PTB-RR) 
 
Rapporteur: Senator Garibaldi Alves Filho (PMDB-RN) 
 
Latest developments: Cachoeira, the first witness called 
before the CPI, testified that Diniz had operated alone and 
had no ties with Jose Dirceu.  Cachoeira also stated that 
Diniz had lied about the bribe being for Geraldo Magela's 
(PT-DF) 2002 governor went directly into Diniz's pockets. 
Opposition members of the CPI complained that Cachoeira was 
"covering up" for Dirceu. 
 
THIRD CPI: THE VOTE-BUYING SCHEME 
--------------------------------- 
 
¶5. Purpose:  To investigate two alleged vote-buying schemes: 
the current scandal involving the PT and other parties from 
the governing coalition, and another vote-buying scheme for 
the "reelection bill" during the Cardoso administration. 
 
Background:  In a testimony before the Chamber's Ethics 
Committee, PTB Congressman Jefferson alleged that over the 
past two years members of the PT party had been paying 
monthly bribes to buy votes in Congress.  Jefferson stated 
that the vote-buying scheme was controlled by the PT's former 
treasurer Delubio Soares, and its former Secretary General, 
Silvio Pereira, with the blessing of PT's former President 
Jose Genoino and former Lula's Chief of Staff Jose Dirceu 
(ref B). 
 
Type: Bicameral (18 Senators and 18 Deputies) 
 
Set up: July 20, 2005 
 
President: Senator Amir Lando (PMDB-RO) 
 
Rapporteur: Deputy Ibrahim Abi-Ackel (PP-MG) 
 
Latest developments:  As noted in paragraph 3, the separate 
CPI on postal corruption has already initiated and heard 
testimony that relates to the vote bribe allegations.  The 
governing coalition maneuvered to control the key seats of 
this CPI to try to protect Lula, the PT, and the 
administration from collateral damage, and was successful in 
getting former Social Security Minister Amir Lando elected as 
president of the committee. 
 
FOCUS ON CORRUPTION: OTHER DEVELOPMENTS 
--------------------------------------- 
 
¶6.  In a parallel investigation, the Federal Public 
Prosecutor's Office uncovered a scheme by which Marcos 
Valerio's companies borrowed approximately U$17 million from 
private and state-owned banks using contracts with state 
companies (such as the Postal Service) as collateral. 
According to Valerio's testimony to the Prosecutor's Office, 
the money was given to the PT to finance its electoral 
campaigns and other allied parties, but he denied the payment 
of monthly bribes.  Valerio also stated that former Chief of 
Staff Jose Dirceu knew about the scheme to funnel funds from 
loans backed by state-owned companies to the Workers' Party 
(PT), and Valerio also surrendered a list of persons who were 
authorized to make withdrawals of money loaned to the PT (see 
septel).  The opposition is seeking sanctions against the 
Workers' Party, including the blocking of public 
party-building funds and the cancellation of the party's 
registry with the electoral authority. 
 
WHO'S WHO IN THE CPI'S 
---------------------- 
 
- Jose Dirceu (PT): former Chief of Staff and deputy. 
Accused of approving the vote-buying scheme; could be 
summoned to testify before the three CPIs. 
 
- Jose Genoino (PT): former PT president.  Accused of 
approving the vote-buying scheme; was replaced by Education 
Minister Tarso Genro as PT president. 
 
- Delubio Soares (PT): former PT treasurer.  Accused of 
controlling the vote-buying scheme; was replaced by Deputy 
Jose Pimentel. 
 
- Silvio Pereira (PT): former PT secretary-general.  Accused 
of controlling the vote-buying scheme; was replaced by former 
Labor Minister Ricardo Berzoini. 
 
- Luis Gushiken (PT): Communications Sectetary.  Lost his 
rank as cabinet minister and is accused of giving benefits to 
one of Valerios' companies in a public bid. 
 
- Roberto Jefferson (PTB): former PTB party president, and 
deputy.  After being accused of heading the corruption scheme 
in the Postal Service and the Brazilian Reinsurance 
Institute, he accused PT members of paying monthly bribes to 
buy votes in Congress. 
 
- Mauricio Marinho: former head of the Postal Service's 
Contracting Department.  Caught on tape negotiating bribes; 
alleged that he was politically connected to Deputy Roberto 
Jefferson. 
 
- Marcos Valerio: advertising executive in Belo Horizonte. 
Accused of being the "bagman"; transferred cash to PT 
campaign coffers and is accused of paying monthly bribes to 
members of Congress. 
 
- Fernanda Somaggio: Valerio's former-secretary and principal 
witness against him. 
 
- Waldomiro Diniz: former Chief of Congressional Relations of 
the Casa Civil.  Caught on tape soliciting bribes from a 
numbers racketeer. 
 
Comment: 
-------- 
 
¶7. (SBU) The Brazilian congress is now utterly absorbed by 
the scandal investigations.  That, coupled with the fragility 
of the President's coalition in the legislature and his lack 
of political clout there, make progress unlikely on many 
substantive agenda items (with the exception, perhaps, of 
political reform) from now until the 2006 elections.  But it 
is institutionally important to the Congress ) and to Brazil 
as a whole ) that the CPIs manage to produce credible 
results in their investigations of corruption allegations 
among not only the GOB and PT officials, but implicated 
congressmen as well.  We will monitor the key investigation 
developments and report them regularly in septels to follow. 
MANGANIELLO