VZCZCXYZ0001
RR RUEHWEB

DE RUEHBU #0086/01 0251400
ZNR UUUUU ZZH
R 251400Z JAN 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0117
INFO RUEHSM/AMEMBASSY STOCKHOLM 0068
RUCNMER/MERCOSUR COLLECTIVE
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RHMCSUU/FBI WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS BUENOS AIRES 000086 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV KCOR EPET EINV ASEC SNAR OECD AR
SUBJECT: ARGENTINA: UPDATE ON SKANSKA CORRUPTION CASE 
 
REF: A. 07 Buenos Aires 2121 
¶B. 07 Buenos Aires 1351 
¶C. 07 Buenos Aires 978 
¶D. 07 Buenos Aires 844 
¶E. 07 Buenos Aires 687 
 
¶1. (SBU) Summary.  Judicial investigations continue into alleged 
bribery and tax evasion by the local affiliate of Swedish 
construction multinational Skanska in the expansion of Argentina's 
northern and southern natural gas pipelines.  The courts appear to 
be approaching the indictment phase, despite delays generated by the 
resignations of the judge and prosecutor handling the bribery 
investigation.  The Skanska case, once front-page fodder with the 
potential to implicate a number of senior-level GOA officials, has 
largely dropped off the political radar.  Indictments could revive 
the issue.  The Swedish anti-corruption office announced it will not 
initiate an independent investigation into the alleged 
irregularities in Argentina unless new evidence against Skanska's 
headquarters or Swedish nationals arise.  End Summary. 
 
----------------------------- 
Slow moves towards indictment 
----------------------------- 
 
¶2. (SBU) There are two judicial investigations into apparent 
over-invoicing, bribery and related tax evasion tied to the 
expansion and modernization of Argentina's natural gas pipeline 
network involving contractors, including the local affiliate of 
Swedish construction giant Skanska.  The investigations should yield 
indictments once the courts resume work following the austral summer 
holidays.  The criminal judge for tax-related issues, Javier 
Lopez-Biscayart, has reportedly collected the necessary evidence to 
decide on the indictments of suspects, including the former manager 
of Nacion-Fideicomisos (a public trust established to structure 
private funding of public works projects) Nestor Ulloa, accused of 
submitting false invoices from a shell company, Infinity Group.  The 
local press reports that judicial cross-checks of phone records 
identified 77 phone calls between Ulloa and one of Skanska's 
managers, communications that should not have occurred between the 
trust fund manager and a contract bidder. 
 
¶3. (SBU) The investigation looking into possible kickbacks/bribes is 
not as far advanced and is more politically sensitive.  The 
supervising judge (Guillermo Montenegro) and the lead prosecutor 
(Carlos Stornelli) resigned in late 2007 to accept positions in the 
Buenos Aires city and Buenos Aires provincial governments 
respectively.  Before stepping down, however, Montenegro and 
Stornelli had already questioned several suspects, including Ulloa 
and Fulvio Madaro, the former President of Enargas (the GOA's 
natural gas regulatory authority).  Montenegro set bond at seven 
million pesos (US$ 2.3 million) for both but had not rendered a 
decision on their indictments.  Stornelli had also asked judge 
Montenegro to summon for questioning Secretary of Energy Daniel 
Cameron, Madaro's boss.  Local press reported that Cameron's office 
instructed Madaro to move ahead with the contracts despite having 
been notified by him that estimates from sub-contrators were 
inflated. 
 
¶4. (SBU) It is uncertain, given the political impact that 
indictments are likely to cause, whether federal judge Sergio 
Torres, who is temporarily handling the bribery/kickback case, will 
choose to move the case ahead after the judicial holidays or leave 
it to his successor, whenever a permanent judge is named. 
 
-------------------- 
Political Influence? 
-------------------- 
 
¶5. (SBU) The resignations of both the judge (Montenegro) and 
prosecutor (Stornelli) in the bribery/kickback investigation to 
accept high-profile political positions in the Buenos Aires City and 
Provincial governments prompted some public speculation about 
political interference.  For conspiracy theorists looking for 
Kirchner handiwork in thwarting the investigation, Stornelli's 
appointment as Security Minister in Buenos Aires Province was fairly 
straightforward, given that former Kirchner Vice President Daniel 
Scioli is the new Governor.  Montenegro, on the other hand, was 
appointed City Security Minister by the Kirchners' principal 
political opponent, Mayor Mauricio Macri.  Political pundits 
speculate that Macri made a deal with the Kirchners to appoint 
Montenegro (and thus remove him from the Skanska investigation) in 
return for something.  Employing Occom's razor, however, the more 
likely explanation for Montenegro's appointment lies in his close 
friendship with Macri's deputy, Gabriela Michetti. 
---------------------- 
Case Not a Concern in Sweden? 
---------------------- 
 
¶6. (SBU) In June 2007, the Argentine Anti-Corruption Office 
requested then-judge Montenegro to broaden his investigation and 
seek the Swedish Government's cooperation in facilitating documents 
from Skanska's headquarters.  In parallel, Swedish Anti-Corruption 
prosecutor Christer Van der Kwast asked Montenegro for information 
about the case, which Montenegro provided in early August.  Daily 
paper La Nacion reported on January 18 that Van der Kwast recently 
confirmed that the information provided was not sufficient to 
warrant a separate Swedish investigation, as neither Swedish 
nationals nor Skanska's headquarters appeared to be involved in the 
alleged kickback/bribery scheme.  According to an August 2007 report 
by weekly paper Perfil, former local Skanska financial manager Jose 
Alonso notified Skanska headquarters in 2006 of the irregularities. 
Skanska's reported response was to let Alonso and other local 
managers go, providing them with generous severance packages. 
Alonso and these other managers are implicated in the parallel tax 
evasion investigation. 
 
------------------------------ 
"Corruption Among Individuals" 
------------------------------ 
 
¶7. (SBU) In his last media interview as Argentine President in early 
December 2007, Nestor Kirchner reiterated his government's position 
that the Skanska scandal was an issue of alleged corruption among 
individuals.  Kirchner stated that his rapid dismissal of Madaro and 
Ulloa once the scandal broke in April 2007 was aimed at "preserving 
the State's integrity"" and that the judiciary, through its 
investigations, will determine whether irregularities occurred.  He 
stated, however, that he did not expect the investigation to find 
irregularities. 
 
-------- 
COMMENT 
-------- 
 
¶8. (SBU) The next step in the Skanska investigations is for the 
judges to issue indictments, although more government officials 
could be called in for questioning, something the Casa Rosada would 
prefer to avoid.  Any immediate action following the January 
judicial holidays depends on whether temporary judge Sergio Torres 
decides to move forward aggressively or sit on the bribery/kickback 
case until a permanent judge is assigned.  Judicial contacts report 
that the process to replace Montenegro on the bench has not even 
started.  The regular process involves testing and public vetting 
for qualified candidates, and the Council of Magistrates preparing a 
list of candidates with the best marks in rank order for the 
President's approval.  The Council, while nominally independent, is 
a politicized institution, with the Administration holding sway over 
the majority of its members, thanks largely to controversial changes 
pushed though the legislature in 2006 by then-Senator Fernandez de 
Kirchner.  Corruption-related investigations/trials in Argentina 
tend to drag on until public (media and opposition) attention wanes 
or fixates on the next scandal.  This could very well be the case 
with Skanska. 
 
WAYNE