VZCZCXRO7877
RR RUEHLA
DE RUEHMD #0097/01 0291138
ZNY CCCCC ZZH
R 291138Z JAN 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 0132
INFO RUEHLA/AMCONSUL BARCELONA 3774

C O N F I D E N T I A L SECTION 01 OF 02 MADRID 000097

SIPDIS

PASS TO ELAINE SAMSON AND STACIE ZERDECKI OF EUR/WE

E.O. 12958: DECL: 01/28/2019
TAGS: PGOV PREL SP
SUBJECT: SPAIN: ALLEGED SPYING SCANDAL HIGHLIGHTS
FRACTURES WITHIN MAIN OPPOSITION PARTY

REF: A. 08 MADRID 785
¶B. 08 MADRID 691
¶C. 08 MADRID 537

Classified By: ADCM William H. Duncan for reasons 1.4 (b) and (d).

¶1. (SBU) SUMMARY: Allegations and counter-allegations of a
spying scandal within the center-right Popular Party (PP)
highlight the party's rivalries. Reports surfaced on January
19 that the PP-led Madrid regional government's (analogous to
a U.S. state) minister of justice and internal affairs,
Francisco Granados, created a spy ring - allegedly financed
by public funds and managed from official offices - to keep
tabs on rival politicians within the PP itself. Photographic
evidence of the surveillance has been made public, so there
is a growing acceptance that these individuals were indeed
monitored, but it is unclear by whom and for what purpose.
Granados denies all the charges. Madrid Regional President
Esperanza Aguirre, who holds a post equivalent to a U.S.
Governor and is a leading force at the national level in the
conservative wing of the Popular Party, has not been
implicated in the scandal. However, several targets of the
alleged espionage, such as Madrid Deputy Mayor Manuel Cobo,
are allied to City of Madrid Mayor Alberto Ruiz-Gallardon,
who represents the PP,s moderate wing and is often
identified as Aguirre's chief rival for eventual leadership
of the party if current leader Mariano Rajoy steps down.
Aguirre has counterattacked with allegations that it is the
PP itself and Madrid,s City Hall that have been keeping
secret files on PP officials. The allegations have surfaced
as regional and European elections loom on the horizon and
have damaged the PP's attempts to present a united front
following a prolonged and divisive debate last year about
Rajoy's leadership.

//THE ALLEGATIONS//

¶2. (U) Leading news daily El Pais (left of center) broke the
story on January 19. Marcos Pena, a former police inspector
who had been hired by Granados as a security consultant, told
the newspaper that he and a team of former Civil Guards ran
investigations on individuals and that he prepared
confidential reports for Granados alone. Among the growing
list of alleged targets were Madrid Deputy Mayor Manuel Cobo,
Madrid Regional Government Vice President Ignacio Gonzalez,
and Alfredo Prada, former Madrid Regional Government Minister
of Justice. Pena reportedly created detailed dossiers on
each of these figures after having monitored their activities
at work, outside the office, and even on trips abroad. Upon
further investigation, El Pais says it encountered espionage
data within Granados' office that pre-dates Pena's employment
there, but also has reported that a civil servants, union is
attacking Granados, claims that his office did not engage in
espionage by publicly alleging that those among them who
refused to cooperate in actions they perceived "verged on the
illegal" and were "harassed and ridiculed" by outside
"security consultants" that Granados hired. Photographic
evidence of the surveillance has been made public, so there
is a growing acceptance that these individuals were indeed
monitored, but it is unclear by whom and for what purpose.
According to the media, initial reports showed that the
espionage was directed against key rivals of Aguirre who
would have been likely to side with Rajoy. The spying
appeared to be primarily aimed at determining who was
conniving within the PP in the capital at a time of great
upheaval in the party. Granados denies all the charges and
says his office operates within the law.

¶3. (C) It is unclear what Aguirre knew or when she knew it;
she at first disputed the veracity of the allegations,
defended her subordinates, and called for anyone with
knowledge of the facts to make it known to the proper
authorities. In the second week of the scandal, however, she
has come out fighting. She claims that she is a victim of a
smear campaign by PP headquarters, which she says is after
her politically. Spanish media reports suggest that PP
headquarters has its own 69-page report - whose scanned index
has been published - on the assets, friends, family and
public decisions of her deputy, Gonzalez. Aguirre also has
made counter-allegations, declaring that in 2006 Gonzalez
discussed with Rajoy the existence of "secret" PP files on
Gonzalez and Granados, which prompted Rajoy to phone Aguirre
about the issue, which Aguirre admits later amounted to
nothing compromising. The PP's former treasurer, Alvaro
Lapuerta also has come forward, telling the press he informed
Rajoy in March 2008 of his suspicions that he was being
followed. However, some press reports suggest it was
Lapuerta who assembled the 2006 files on Gonzalez and
Granados. Finally, Aguirre has alleged that it is City Hall,
led by Mayor Ruiz-Gallardon, rather than the regional office

MADRID 00000097 002 OF 002


which employs a parapolice espionage unit.

//THE POLITICAL BACKDROP - JOCKEYING FOR POWER WITHIN THE PP//

¶4. (C) Before the March 2008 general election, Aguirre
maneuvered successfully to keep her arch-rival, Madrid Mayor
Ruiz-Gallardon, off the PP,s congressional lists, and
following the defeat of PP leader Mariano Rajoy in the
general election, she tried to unseat Rajoy. She abandoned
that attempt when it became clear she did not have sufficient
support within the party. Media reports suggest the
espionage began in March 2008, shortly after the general
election (i.e., when Aguirre was mounting her coup against
Rajoy). Regarding the spy scandal, Ruiz-Gallardon has said
it appears that the regional government is employing an
illegal para-police organization with espionage powers and
has called for an investigation to clear up the matter.

¶5. (C) Rajoy has promised an internal PP investigation of the
spying incident and has asked two trusted PP deputies to lead
the inquiry. Despite being a two-time loser in Presidential
politics and unrest in his own party, Rajoy won re-election
as party leader last year. He thereafter pushed aside a
number of party figures associated with former President Jose
Maria Aznar and moved new figures, several of them female,
into prominent positions in the party. The next scheduled
opportunity to challenge him for the leadership will be at
the PP convention in 2011 (the next general election is
expected in 2012). Despite his post-general election moves
to solidify his leadership, grumbling within the party about
Rajoy has not stopped. Many say he has failed to take
sufficient advantage of Zapatero,s vulnerability on the weak
economy. The Galician and Basque regional elections on March
1 and the European parliamentary elections on June 7 could be
key tests for Rajoy. In anticipation, Rajoy, has said
publicly he will not interpret a PP loss in any of those
elections as an indication of lack of public support him.

//LOOKING AHEAD - INVESTIGATIONS LIKELY TO UNCOVER MORE
DETAILS//

¶6. (U) A slew of investigations have begun to attempt to
uncover what really has been going on. In addition to the
internal PP investigation mentioned above, Madrid Deputy
Mayor Cobo filed a lawsuit on January 21 to get to the bottom
of the scandal; public prosecutors began their inquiry the
next day. Their first witness was the El Pais journalist who
broke the story; the newspaper already has provided the files
it has on the subject. Meanwhile, Investigating Judge Jose
Sierra opened a case on January 26 to investigate the alleged
espionage against Gonzalez while overseas, which Sierra has
stated could be a violation of article 197 of the Penal Code
and could result in a prison sentence of one to four years
for anyone convicted of having carried out the surveillance.
Granados is scheduled to appear in the Madrid regional
Assembly on January 30 to clarify the facts.

¶7. (C) COMMENT: This spy scandal has erupted into a near
free-for-all of allegations and counter-allegations of
espionage, at least some of which appears to have been
actually carried out, although by whom, on whose orders and
for what purposes all remain to be revealed. It also remains
unknown who is behind the constant source of leaks to the
press on the issue. This scandal, which will no doubt drag
on for a long time, could become a serious liability for
Esperanza Aguirre, a hyper-ambitious politician who sees
herself as a future President of the Spanish Government. To
the extent that Aguirre is damaged, Ruiz-Gallardon,s star
may rise. Ruiz-Gallardon generally gets high marks as Mayor
of Madrid. He is charming, sharp-witted, and has a
reputation for honesty. An unknown is his vote-getting
ability outside Madrid. During the Ambassador's farewell
call with the Spanish President on January 16, Zapatero
opined that Ruiz-Gallardon was the only member of the PP who
could become President of Spain. As for Rajoy, while he may
enjoy Aguirre,s discomfort, the scandal could add to the
impression that the PP under his leadership is more concerned
with its internal rivalries than with the problems of
ordinary Spaniards. The only clear winner at the moment
would seem to be Zapatero and the PSOE who not only benefit
from the spectacle of PP fratricide but probably welcome the
distraction from all the economic bad news on their watch.
CHACON