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

UNCLAS SECTION 01 OF 02 SAO PAULO 000971 
 
SIPDIS 
 
STATE  IIP/R/MR; WHA/PD 
 
E.O. 12958: N/A 
TAGS: PGOV KPAO BR
SUBJECT:  Sao Paulo journalists discuss corruption scandal 
in Brazil 
 
 
¶1. Summary:  At the end of July/early August, IO Sao Paulo 
held a series of individual meetings with prominent 
journalists to discuss the corruption scandal unfolding in 
Brazil. Various journalists commented that they believe 
President Lula da Silva (Lula) may not have been aware of 
the corruption but that they believed that Chief of Staff 
Jose Dirceu was. They mentioned several rumors regarding the 
source of the money that businessman Marcos Valerio de Sousa 
"loaned to members of the government and political party 
and confessed to have no idea of how the scandal would 
eventually end. End Summary. 
 
¶2. Over a series of days, from July 14 - August 3, IO met 
separately with eight journalists to gather their opinions 
on the ongoing government corruption scandal in Brazil.  The 
journalists are all prominent commentators and anchors from 
television, radio, print and Internet press. Although the 
journalists had different theories and points of view, the 
discussions painted an interesting picture of the general 
view of the media on the scandal. 
 
Key Goernment Figures: 
 
¶3. Most of the journalists seeed not to believe, or did not 
want to believe, that President Lula knew of corruption in 
the government and the Worker's Party (PT). All of them 
however, were certain that Dirceu was aware of and involved 
in a scheme to pay members of congress to support government 
policy. They also stated that all parties rely on 
unregistered funds to support their election campaigns. 
Many posited that the PT, always in the role of opposition 
until Lula's election, was not prepared to govern.  They 
suggested that the party did not know how to lobby for votes 
and support and so resorted to purchasing it. Some referred 
to the communist roots of the PT and suggested that this 
same modus operandi of controlling policy through 
centralization of power led the PT to try to govern through 
the monthly payments (mensalao).  Dirceu was described as an 
"apparatchik" and someone in whom Lula mistakenly put too 
much trust.  When asked about Finance Minister Antonio 
Palocci, most journalists thought that he was not involved 
in the scheme. Others thought that the government did not 
want attention focused on him and brought up the fact that 
when Lula was running for office, Palocci replaced Celso 
Daniel, the mayor of St.Andre, as Lula's campaign 
coordinator. (Note: Celso Daniel was murdered in what was 
judged by police to be a robbery attempt.  Rumors have 
persisted that Daniel was in fact murdered because he was 
investigating corruption in the PT election campaign). 
 
Follow the Money: 
 
¶4. This was the phrase used by several journalists to 
describe their methods of investigating the scandal.  All of 
the journalists commented that the press is completely free 
to investigate and that their media outlets are aggressively 
pursuing the case.  One journalist mentioned that the press 
receives all of the information that the Congressional 
Investigative Committee (CPI) receives at the same time that 
the CPI receives it and that they rely upon this information 
and follow up on it.  One journalist commented that he 
believes this is why the government did not want a CPI. Many 
media outlets have sent additional staff from Sao Paulo to 
Brasilia to help report on the scandal.  One journalist 
suggested that the question is not only to whom did Marcos 
Valerio de Sousa (Valerio) give the money, but also from 
where/whom, did Valerio get the money.  Journalists had 
differing theories on the origin of the money.  One believed 
that the PT had money from unregistered donations that they 
transferred to overseas accounts.  He suspected that for 
some reason they could not access these accounts and so had 
to borrow from Valerio.  Others believed that the PT gave 
lucrative contracts to Valerio and other publicity companies 
paying much more than they were worth, with the 
understanding that they would then be able to "borrow" this 
money and not repay it.  Another suggested that the money 
might have come from state owned companies.  A prominent 
anchorman whose name was among those whose telephones the 
businessman Daniel Dantas is accused of having illegally 
tapped in the Kroll scandal, says that he believes that 
Dantas actually provided the money to Valerio to give to the 
party. 
 
 
Where will it all end? 
 
¶5. The journalists confessed they had no idea where the 
scandal would end.  At the time of speaking they doubted 
that it would end in the impeachment of the President.  One 
journalist posited that unless something is found directly 
implicating the President, for example a check written to 
him, the President would not be impeached.  Another 
journalist mentioned that there were rumors that Federal 
Police raided the Sao Paulo luxury department store, Daslu, 
because the store had a receipt for a purchase by Lula's 
wife that was made with Valerio's credit card. The 
journalist asked, if this is the case, was the raid to 
uncover this evidence or to cover it up? Some predicted the 
demise of the PT party.  Many commented that Lula helped the 
PT to win rather than the other way around. Some predicted 
the PT party would divide between the more liberal elements 
and the more conservative.  Others thought that Lula might 
begin to court the more leftist members of his party. 
 
¶6. As for the upcoming elections, all of the journalists 
still believed Lula to be a strong contender although many 
pointed out that polls taken now cannot reliably predict how 
the electorate will feel next year.  They also pointed out 
that the opposition would use the scandal during the 
election campaign to attack Lula in a way they are not doing 
now.  Some suggested that it suits the opposition to have a 
"lame duck" president in office, rather than impeaching him. 
Another theme was the fear that a populist candidate in the 
mold of Severino Calvacanti might take advantage of the 
opportunity and run and win (a la Venezuela's Chavez).  More 
than one journalist mentioned the Rio politician Anthony 
Garotinho as one such possible candidate. The journalists 
who suggested this possibility thought that it was remote, 
but definitely the worst-case scenario. 
 
7.While many thought that this was a good opportunity to 
shine a light on corrupt practices in the Brazilian 
government, few had much hope that this scandal would result 
in concrete reforms to the political system. 
 
¶8.  Comment:  These conversations took place several weeks 
ago and time is proving many of the speculations to have 
some basis in fact. Since the conversations, there have been 
revelations that the PT may have an offshore account and 
Dantas's name has also been mentioned in connection with the 
scandal.  Duda Mendonca, who is the businessman who created 
an offshore account (for the PT?), is married to one of the 
owners of the department store, Daslu.  End comment. 
 
WOLFE