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C O N F I D E N T I A L BUENOS AIRES 000978 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 05/17/2017 
TAGS: PGOV EINV ENRG PREL ECON SW AR
SUBJECT: SKANSKA SCANDAL TAKES DOWN FIRST TWO OFFICIAL 
VICTIMS; GOA FACING OTHER PROBLEMS AS WELL 
 
REF: A. BUENOS AIRES 906 
 
     ¶B. BUENOS AIRES 844 
 
¶1. (SBU)   Summary:  Skanska-gate has its first two official 
victims.   On May 16, Cabinet Minister Alberto Fernandez 
announced the firing of the President of ENARGAS (the GoA's 
natural gas regulatory authority) and the Manager of Nacion 
Fideicomisos (the public trust established to structure 
private funding  public works projects), following a judge's 
order that the two be called in for questioning in the 
Skanska case.  The Judge's order comes after it was revealed 
that an internal Skanska auditor in October 2005, made tapes 
of a conversation he had with then-Skanska commercial manager 
Javier Azcarate, in which Azcarate stated that bribes 
totaling 5% of the inflated cost of gas pipeline projects 
Skanska had been awarded had been paid to ENARGAS (Madaro) 
and Nacion Fideicomiso (Ulloa). 
 
¶2. (C)  The judge,s order, that the two officials be called 
in for questioning (and the existence of the tape), undercut 
the Government,s previous spin that the Skanska scandal is 
exclusively an issue of bribery between private companies. 
The question is, will there be further implication of 
government officials in the scandal?  Moving up the food 
chain, the most logical candidates would be Secretary of 
Public Works Jose Lopez and Secretary of Energy Daniel 
Cameron, who also have technical oversight authority over the 
project.  Both work for Planning Minister De Vido. The GoA 
moved quickly to fire the two officials in an attempt to 
quell the growing investigation and public attention. 
 
3.(C) In unrelated-but-ongoing headaches for the government: 
the Attorney General Prosecutor for Administrative Issues 
Manuel Garrido, on May 16, requested the dismissal of 
powerful Internal Commerce Secretary Guillermo Moreno (the 
President's front man in the war on inflations) and the head 
of the National Statistical Agency's (INDEC's) consumer price 
index (CPI) office Beatrice Pagliero on the grounds that they 
might obstruct an ongoing investigation of irregularities in 
INDEC's CPI calculations.  And, passenger disgruntlement over 
delayed commuter train service erupted into a full scale riot 
with significant damage to one of Buenos Aires' main train 
stations, numerous injuries and multiple arrests.  The 
federal government blamed the private concessonaire for the 
problems with the train service and, interestingly, fingered 
the radical leftist piquetero group "Quebracho" for 
instigating the violence at the train station.  The 
government has promised a full investigation.  The headline 
of one noted analyst's column May 17 was "Is Kirchner losing 
it?"  End Summary. 
 
--------------------------------------------- ------------- 
Skanska-gate: Not Just a Matter Between Private Companies 
--------------------------------------------- ------------- 
 
¶4. (C)  The growing scandal is over apparent cost inflation 
and payment of bribes/kickbacks tied to the expansion and 
modernization of the national natural gas pipeline network, 
and actions taken by pipeline expansion project contractors 
--including Swedish construction giant Skanska.  The scandal 
claimed its first two official victims (see Ref. B for more 
background).  On May 16, Cabinet Minister Alberto Fernandez 
announced the firing of two high-level officials, Fulvio 
Madaro, President of ENARGAS (the GoA's natural gas 
regulatory authority), and Nestor Ulloa, Manager of Nacion 
Fideicomisos (a public trust established to structure private 
funding of public works projects).  The firings follow Judge 
Guillermo Montenegro's order that the two officials be called 
in for questioning in the Skanska case.  The Judge's order 
comes after it was revealed that during an internal Skanska 
audit in October 2005, auditor Claudio Corizzo (already under 
suspicion and questioned in the case) had made tapes of a 
conversation he had with then-Skanska commercial manager 
Javier Azcarate (also under suspicion and questioned), in 
which Azcarate apparently stated that bribes totaling 5% of 
the cost of the pipeline project had been paid to ENARGAS 
(Madaro) and Nacion Fideicomiso (Ulloa).  This tape would be 
inadmissible in a trial but there is apparently admissible 
corroborating evidence. 
 
¶5. (C)  The judge,s order that the two officials be called 
in for questioning (and the existence of the tape), undercut 
 
the Government,s previous spin that the Skanska scandal is 
exclusively an issue of bribery between private companies. 
The question is, will there be further implication of 
government officials in the scandal?  Moving up the food 
chain, the next most logical candidates to come under 
scrutiny would be Secretary of Public Works Jose Lopez and 
Secretary of Energy Daniel Cameron, who also have technical 
 
SIPDIS 
oversight authority over energy infrastructure development 
projects.  Both report to Planning Minister De Vido. 
 
¶6. (C) President Kirchner earlier -- while insisting this was 
a corruption issue among private companies -- had quite 
assuredly stated that he would take action against any 
government officials implicated in the investigation.  To his 
credit, he has.  Nevertheless, while these officials are not 
charged or indicted in the case, their being called in for 
questioning is a blow to this government's effort to portray 
itself as clean of the corruption that is typically 
attributed to virtually every previous Argentine 
administration.  In announcing the firings, Cabinet Chief 
Anibal Fernandez stated that in no way did the firing of the 
Madaro and Ulloa imply any guilt or involvement in the case. 
Nevertheless, he said, the Judge's citation for the two to 
come in for questioning was sufficient motive for them to be 
removed from their positions. Fernandez stated that the 
government wanted to avoid any implication that Madaro and 
Ulloa were being "shielded." 
 
---------------- 
INDEC CPI Crisis 
---------------- 
 
¶7. (C) In another ongoing political headache for the GoA, the 
Attorney General Prosecutor for Administrative Issues Manuel 
Garrido, on May 16, requested the dismissal of powerful 
Internal Commerce Secretary Guillermo Moreno and the head of 
the National Statistical Agency's (INDEC's) consumer price 
index (CPI) Beatrice Pagliero on the grounds that they might 
obstruct an ongoing investigation of irregularities in 
INDEC's calculation of the CPI index.  Moreno is Kirchner's 
heavy-handed front man in the war on inflation who has 
attempted to control double digit inflation via a series of 
"voluntary" price accords with private sector producers of 
key consumer items.  A controversy has emerged whether the 
government is doctoring the statistics.  Moreno had been 
instrumental in Paglieri's appointment to INDEC in February. 
Pagliero has since implemented a series of methodological 
changes in CPI calculation that have resulted in 
lower-than-expected monthly consumer inflation totals.  INDEC 
rank-and-file have accused Pagliero of a politicized 
manipulation of inflation figures to allow the GoA to claim 
that it had reduced inflation to single digits in a 
pre-election year.  Local and international analysts linked 
this reported heavy-handed manipulation of CPI numbers to a 
broader loss of credibility in GoA economic statistics and a 
consequent increase in country risk premium.  Local media 
reports that Economy Minister Miceli, a political adversary 
of Moreno, is preparing to announce an overhaul of INDEC, to 
include some form of international best practices oversight, 
that will restore its tarnished credibility and lessen 
Moreno's influence in the Kirchner administration. 
 
--------------------------------------------- -- 
Bad Train Service - Burn Down the Train Station 
--------------------------------------------- -- 
 
¶8. (C) On May 14, at the beginning of afternoon rush hour, a 
stalled train in the Constitucion train station disrupted 
service resulting in a full blown riot as disgruntled 
passengers set fire to ticket booths and clashed with police. 
 There were numerous injuries and multiple arrests.  The 
government blamed the private concessonaire for the problems 
with the train service and, interestingly fingered the 
radical leftist piquetero group "Quebracho" for instigating 
the violence at the train station.  The government has 
promised a full investigation.  This event, on the tail of 
extended and violent teacher strikes in the President's home 
province of Santa Cruz and earlier in the province of 
Neuquen, a series of ongoing labor-related demonstrations 
that are wreaking havoc for commuters in the subways and on 
the streets of Buenos Aires and for business travelers and 
tourists at the municipal airport, has given some the 
 
impression that President Kirchner is starting to lose some 
of his vaunted control.  That was the theme of a front page 
editorial in center-right paper-of-record La Nacion on May 17. 
 
¶9. (SBU) Comment: Many observers gave little credence to the 
government's insistence that the Skanska scandal was only an 
issue between private companies and assumed it was only a 
matter of time before government officials would be pulled 
in. No GoA officials have been charged yet, and the 
investigative process is sufficiently opaque that perhaps 
none will. The story, however, "has legs" and is not going to 
go away soon.  While all this might be significant -- and 
worrisome for the government -- in a normal electoral 
environment, with no effective opposition and no apparent 
challenger on the horizon, President Kirchner (or the First 
Lady Senator Fernandez de Kirchner) should be able to ride 
out the storm and win reelection comfortably in October. 
This scandal, which threatens to spread and taint more senior 
officials close to (or in) the Casa Rosada, and the seemingly 
endless series of (mostly small scale) strikes and 
demonstrations, give the impression, however, that the 
Kirchner governance model is beginning to show some strain. 
WAYNE