VENEZUELAN CORRUPTION CRACKDOWN: A DAY LATE, A DOLLAR SHORT

Identifier: 
06CARACAS514

C O N F I D E N T I A L SECTION 01 OF 05 CARACAS 000514

SIPDIS

SIPDIS

HQSOUTHCOM ALSO FOR POLAD
FOR FRC LAMBERT

E.O. 12958: DECL: 01/21/2026
TAGS: PGOV, KCRM, VE
SUBJECT: VENEZUELAN CORRUPTION CRACKDOWN: A DAY LATE, A
DOLLAR SHORT

REF: A. A: 05 CARACAS 03230

B. B: 05 CARACAS 00636
C. C: 05 CARACAS 01522
D. D: CARACAS 00078

Classified By: POLITICAL COUNSELOR ROBERT R. DOWNES FOR 1.4 (D)

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Summary
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1. (C) Venezuelan President Hugo Chavez is making
corruption a campaign issue, according to Presidential
speeches and MVR strategy documents. National Assembly
deputies have prioritized the passage of at least five laws
dealing with corruption. The Venezuelan Government, however,
has a poor record of enforcing anticorruption laws already on
the books. In addition to its legislative agenda, the
government appears to be taking some concrete actions to show
it is serious about corruption, including the investigation
of an army regiment for the possible embezzlement of USD 1.2
million. Meanwhile, new scandals continue to come to light.
With over seven years in office, Chavez is being forced to
admit that some corrupt officials make up his administration.
The Venezuelan Government's eleventh-hour fight against
corruption is unlikely to pay any political or social
dividends, but Chavez' opponents are not exploiting his
failures. End Summary.

2. (U) As he did in 1998, Venezuelan President Hugo Chavez
is making corruption a campaign issue. In a typically
melodramatic outburst, Chavez told listeners to his 15
January "Alo Presidente" program that he would order the
execution of corrupt soldiers if he could. The rest of his
administration has taken his cue. The MVR's national
tactical command listed "fight against the corrupt" among its
13 campaign themes. Interior Minister Jesse Chacon counted a
plan to attack corruption among seven projects his office had
planned for 2006.

3. (SBU) Several National Assembly deputies have said the
fight against corruption would be a legislative priority in
the upcoming year. National Assembly president Nicolas
Maduro said in late December that the new legislature would
champion the crusade against corruption, mentioning the need
to integrate the parliament with the people to fight the
problem effectively. Of the 51 bills the chamber says it
will pass, five deal with corruption: the organic penal law
against corruption, a reform of the bidding law, the
parliamentary ethics and discipline code, the social
comptroller special law, and a reform of the law regulating
public officials' appearance before the legislature.
Further, National Assembly comptroller committee chairman
Pedro Carreno during a press interview called for legislation
to make state and municipal comptroller boards independent
from their governments. While they talked about the evils of
corruption, deputies appeared to be jockeying for positions
that offered opportunities for kickbacks. According to press
reports, 80 percent of the incoming National Assembly
deputies said they wanted a seat on the body's finance
committee.

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National Police Law

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4. (U) The national police corps law, which is on the 2006
agenda of the National Assembly's interior policy committee,
purports in part to reform Venezuela's corrupt law
enforcement system. Interior Minister Chacon called in late
January for a centralized force that reduces political
nominations of personnel to a minimum and avoids "police
recycling," which may refer to the reenlistment of corrupt or
incompetent cops. He condemned what he termed the failed
police decentralization of previous administrations.

5. (C) The draft text, however, does not mention
corruption. As it stands, the bill mainly deals with
re-centralization. It would eliminate some federal and local
police forces in addition to establishing a new national
police corps and centralized "coordination" bodies to oversee
state and local forces. Although its phrasing can be
ambiguous, the bill contains provisions that raise human
rights concerns. For example, the bill excuses police
offenses committed in the "protection of police service and
public order" and during a "state of necessity." It also
gives the national police force the authority to manage
secret "crime" and "security" information to be shared only

SIPDIS
with prosecutors and judges. It does not grant defense
attorneys access to the information.

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No One Follows the Laws Anyway
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6. (C) Laws will not make Venezuelan public officials more
honest without a culture committed to eradicating the scourge
of corruption. For example, the current anticorruption law
makes punishable the use of a public office to support
political candidates by one to three years in prison.
Nonetheless, the Chavez' administration continues to make
extensive use of public funds to promote the campaigns of the
president and his supporters. Comptroller General
Clodosbaldo Russian called for a purge of the judicial
system, which he blamed for impeding punishments handed down
by his office against corrupt officials. Ramon Medina,
former director of common crimes in the Attorney General's
office, told poloff in late October 2005 that institutions
charged with enforcing the organized crime law--which also
deals with crimes of corruption--were the same ones who
committed the offenses the law outlawed. He argued,
moreover, that prosecutors and police were too ineffective to
enforce the law properly. Police in Venezuela, he added,
considered their work finished once stolen items were
returned.

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We Really Are Battling Corruption
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7. (C) In addition to sponsoring legislation, the
government appears to be trying to show it is taking its
campaign pledge seriously:

-- A military investigation has revealed that the 62nd Army
Regiment, commanded by Gen. Delfin Gomez Parra, "lost" about
USD 1.2 million as it carried out work projects on a sugar
mill near Chavez' home village of Sabaneta, Barinas. The

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military sent the case to the Attorney General's office on
January 20, adding that its investigation revealed bribery,
nepotism, and backlogs in accounting. Federal police faulted
state development bank Banfoandes, saying the bank could have
detected the counterfeiting of two checks for a total of over
USD 160,000, according to late February press reports.

-- Making good on Maduro's promise to take the parliament to
the people, National Assembly deputy Belkys Solis on January
26, 2006 called everyone participating in BRV social missions
in her home state of Bolivar to bring any complaint,
recommendation, or question they had about the programs to
the legislature, according to a pro-Chavez website. She
pledged that all complaints related to the Mercal subsidized
grocery store program (see REF A for a description of Mercal
corruption) in Bolivar would be investigated.

-- Outgoing Food Minister Rafael Oropeza said the Attorney
General's office was dealing with over 100 cases of presumed
corruption in Mercal. The cases appear to be languishing,
however, as Oropeza noted that many of them dated back to
2003, according to press reports.

-- Comptroller General Russian publicly claimed in December
2005 that no other comptroller had talked more about
corruption than he, adding that the government had punished
both BRV and opposition officials. He refused to name names,
however, noting that all the corruption cases were published
in the BRV's official gazette. Russian is also not above
targeting officials for political reasons. For instance, he
suspended the mayor of Caracas' Chacao municipality, Leopoldo
Lopez (Primero Justicia), from political activity for six
years after he leaves office in 2008 because Lopez' office
paid local officials' salaries with money earmarked for a
federal fund.

-- Official media reports claimed the Attorney General's
Office had confiscated 1.5 billion bolivars (nearly USD
700,000 at the official exchange rate) relating to 674 cases
of "illicit enrichment and crimes against public business" in
2005. According to the report, the seizures result from the
investigation of 31 percent more cases than in 2004.

-- The Supreme Court's enforcer, Justice Luis Velazquez
Alvaray (Note: see SEPTEL list of allegedly corrupt
officials and REFS B and C) said anticorruption tribunals
would begin working in the first trimester of 2005. He asked
the Attorney General to prosecute those court officials
accused of corruption. Velazquez Alvaray appeared focused on
administrative embezzlement; he did not mention any cases of
bribes taken to subvert the legal process, according to press
reports.

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Scandals Old and New
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8. (C) In the tradition of our previous reporting (REF A),
we provide below updates on corruption rumors we have
received.

-- Retired National Guard Gen. Regulo Diaz, who served as
comptroller of the Venezuelan Armed Forces, said he brought
evidence implicating 10 officials in corruption to Chavez'

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attention, including cases against former Interior Minister
and Defense Minister (ret.) Gen Lucas Rincon, commander of
the army Gen. Raul Baduel, and Social Development Minister
(ret.) Gen. Jorge Luis Garcia Carneiro. Diaz said Chavez had
told him to leave the reports for him to deal with later.
Diaz said he sent the cases to the Attorney General and the
Comptroller in 2002, but nothing was ever done.

-- Opposition websites and tabloids have alleged corruption
involving BRV officials and Smartmatic, the firm that
provides Venezuelan voting machines. One tabloid claimed
Smartmatic paid a USD six million bribe to an unnamed
official close to Luis Miquilena, the former Chavez mentor
and Interior Minister who was charged in 2002 with
mishandling funds donated by Spain's Banco Bilbao Viscaya
(BBV) to Chavez' 1999 campaign. (Note: Post has a copy of a
Spanish court order seeking the arrest of several BBV
executives for irregular money movements, including the USD
1.5 million allegedly donated to Chavez in 1999.) Opposition
members later accused National Electoral Council president
Jorge Rodriguez of benefiting from a stay and a USD 280
massage at a luxury resort in Boca Raton paid for by
Smartmatic, and they produced a copy of his bill. Rodriguez
responded that he had reimbursed Smartmatic for the expense.

-- According to the Financial Times, most of the USD 600
million in Argentine bonds the BRV sold in December 2005 went
directly--instead of in an auction--to two Venezuelan banks.
The banks benefited by purchasing at the official exchange
rate of 2,150 bolivars to the dollar and selling at the
parallel rate of about 2,600 bolivars.

-- An law enforcement officer at the Italian Embassy in
Caracas told poloff that Venezuela's Department of
Immigration and Identification (ONIDEX) had shut down its
comptroller's office in mid- to late-2005, effectively
eliminating oversight of the corrupt institution. (See REF A
for a description of ONIDEX corruption.)

-- A labor leader for aluminum parastatal CVG Alum denounced
his company for covering up possible evidence of corruption.
He noted "administrative errors" that resulted in a fine by
tax collection agency Seniat and the company's accumulation
of approximately USD 56 million in losses despite record
production levels and high aluminum prices during 2004-05.

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Comment
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9. (C) Since everyone knows corruption remains a problem in
Venezuela, the BRV must act, or at least appear to act.
Chavez became president in part because he campaigned against
corruption. As incumbent, he cannot exploit the issue again
without having something to show for it. Having been in
power for seven years, members of Chavez' administration make
up most of those accused of wrongdoing. Chavez himself
admits that some corrupt officials have tainted his
revolution. Yet, the actions he has taken to date are
neither significant enough to make a difference nor timely
enough to convince the public that corruption really has been
the President's priority. According to Keller and
Associates' fourth quarter poll, a plularity (45 percent) of
the population believes corruption has gotten worse. If

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opposition leaders were smart, they would question why the
government has taken over seven years to begin fighting
corruption. But they are not. Chavez, meanwhile, retains
his image of inculpability.

10. (C) The National Assembly may be opening a can of worms
by asking the people to bring their complaints. The rookie
legislature could generate discontent when it becomes clear
it is unequipped to handle each individual request. The
corrupt Chavez administration, meanwhile, may create even
more problems as it hunts down its own personnel. Witch
hunts risk disrupting internal morale, as they already may be
doing in the military (REF D).
WHITAKER