VZCZCXRO2481
RR RUEHIK
DE RUEHMD #0006/01 0071313
ZNR UUUUU ZZH
R 071313Z JAN 10
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1639
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 4292

UNCLAS SECTION 01 OF 02 MADRID 000006 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EUR/WE 
 
E.O. 12958: N/A 
TAGS: PGOV SP KCOR KCRM KJUS
SUBJECT: SPAIN: MOVING PAST CORRUPTION SCANDALS, POPULAR 
PARTY LEADS IN POLLS 
 
REF: A. 09 MADRID 214 
     ¶B. 09 MADRID 1026 
     ¶C. 09 MADRID 499 
     ¶D. 09 MADRID 553 
     ¶E. 09 BARCELONA 160 
     ¶F. 09 MADRID 97 
 
MADRID 00000006  001.3 OF 002 
 
 
¶1. (SBU) SUMMARY AND COMMENT.  The center-right Popular Party 
(PP), the largest opposition party in the Spanish Congress, 
enters 2010 with a series of polls indicating that - by an 
increasingly large margin - it would oust the incumbent 
Socialists (PSOE) in a hypothetical vote, although the next 
scheduled general election is more than two years away.  The 
polls' findings are welcome news for the PP, which appears to 
have overcome a series of corruption scandals - most notably 
the "Gurtel scandal" investigating 
kickbacks-for-public-contracts - that plagued the party for 
virtually all of 2009, claimed numerous high-profile party 
officials as victims, and tarnished the party at the 
national, regional and municipal levels.  Despite the 
scandals, the PP notched impressive electoral wins in 2009, 
including retaking power in Galicia (Ref A), becoming the de 
facto junior partner in the Basque Region (Refs B and C), and 
besting the Socialists in European Parliamentary elections in 
June (See Ref D).  Fighting as much for his own political 
career as for the party's credibility, PP leader Mariano 
Rajoy spent much of the fall of 2009 undertaking a series of 
anti-corruption initiatives to shore up the party's viability 
as an alternative to President Zapatero's increasingly 
unpopular Socialists.  The PP appears for now to have 
stanched the damage from the various scandals, but thousands 
of pages of court documents have yet to come to light and 
judicial proceedings remain ongoing.  END SUMMARY AND COMMENT. 
 
//Fighting Back with Anti-Corruption Initiatives// 
 
¶2. (SBU) In end-of-the-year reflections, Rajoy publicly 
admitted in December that 2009 was "a very tough year" while 
even friendly, conservative media less charitably described 
2009 as "a nightmare" for the party.  In addition to the 
alleged intra-party espionage scandal between rival factions 
with the PP (see Ref F), the party faced ongoing 
investigations stemming from an initial judicial inquiry - 
known as Operation Gurtel - by Investigating Judge Baltasar 
Garzon of the National Court.  Garzon in February publicly 
unveiled his initial findings into an investigation of 
alleged corruption in the PP national leadership during the 
time of former Spanish President Aznar (1996-2004), as well 
as among high level officials of Autonomous Communities 
governed by the PP (Valencia and Madrid).  The corruption 
network was allegedly led by Francisco Correa, a now-jailed 
businessman who oversaw a network of businesses involved in a 
kickbacks-for-public-contracts scheme to get public funds, 
mostly from city halls and autonomous regions (equivalent to 
U.S. states), in addition to illegally financing the 
PP-Valencia. 
 
¶3. (SBU) Stung by the Gurtel scandal, the PP has undertaken a 
series of efforts to prevent the recurrence of a similar 
crisis.  On December 21 party officials publicly unveiled a 
revised code of ethics that promotes greater transparency in 
internal party contracts and audits, mandates competitive 
bidding in party-awarded contracts, and prohibits party 
officials from being able to accept expensive gifts or 
favors.  Former Minister Jose Manuel Romay Beccaria will 
oversee the implementation of these changes as the party's 
new Internal Practices Auditor, a newly created position. 
Finally, party officials will be forced to sign a legal 
document in which they promise to conduct their work with 
"integrity and transparency."  In addition, press reports in 
November also indicated that the PP and the PSOE - which in 
October was stung by its own corruption scandal in Catalonia, 
where it leads a tripartite regional government - have found 
common ground to propose legal reforms to change the penal 
code and the Party Finance Law to curb kickbacks-for-favors 
scandals. 
 
//Recent Polls Are Encouraging for the PP// 
 
¶4. (SBU) Polling since mid-2009 has been encouraging for the 
PP, although the next general election is not scheduled to 
take place before early 2012 and it is not assured that the 
PP's good fortunes will continue at expense of the PSOE, 
which is under fire for its handling of the economic crisis, 
among other setbacks.  The March 2008 general election gave 
the PP 39.7 percent of the vote and 154 seats in the 350-seat 
Congress of Deputies, while the 43.6 percent of the vote that 
Zapatero's PSOE received enabled it to form a minority 
 
MADRID 00000006  002.3 OF 002 
 
 
government with 169 seats, seven shy of a majority.  A series 
of polls conducted during November and December all suggest 
that the PP has between 1.5 - 5.5 percent more support among 
respondents than the PSOE.  Polling experts have extrapolated 
that this data could translate into as many as 165-170 seats 
for the PP in a hypothetical vote, enough to give the PP a 
plurality in Congress.  Recent polls further suggest that - 
through increased voter abstention and by losing support to 
smaller leftist parties - the PSOE could be left with just 
145-150 seats.  The next scheduled key election will be held 
in late 2010 in Catalonia, where the PP has not traditionally 
fared well. (See Ref E). 
 
//Background on the Gurtel Scandal and Its Key Victims// 
 
¶5. (U) More than 100 people have been indicted thus far in 
the Gurtel scandal, which has left in its wake numerous 
high-profile PP victims, who were either fired or forced to 
resign.  Among those indicted, charges have included 
illegally financing the PP, money laundering, tax fraud, 
influence-peddling, forgery of public documents, and 
prevarication or abuse of trust.  Foremost among these 
victims were the national party's treasurer (who is also a 
Senator), the party's number-two official in Valencia, a 
member of the European Parliament, a regional minister, four 
mayors and other senior party officials, most often in the 
PP-led regional governments of Madrid and Valencia, 
traditional strongholds for the party.  The scandals also may 
have caused permanent damage to Francisco Camps, the 
President of the Autonomous Community of Valencia and a 
one-time rising star whom many predicted could have even been 
an eventual future contender for party leader.  A brief 
outline of some of the key Gurtel victims follows. 
 
¶6. (U) Luis Barcenas, a PP Senator who oversaw the party's 
finances for 20 years, professes his innocence but resigned 
his post as party treasurer in July 2009, claiming that he 
wanted to "save the reputation of the Party."  Publicly 
available investigative documents allege that he received 
millions of euros in kickbacks from companies linked to 
Correa, the businessman at the heart of the scandal, in 
exchange for assurances that Correa's companies would win 
contracts from the Ministry of Public Works during the Aznar 
administration.  Barcenas was forced to resign after he was 
accused by Garzon of illicit association, money laundering, 
and a crime against the Public Administration for allegedly 
having facilitated the illicit activities of Correa.  Because 
Barcenas remains a Senator, the Supreme Court will 
investigate his case. 
 
¶7. (U) Judge Garzon initially investigated Francisco Camps, 
President of the Autonomous Community of Valencia, for having 
awarded public work to some Correa's companies in exchange 
for such gifts as expensive, tailor-made clothing.  Garzon 
alleged that Correa paid for the suits that Camps bought in a 
shop in Madrid and accused other leaders of the PP-Valencia 
of being complicit in the activity.  Garzon had to transfer 
the case to the High Court of Justice of Valencia because the 
people he was charging were members of an Autonomous 
Parliament.  In early August 2009, the High Court of Justice 
of Valencia shelved the case after ruling that accepting 
gifts was not "passive bribery" if the recipient was not 
directly responsible for awarding contracts.  The Office of 
the Prosecutor announced that it will appeal the sentence - 
which Spain's flagship daily criticized as "a dangerous 
precedent" - to the Supreme Court.  By late September, the 
media published excerpts of a police report that outlined how 
the corruption network allegedly worked within the Autonomous 
Community of Valencia, explaining the double accounting of 
the companies involved, and how everything was agreed on 
between the then Secretary General of the PP-Valencia and 
with the Vice President of the Autonomous Community.  The 
report concluded that dirty money was deposited in PP's 
vaults to illegally finance the Party.  Days later, the media 
reported the police had intercepted phone conversations in 
which a senior official in the PP's Valencia branch allegedly 
stated that Camps was aware of the shady transactions. 
DUNCAN