This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS BRASILIA 003216 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON BR
SUBJECT:  BRAZIL CORRUPTION SCANDAL UPDATE, WEEK OF 05-09 
DECEMBER 2005 
 
REF.: BRASILIA 03150 AND PREVIOUS 
 
¶1. SUMMARY. This was a quiet week in investigations of the scandals in the GOB and PT party (refs). Congressional investigation committees (CPIs) probed allegations of irregular payments by the PT to a textile firm owned by Vice President Alencar, but did not link these charges to the broad financial and bribery conspiracy at the core of the past several months' scandals. A CPI also heard a witness who claimed she had informed President Lula da Silva of municipal corruption related to the PT in the city of Santo Andre, Sao Paulo, where PT mayor Celso Daniel was murdered in 2002. End introduction. 

PT USES UNACCOUNTED FUNDS TO PAY VICE-PRESIDENT'S COMPANY --------------------------------------------- ------------ 

¶2. On December 4, leading newspaper Folha de Sao Paulo announced the detection of a payment in the amount of one million reais (approximately 450 thousand dollars) made by the Worker's Party (PT) to Coteminas, a textile industry owned by Vice President Jose Alencar. The May 2005 payment was not accounted for in the party's records, but the bank where the deposit was made informed the Ministry of Finance in August. According to the former PT treasurer, Delubio Soares, the sum was given -- in cash -- to Coteminas as a payment for T-shirts sold by the textile company to the party during the 2004 municipal campaign. Soares also confirmed that the payment was made with PT private sector moneyman Marcos Valerio's funds and that the party owes another 11 million reais (5.4 million dollars) to the company. Alencar, whose son took over the presidency of Coteminas after his resignation, said that the company recorded the payments in its accounting books and, therefore, did not do anything illegal. Alencar added that there was no reason to question the origin of the money at the time. Ricardo Berzoini, current PT president, and Paulo Ferreira, PT treasurer, released a statement on December 5 saying that the "supposed payment" was not accounted for by the PT, and blamed Delubio Soares and the former PT directorate. 

¶3. (U) Members of the Postal Service CPI said that the episode is further evidence of the use of unaccounted campaign funds by the Worker's Party, but they do not believe it is part of the broader illicit financing and bribery scheme facilitated by Marcos Valerio, given the date of the payment. Investigations conducted by the CPI point to the fact that, by May 2005, the scheme already had a deficit of 3 million reais (1.3 million dollars). Valerio denied knowledge of the payment and said that the last money transfer he made for the PT was in October 2004, before the payment to Coteminas was made. The CPI requested assistance from the Federal Police to investigate the case. 

MURDERED MAYOR CASE: PRESIDENT LULA AWARE OF BRIBES SCHEME --------------------------------------------- ------------- 

¶4. (U) On December 6, in a testimony before the CPI on bingo games and municipal corruption, Mara Gabrilli, daughter of Santo Andre, Sao Paulo transportation company owner Luiz Alberto Gabrilli, stated that she met with President Lula in March 2003 to request federal intervention in Santo Andre to bring to an end the corruption scheme in the municipality. According to Gabrilli, she told the president about the scheme and said that it was still in place, even after PT Mayor Celso Daniel's assassination. She said that the President promised to take the necessary measures to curb corruption and to punish those involved, but asked her not to mention the subject to the press and changed the subject. Gabrilli's statements reinforce previous testimonies heard by the CPI in which owners of transportation companies in Santo Andre affirmed that a scheme to collect kickbacks for PT slush funds was in place in the municipality, and that Daniel's assassination was connected to the scheme. The Presidency did comment on the testimony. 

LINEHAN