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Compromising Tapes

Compromising
    Tapes

It is still not clear who is behind the mud-throwing effort. The
President seems to believe that former President Fernando Collor de Mello has something to
do with it. Collor, naturally, has denied any involvement.
By Émerson Luís

In a moment when Brazil has just reached an agreement with the International Monetary
Fund for a $41.5 rescue loan and looks to the international community for a renewed vote
of confidence, two bombs that can wreck these efforts have exploded in the capital city of
Brasília. Both could seriously compromise the second mandate of Fernando Henrique Cardoso
who was reelected to the presidency in October.

The first bomb by all accounts is a collection of crude and fraudulent faxes used in an
attempt to incriminate the President and his close allies. The documents show that since
1994, Cardoso and three friends have maintained a secret bank account in the Cayman
Islands with a balance of $368 million. The money was deposited into the checking account
of a company named CH, J & T Inc, whose initials conveniently correspond to the names
of their alleged owners. So, the C would be for Covas (Mário Covas, governor of São
Paulo), the H for Henrique (Fernando Henrique Cardoso), the J for Health Minister José
Serra, and the T for Ray Terrence, a purported American proxy for Serra.

As baseless as it might be, the ploy was able to place the government on the defensive.
And any small irregularity that might be discovered with all the attention of the media
and foes focused on the rumors would be a victory for those who forged the documents.
Daily Folha de São Paulo found out for example that there is a CH, J & T
company in the Bahamas. But this and other discoveries couldn’t prove anything against
Cardoso.

It is still not clear who is behind the mud-throwing effort. The President seems to
believe that former President Fernando Collor de Mello, who resigned in 1992 to prevent an
imminent impeachment by Congress on corruption charges, has something to do with it.
Cardoso called those responsible for the intrigue "farceurs and forgers" and
went on: "It is necessary to express to the nation the indignation I feel at seeing
people with no credibility whatsoever returning again to the public scene with
insinuations." Collor, naturally, has denied any involvement and vowed to sue Cardoso
for libel.

Hot Tapes

The second bomb involved the illegal tapping of phone conversations between top aides
of the Cardoso administration. The recordings revealed candid talks in which
Communications Minister Luiz Carlos Mendonça de Barros, who was being groomed to take the
newly created post of Production Minister, and André Lara Resende, president of the
government’s National Bank of Economic and Social Development, discussed how to help Banco
Opportunity win a bid at a phone privatization auction. In July, Telebrás, the state
telephone holding company, offered 12 firms to the highest bidder, a $19 billion deal.
Banco Opportunity’s senior officers are friends of Barros and Resende. Ironically,
however, the consortium led by the private bank dropped out of the bidding.

On November 23, two weeks after the tapes were first leaked to the press, four top
officials resigned including the Minister and the development bank president. Foreign
Trade Secretary José Roberto Mendonça de Barros, brother of the Communications Minister
also stepped down "in solidarity". Later that same day, the vice president of
the development bank, Pio Borges, presented his resignation too.

Speaking before Congress, Mendonça de Barros argued that the tapes had been doctored
to make him look bad and that all he did was to help to raise the price of the bidding.
His reasoning wasn’t convincing, however, even though there were voices in the government
urging him to stay to send a message to those who made the secret taping: illegal
tampering will not be rewarded. But soon, the minister became too hot an issue for the
government to handle.

Sérgio Amaral, the President’s spokesman, called the dossier against Fernando Henrique
a forgery and let it be known that it’s an unthinkable and ludicrous idea that Cardoso
might have money hidden in some fiscal paradise. "Of course the President does not
own any companies abroad," said Amaral at a news conference. "The only assets he
has overseas are two bank accounts in New York City with a total of about $23,000."
He uses these accounts to collect foreign royalties for books he wrote and has declared
them in his taxes.

Those who had access to some 400 pages of documents found out that CH, J & T, the
President’s alleged company, was controlled by a second one called Trident Corporate
Services. The papers also show a heavy traffic of money from Swiss banks to the Caribbean
Islands. These are documents signed by all the main characters involved including the
President. The majority of the papers are in English, but clearly written by someone for
whom English is not their first language.

News about the dossier started to circulate in September, the month before the
presidential election that would reelect Cardoso. Three presidential candidates were
offered the documents for a price that started at $4 million. Some even considered buying
it, but in the end all declined convinced that the papers weren’t reliable enough. Health
Minister José Serra, one of the partners in the alleged scheme received some pages of the
document by fax and he was the one who had the initiative to divulge the material hoping
that by doing so the allegations would evaporate as totally ludicrous. The move, however,
ended up giving some legitimacy to documents that some publications already had, but were
afraid do divulge.

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