VZCZCXYZ0002
RR RUEHWEB

DE RUEHBU #1351/01 1942016
ZNR UUUUU ZZH
R 132016Z JUL 07
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 8634
INFO RUEHAC/AMEMBASSY ASUNCION 6348
RUEHBR/AMEMBASSY BRASILIA 6213
RUEHCV/AMEMBASSY CARACAS 1346
RUEHLP/AMEMBASSY LA PAZ JUL MONTEVIDEO 6577
RUEHSG/AMEMBASSY SANTIAGO 0576
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RHMFIUU/FBI WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS BUENOS AIRES 001351 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL AR
SUBJECT: ARGENTINA: TOILET-GATE, ENVIRO-GATE, AND OTHER 
CORRUPTION TALES 
 
REF: BUENOS AIRES 00844 
 
¶1.  (SBU)  SUMMARY:  The emergence of yet more corruption 
scandals tied to the administration has President Kirchner on 
the defensive.  On July 11, Cabinet Chief Alberto Fernandez 
publicly defended the actions of Environment Secretary Romina 
Picolotti against charges of nepotism and irregular spending. 
 The administration has also had to publicly defend Economy 
Minister Felisa Miceli against charges of corruption and tax 
evasion after a bag of unexplained cash was found in her 
private office rest room.  First Lady and Senator Cristina 
Fernandez de Kirchner's position as the front-runner of the 
presidential race has not yet been affected by the mounting 
corruption discoveries, but with an energy crisis on their 
hands, a recent series of provincial election setbacks, and 
now these emerging scandals, the Kirchner dynasty's aura of 
invincibility is declining.  END SUMMARY. 
 
--------------------------------------------- ------------ 
Toilet-Gate: The Econ Minister and the Mysterious Bag of Loot 
--------------------------------------------- ------------ 
 
¶2.  (SBU)   Economy Minister Felisa Miceli has come under 
scrutiny after Perfil reporter Jorge Lanata reported that 
during a routine inspection by the explosives brigade in the 
Economy Ministry, a bag with US$241,000 had been discovered 
in the closet of Miceli's private bathroom.  A Ministry 
spokesperson clarified that the amount was actually more like 
US$60,000 and that the money had been declared in the 
Minister's public declaration upon taking office.  According 
to Miceli's office, the money was intended for the 
acquisition of property for one of her daughters.  The press 
and some opposition members are insinuating corruption, tax 
evasion, and other violations.  A private lawyer has filed a 
complaint following the release of the story and opposition 
legislators have requested information from the executive and 
are calling for the Miceli's appearance in Congress to give 
explanations on the case.  A federal prosecutor is gathering 
evidence in the case and may summon Miceli to make a 
statement.  The prosecutor may recommend charges be brought 
against Miceli if there is sufficient proof against her. 
This decision may take place in the weeks ahead. 
 
¶3.  (SBU)  During the weekend of July 8-9, Cabinet Chief 
Alberto Fernandez and President Kirchner came out in support 
of Miceli.  Fernandez has said that there are no plans for 
Miceli to step down, that they believe her explanation 
regarding the money, and that it was "just a lapse in 
judgment, but not a crime."  Miceli is claiming that there is 
a dirty campaign against her by some in the Economic Ministry 
allegedly linked to another possible corruption case under 
investigation (the Greco case). 
 
¶4.  (SBU)  After two weeks of silence from Miceli and the 
story refusing to die, Fernandez and Kirchner called her in 
for a meeting and reportedly told her to clarify the 
situation.  Her public statements have done little to dispel 
suspicion of wrongdoing and have highlighted several 
inconsistencies in her story. Sticking with the real-estate 
story, Miceli says she had taken the money to her office 
because she was expecting to buy an apartment for herself 
(not her daughter).  She added that the money found had been 
loaned to her by her brother and that only a "little bit" was 
her own (i.e. that it was not hers, perhaps because she knew 
that she could not account for the money in her original 
public declaration of funds.) 
 
¶5.  (SBU)  The press reports other supposed anomalies such as 
some of the money being in Central Bank "bundles."  According 
to the press, the Central Bank only provides money to banks 
or financial institutions, not to individuals.  Agendas that 
were seized by the court did not show any indication that 
Miceli had scheduled meetings with real-estate brokers, to 
which Miceli responded that she had not yet found a house 
and, therefore, had no sales contract or broker.  (NOTE: 
This highlights another inconsistency in Miceli's story: if 
she had not yet identified a house for purchase, she would 
not know how much money she would need for the purchase.  END 
NOTE.)  While Miceli has said that she made a mistake with 
the handling of the money, she has emphasized that she has 
not committed a crime. 
 
 
-------------------------------- 
Enviro-Gate: Lessons in Nepotism 
-------------------------------- 
 
¶6.  (SBU)  In an article published in Argentine newspaper 
Clarin on July 8, Environment Secretary Romina Picolotti was 
accused of nepotism, misuse of public funds (for private 
transportation to provinces), and the irregular routing of 
international development funds through the Fundacion 
ArgenINTA.  According to the article, Picolotti, a former 
activist who rose to prominence in the paper mill dispute 
with Uruguay but with no political experience, has hired 350 
new staff--including family and friends--since she took 
office last year.  The report added that the Secretariat had 
been paying higher wages to Picolotti's inner circle, far 
beyond the average wage ordinary employees receive. 
Picolotti is also accused of using private jets for travel to 
the provinces despite commercial airline availability and the 
acquisition of new furniture and equipment that ended up 
abandoned in hallways of the Secretariat.  Apparently, the 
money to fund the irregular spending was routed through 
ArgenINTA, an entity under the Secretariat that reportedly 
has fewer controls on spending. 
 
¶7.  (SBU)  Cabinet Chief Alberto Fernandez asked Picolotti to 
respond to the charges in writing to him.  After a meeting 
with her on July 11, Fernandez in a press conference 
disregarded the accusations and expressed his and the 
administration's  confidence in Picolotti's capabilities as 
the head of the Environment Secretariat.  He defended the 
employment of Picolotti's relatives and friends, who, he 
said, were hired based on their qualifications as 
environmental consultants and professionals.  Picolotti was 
also present in the press conference, but remained silent as 
Fernandez defended her and denounced the accusations as part 
of a "political operation" by fired Secretariat employee 
Bruno Carpinetti.  Carpinetti was reportedly abruptly removed 
from his position as Undersecretary of Coordination and 
Environment Policy after a confrontation with Picolotti's 
brother Juan Picolotti, Romina's chief of staff.  Fernandez 
also used the press conference as the opportunity to 
criticize the reporter, whom he called "a pseudo-journalist" 
and a "self-proclaimed investigative journalist," spurring 
criticism from local press associations. 
 
------------- 
Skanska Update 
------------- 
 
¶8.  (SBU)  The largest and most visible scandal of the 
winter, the Skanska case (see REF) has been a regular feature 
in the Argentine media and causing headaches for the Kirchner 
administration.  A tax-evasion investigation of the Swedish 
company Skanska's involvement in a gas pipeline expansion in 
the north of Argentina led to a criminal investigation for 
alleged bribes after Congressmen Adrian Perez of the 
center-left ARI party and Esteban Bullrich of the 
center-right PRO party pushed for a corruption investigation. 
 Skanska has admitted to using 118 false receipts valued at 
AR$17 million.  The Criminal Court of Appeals in Economic 
Matters split the case into two parts and among two judges. 
Judge Javier Lopez Biscayart has jurisdiction over the 
alleged tax-evasion, and Federal Judge Guillermo Montenegro 
is in charge of the investigations for alleged bribery.  The 
tax-evasion case is now stalled as the court hear appeals 
from the accused (no GOA officials).  Montenegro will 
continue to hear testimony from Skanska employees (both 
current and former) and Argentine officials, two of which are 
ex-president of Enargas Fulvio Madaro and ex-president of 
Nacion Trust Funds (part of the National Bank) Nestor Ulloa. 
Ulloa is suspected of knowingly allowing the diversion of 
state funds for the pipeline project to pay bribes to 
construction companies.  Madaro is being questioned about 
Enargas' management of the pipeline project and possible 
knowledge of bribes.  The case has also been loosely tied to 
Planning Minister Julio De Vido, whose Ministry oversees the 
pipeline project, although De Vido himself has not yet been 
implicated in either tax evasion or bribes. 
 
------------------- 
 
Patagonian Pipeline 
------------------- 
 
¶9.  (SBU)  Congressman Carlos Lorenzo (Radical Civic Union 
from Chubut) filed a complaint about the failure to follow 
proper procedures and solicit bids in the awarding of a 
public works project worth US$90 million to build a pipeline 
in Chubut province.  According to press reports, businessman 
Alejandro Ivanisevich submitted a proposal to build the 
pipeline, whose funding was to be shared among Engasud (a 
construction and auditing company), the province of Chubut, 
the National Bank, and the Federal Government.  Apparently, 
the job was awarded to Ivanisevich in an irregular way that 
suggests corruption.  Public works projects are subject to 
requirements for bid solicitations and transparent 
competition, both of which were apparently waived in this 
case.  The investigation of the corruption allegations is in 
its preliminary stages and the prosecutor has yet to render 
an opinion as to the status of the accused. 
 
-------------------------------------- 
Fake Invoices and other Irregularities 
-------------------------------------- 
 
¶10.  (SBU)  In the Viasso case, Roberto Viasso and his wife 
are suspected of leading an illicit organization that created 
front companies that sold fake invoices to different 
companies and public entities.  There are 3000 companies 
under investigation for alleged tax evasion via false 
invoices and 37 public entities--including labor unions--that 
are suspected of having received bribes.  Some of the public 
offices under investigation include: the Congressional 
Committee for the Oversight of Intelligence Agencies and 
Activities, the Cabinet Chief's office, the Ministry of 
Social Development, the Ministry of Health, and the Ministry 
of Education.  There is also a list of labor unions under 
suspicion. 
 
¶11.  (SBU)  As an offshoot of the Viasso case, six judges are 
investigating AR$40 million in false billing for public works 
completed by 12 construction companies.  Judge Biscayart is 
investigating 500 companies and public offices suspected of 
involvement with false invoicing in another derivative 
investigation of the Skanska and Viasso cases.  On July 12, 
45 companies were raided for documents related to the front 
companies discovered in the Skanska case.  Some of the raided 
companies mentioned in the press include: Autopistas del Sol 
(private toll road company), Banco Columbia, Baxterrica 
Clinic, Easy Argentina (home-improvement company), Cencosud 
(Chilean supermarket chain), and Wal-Mart. 
 
---------------- 
Come Fly With Me 
---------------- 
 
¶12.  (SBU)  In the Federal Airlines Company (LAFSA) and 
Southern Wings airline case, the Secretary for Transportation 
Ricardo Jaime is under investigation for  mismanagement and 
irregular accounting in the agreement between LAFSA and the 
now extinct Southern Wings company.  Federal Judge Daniel 
Rafecas is also looking into irregular invoice payment by the 
Federal government for fuel provided to Southern Wings and 
for staff compensation. 
 
------------------------- 
Fiddling with the Numbers 
------------------------- 
 
¶13.  (SBU)  Federal prosecutor Carlos Stornelli has asked 
Federal Judge Rodolfo Canicoba Corral to summon Commercial 
Secretary Guillermo Moreno -- the President's front man on 
 
SIPDIS 
keeping a lid on inflation -- to give a statement on the 
alleged irregularities surrounding the inflation rate 
measured by the National Institute for Statistics and Census 
(INDEC).  Moreno is being accused of abusing his position by 
adulterating the monthly inflation and cost of living indexes 
that INDEC measures and publishes.  In fact, Moreno has no 
statutory authority over INDEC, which falls under the 
Minister of Economy. 
 
------- 
 
Comment 
------- 
 
¶14.  (SBU)  The corruption scandals tied to the Kirchner 
administration continue to build and have led many analysts 
here to speculate that President Kirchner now finds himself 
in an uncomfortable position in the run-up to the October 
presidential elections.  Some analysts have cited this as a 
possible motive behind Kirchner's decision to run his wife, 
Senator Cristina Fernandez de Kirchner, as the Victory Front 
(FPV) candidate in October.  After the first snow in over 89 
years fell in the capital of Buenos Aires in the middle of an 
energy crisis, the mounting corruption investigations 
highlight some cracks in the Kirchner dynasty but as yet have 
not seriously affected his polling or that of Cristina.  For 
now, the polls still show Cristina as the front-runner, with 
an increased projected intention of votes of approximately 48 
percent (depending on the poll company), up from 45 percent. 
 
¶15.  (SBU)  The wholesale effect of this grab-bag of scandals 
and pressure on the Kirchner administration is, however, as 
of now does not appear likely to result in a significant 
change of the political status quo.  Presidential candidates 
Elisa Carrio (ARI, Center-left) and Roberto Lavagna 
(Kirchner's ex-Economy Minister) have rejected center-right 
candidate Ricardo Lopez Murphy's appeal to form a united 
opposition to challenge the Kirchners in October.  The 
emerging Peronist alternative headed by former Presidents 
Carlos Menem, Ramon Puerta, and Adolfo Rodriguez Saa also 
remains fragmented and without a clear leader.  However, 
there have been a number of surprises in recent months and in 
the time until the October 28 elections may well contain a 
few more.  END COMMENT. 
WAYNE