Cablegate: Former Justice Secretary Perez Faces Graft,

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O 120735Z JAN 07
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SENSITIVE
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E.O. 12958: N/A
TAGS: PGOV KCRM KCOR RP
SUBJECT: FORMER JUSTICE SECRETARY PEREZ FACES GRAFT,
EXTORTION CHARGES

1. (U) The Ombudsman, a body charged with investigating and
prosecuting corruption by government officials, on January 8
filed graft, extortion, and falsification charges before the
Sandiganbayan anti-graft court against ex-Justice Secretary
Hernando Perez, a former aide of President Arroyo and
secretary general of the ruling party Lakas. The charges

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stem from a $2 million extortion complaint lodged in 2002 by
former Manila Representative Mark Jimenez in connection with
a government contract for a hydroelectric plant awarded to
Industrias Metalurgicas Pescarmona Sociedad Anonima (IMPSA)
in 2001.

2. (U) As Justice Secretary, Perez issued a legal opinion in
February 2001 that paved the way for IMPSA's $470 million
contract to rehabilitate and operate a power plant in Laguna
Province, just south of Manila. Jimenez, who served as
ex-President Estrada's adviser, alleges that he deposited $2
million in a Hong Kong bank account belonging to Ernest
Escaler, Perez's business associate, that same month. The
payoff was intended to ease pressure on Jimenez to testify
against Estrada, who was charged with plunder and perjury by
the Arroyo administration immediately after his ouster. The
$2 million ended up in the Swiss accounts of Perez's wife and
brother-in-law. Perez was forced to resign in 2003 amid
Jimenez's allegations.

3. (U) The Ombudsman claims it found enough evidence to file
charges, including the paper trail of bank transactions from
Hong Kong to Geneva. Perez and his co-conspirators failed to
establish that the money came from inheritance or the sale of
real estate property, as they had alleged.

4. (U) Ombudsman Merceditas Gutierrez, an Arroyo appointee
who previously served as one of Perez's undersecretaries at
the Justice Department, publicly vowed to follow the trail of
corruption even if it leads to Malacanang. Jimenez, back in
Manila after serving a two-year jail sentence in the United
States for illegal campaign contributions and tax fraud,
called the Ombudsman's decision to file charges against Perez
a "vindication" for him and his family, while publicly
asserting that President Arroyo was not implicated in the
case.

5. (U) Executive Secretary Eduardo Ermita, a long-time Perez
associate and Lakas party leader, assured Perez that he had
the Lakas party's full legal and moral support and
newly-resigned presidential chief of staff Michael Defensor
called the development an opportunity for Perez to defend
himself against the long-standing accusation. Presidential
political adviser Gabriel Claudio stressed that Malacanang
would not interfere in the case.

COMMENT
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6. (SBU) When Gutierrez was appointed Ombudsman in 2005
after serving as President Arroyo's chief legal adviser, she
was criticized as being too close to the Administration to be
effective. While the current charges may yet amount to
little in the long term -- the judicial process in the
Philippines moves at glacial pace -- Gutierrez showed resolve
in filing the case. It is difficult to predict whether the
case will hurt the Administration, given Perez's ties to
President Arroyo, or the opposition, given Jimenez's ties to
ex-President and key opposition figure Joseph Estrada, in the
May midterm elections.

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