Cablegate: Spain: Moving Past Corruption Scandals, Popular

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

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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

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