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

C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 003150 
 
SIPDIS 
 
E.O. 12958: DECL: 09/22/2015 
TAGS: PGOV PREL ECON BR
SUBJECT: BRAZIL CORRUPTION SCANDAL UPDATE, WEEK OF 28 
NOVEMBER - 02 DECEMBER 2005: DIRCEU FALLS 
 
REF: BRASILIA 03103 AND PREVIOUS 
 
Classified By: Classified By: POLITICAL COUNSELOR DENNIS HEARNE. REASON 
S: 1.4 (B) (D). 
 
 ¶1. (C)  Summary: On the evening of 30 November the Brazilian 
congress's Chamber of Deputies (lower house) voted to 
"cassar" (ban from office or impeach) congressman Jose Dirceu 
-- until a few months ago, arguably the most powerful 
minister in President Lula da Silva's government and the main 
leader in the PT party, but recently a central figure in the 
ongoing scandals that have rocked Brazil (ref).  Dirceu was 
impeached on charges of breaking "congressional decorum" on 
specific items related to the scandal allegations, but his 
fall is viewed here as a broader acknowledgment by the 
political class that the financial improprieties at the core 
of the scandals are real, important in scope, and ultimately 
the responsibility of senior figures beyond those already 
implicated and sanctioned publicly.  Hence Dirceu's fate 
cannot be considered good news for Lula, though Dirceu's fall 
may temporarily diminish pressure on the GOB through the 
year's end.  End summary. 
 
DIRCEU FALLS 
------------ 
 
¶2.  (U) Until a few months ago Lula's powerful Chief of Staff 
and once the most influential figure in the cabinet, Jose 
Dirceu was formally ousted by his congressional colleagues 
late on 30 November from his seat in the Chamber of Deputies, 
and also lost his political rights until 2016.  A majority of 
293 deputies -- 36 more than the necessary -- in the 513-seat 
Brazilian lower house voted to expel Dirceu from congress, 
indicating their acceptance of a report by the chamber's 
ethics committee charging his culpability in the illicit 
financing and vote-buying scandals that have rocked the Lula 
administration (ref).  The vote calling for Dirceu's 
"cassacao" (a formal ousting process akin to banning or 
impeachment) was the denouement of Dirceu's story in the 
crisis, which started six months ago, when a former member of 
the governing coalition, deputy Roberto Jefferson (himself 
impeached several weeks ago, see refs), accused the Worker's 
Party of bribing lawmakers, and implicated Dirceu as the 
corruption scheme's mastermind.  Dirceu's last in a series of 
appeals to the Supreme Court was decided just hours before 
the impeachment vote took place, with the Supreme Court 
Justices allowing the vote on Dirceu's impeachment, provided 
portions of the report judged to be unconstitutional on 
procedural grounds were deleted.  The 42-page report included 
circumstantial evidence that links Dirceu to the PT's 
corruption schemes and supports the assertion that  "(Dirceu) 
altered the regular legislative process by collecting money 
from the Banco Rural and Banco de Minas Gerais, together with 
Mr. Delubio Soares (former PT treasurer) and by Mr. Marcos 
Valerio de Sousa (the private sector money man at the center 
of the scandals)... and used that money to buy congressmen's 
votes in favor of the governing coalition." 
 
¶3.  (U) At 7:30 p.m., the chamber started impeachment 
procedures by hearing a strong oral presentation of the 
charges by the ethics committee rapporteur, Deputy Julio 
Delgado, followed by Jose Dirceu, who made an emotional 
speech in his own defense.  Dirceu denied all the accusations 
presented in the report, claiming that there were no evidence 
to support them.  Dirceu defended his record of public 
service and argued he was a scapegoat and victim of vendettas 
by those who resented his political power and arrogant 
personal style.  He pleaded not to be ousted from the 
Chamber: "I reached the point where my situation became an 
agony, a decapitation, a hell, a political execution... I 
cannot be impeached because I was the "all-mighty" (in the 
government), because I did not answer telephone calls or 
schedule meetings.  I cannot be impeached because of my 
personality.  It is not fair, my hands are clean." It was 
past midnight when the chamber President (Speaker of the 
House equivalent), Aldo Rebelo, announced the final result 
and declared Dirceu ousted.. 
 
¶4. (SBU) Dirceu's fall from the apex of power he enjoyed in 
the early months of Lula's government began in February 2004, 
when his friend and senior advisor Waldomiro Diniz was caught 
soliciting bribes from a numbers racketeer, apparently 
intending to funnel the cash into PT slush funds.  The 
governing coalition was able to put off further investigation 
of the case for over a year and Dirceu began to regain some 
of his previous influence.  However, in early June 2005 he 
was forced to step down as Lula's chief minister after former 
deputy Roberto Jefferson alleged to the press and to Congress 
that the Worker's Party was running illicit campaign 
financing operations and a bribery scheme in exchange for 
lawmakers' support, and that Dirceu was not only aware of the 
scheme, but was the mastermind behind it.  Jefferson's 
allegations prompted the congress to open investigations on 
the bribes-for-votes scheme and other allegations, with three 
investigative committees (CPIs) examining a range of issues 
including use of state funds in illegal actions, money 
laundering, bribery charges and corruption involving bingo 
houses and contracting practices under PT municipal 
governments.  After resigning, Dirceu returned to his seat in 
the Chamber of Deputies, from where he maneuvered tirelessly 
against his impeachment.  Ultimately the efforts were 
fruitless, as he became the second deputy to be judged and 
ousted, following Roberto Jefferson.  Throughout the process, 
Dirceu made three different appeals to the Brazilian Supreme 
Court, a tactic which threatened in its latter stages to 
spark an institutional crisis between the legislative and the 
judicial branches. 
CONGRESSIONAL COMMITTEES:  NEXT MOVES 
------------------------------------- 
 
¶5. (U) With the conclusion of Dirceu's case, the Ethics 
Committee in the chamber is expected to move ahead on 13 
other cases against implicated congressmen, and will likely 
try to conclude these processes by year's end.  Dirceu's 
impeachment may well pave the way for faster handling of the 
other cases, which include both PT and allied party 
congressmen and in which there is substantial material 
evidence in some instances.  Osmar Serraglio, rapporteur of 
the CPI on the Postal Service -- which is charged with 
investigating use of state funds in the PT's illicit finances 
-- said his committee will also release a report on related 
bribery operations involving congressmen, in an effort to 
shore up a gap left by the demise earlier this month of a 
separate and largely ineffective CPI on vote buying.  The 
second remaining CPI, which covers corruption in bingo gaming 
and municipal governments under the PT, continued its 
examination of allegations relating to finance minister 
Palocci's tenure as mayor of Riberao Preto, Sao Paulo, and 
the murders of PT mayors linked to suspected corruption in 
Campinas and Santo Andre, Sao Paulo state. 
 
¶6. (C) Comment.  Dirceu's fall is a watershed.  Beyond the 
specific charges in the report on which Dirceu's impeachment 
was founded, there has been an ongoing and powerful suspicion 
here that Dirceu's guilt is broader, that he was in fact the 
mastermind, or at the very least a knowledgeable and 
complicit observer, in the PT's network of illicit financial 
activities, both in government and in the years leading up to 
Lula's victory, when proceeds from kickbacks from PT-led 
municipalities apparently flowed into party war chests, 
fueling campaigns and embroiling some PT mayors in nefarious 
circumstances that literally led to murder in the cases of 
Santo Andre and Campinas, and that continue to haunt Palocci. 
We have tended to share that view of Dirceu's probable 
culpability.  Dirceu was, for years, the single most powerful 
figure within the PT as the party's president, he crafted the 
campaign image-remake of Lula that led to his presidential 
victory, and he was the most important cabinet minister in 
the early years of the administration.  It strains credulity 
that he would not have been involved in the large-scale, 
illicit financial machinations that are at the core of the 
current scandals. In our assessment, it fits with Dirceu's 
personal history of devotion to both the PT and his own 
ambition -- a history that includes exile, training in Cuba 
as a guerrilla, and years of clandestine life under assumed 
names in Brazil -- that he would view dubious means as 
justified by his ends.  Indeed, the schemes of which he now 
stands accused were set in play to win and consolidate 
political power for the PT, rather than fuel graft in a 
traditional sense.  We see no indication that an angry or 
embittered Dirceu will now implicate Lula in wrongdoing, as 
that would undercut Dirceu's assertions of his own innocence 
(he must still be wary about criminal indictments, though 
those seem unlikely), and in the end, Dirceu is probably 
still too much of a good soldier to ruin his former chief and 
further damage his party.  Dirceu recently told Embassy 
officers that he intends to vanish for a time from Brazil's 
political scene, to work on a book and travel to the United 
States in early 2006, where he will recharge his batteries, 
learn some English and visit a country that is largely alien 
to him.  But we are certain that, even with his right to run 
for office lost until 2016, Dirceu will remain an extremely 
influential figure in the PT and Brazilian left. 
¶7. (C) Comment continued.  The Lula government, for its part, 
expended virtually no energy to defend its former high priest 
in his final trial before the congress, leaving him in the 
end to his fate.  Lula must now hope that Dirceu's sacrifice 
may be sufficient to diminish pressure from the ongoing 
investigations, at least through the end of the year.  But it 
also can be argued that the condemnation of Dirceu represents 
the strongest statement yet that the body politic and public 
in Brazil believe that the corruption schemes revealed over 
the past months are real, that their scope is vast, and that 
senior persons in the government and PT party beyond the 
former party treasurer, secretary general and others already 
thrown from the ship during investigations bear 
responsibility. Despite some temporary relief that last 
night's vote may offer, that cannot be comforting news for 
Lula. 
 
 
 
LINEHAN