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

UNCLAS BRASILIA 003216 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON BR
SUBJECT:  BRAZIL CORRUPTION SCANDAL UPDATE, WEEK OF 05-09 
DECEMBER 2005 
 
REF.: BRASILIA 03150 AND PREVIOUS 
 
¶1.  SUMMARY. This was a quiet week in investigations of the 
scandals in the GOB and PT party (refs).  Congressional 
investigation committees (CPIs) probed allegations of 
irregular payments by the PT to a textile firm owned by 
Vice President Alencar, but did not link these charges to 
the broad financial and bribery conspiracy at the core of 
the past several months' scandals.  A CPI also heard a 
witness who claimed she had informed President Lula da 
Silva of municipal corruption related to the PT in the city 
of Santo Andre, Sao Paulo, where PT mayor Celso Daniel was 
murdered in 2002.  End introduction. 
 
PT USES UNACCOUNTED FUNDS TO PAY VICE-PRESIDENT'S COMPANY 
--------------------------------------------- ------------ 
 
¶2.  On December 4, leading newspaper Folha de Sao Paulo 
announced the detection of a payment in the amount of one 
million reais (approximately 450 thousand dollars) made by 
the Worker's Party (PT) to Coteminas, a textile industry 
owned by  Vice President Jose Alencar.  The May 2005 
payment was not accounted for in the party's records, but 
the bank where the deposit was made informed the Ministry 
of Finance in August.  According to the former PT 
treasurer, Delubio Soares, the sum was given -- in cash -- 
to Coteminas as a payment for T-shirts sold by the textile 
company to the party during the 2004 municipal campaign. 
Soares also confirmed that the payment was made with PT 
private sector moneyman Marcos Valerio's funds and that the 
party owes another 11 million reais (5.4 million dollars) 
to the company.  Alencar, whose son took over the 
presidency of Coteminas after his resignation, said that 
the company recorded the payments in its accounting books 
and, therefore, did not do anything illegal.  Alencar added 
that there was no reason to question the origin of the 
money at the time.  Ricardo Berzoini, current PT president, 
and Paulo Ferreira, PT treasurer, released a statement on 
December 5 saying that the "supposed payment" was not 
accounted for by the PT, and blamed Delubio Soares and the 
former PT directorate. 
 
¶3. (U) Members of the Postal Service CPI said that the 
episode is further evidence of the use of unaccounted 
campaign funds by the Worker's Party, but they do not 
believe it is part of the broader illicit financing and 
bribery scheme facilitated by Marcos Valerio, given the 
date of the payment. Investigations conducted by the CPI 
point to the fact that, by May 2005, the scheme already had 
a deficit of 3 million reais (1.3 million dollars). 
Valerio denied knowledge of the payment and said that the 
last money transfer he made for the PT was in October 2004, 
before the payment to Coteminas was made.  The CPI 
requested assistance from the Federal Police to investigate 
the case. 
 
MURDERED MAYOR CASE: PRESIDENT LULA AWARE OF BRIBES SCHEME 
--------------------------------------------- ------------- 
 
¶4. (U) On December 6, in a testimony before the CPI on 
bingo games and municipal corruption, Mara Gabrilli, 
daughter of Santo Andre, Sao Paulo transportation company 
owner Luiz Alberto Gabrilli, stated that she met with 
President Lula in March 2003 to request federal 
intervention in Santo Andre to bring to an end the 
corruption scheme in the municipality.  According to 
Gabrilli, she told the president about the scheme and said 
that it was still in place, even after PT Mayor Celso 
Daniel's assassination.  She said that the President 
promised to take the necessary measures to curb corruption 
and to punish those involved, but asked her not to mention 
the subject to the press and changed the subject. 
Gabrilli's statements reinforce previous testimonies heard 
by the CPI in which owners of transportation companies in 
Santo Andre affirmed that a scheme to collect kickbacks for 
PT slush funds was in place in the municipality, and that 
Daniel's assassination was connected to the scheme.  The 
Presidency did comment on the testimony. 
 
LINEHAN