Peruvian state prosecutor recommends shelving case against Montesinos

LIMA, Peru (Reuters) -- Disgraced Peruvian spy chief Vladimiro Montesinos, the man at the center of a corruption scandal that has prompted new elections, cleared a new hurdle on Tuesday in his bid to avoid facing justice at home.

The state prosecutor investigating corruption charges against Montesinos, who fled to Panama on Saturday where he has requested asylum, said on Tuesday she had recommended shelving the case -- a move sure to inflame the opposition.

The spymaster who ran Peru's notorious intelligence service (SIN) sparked a political crisis earlier this month when a video was aired on television showing him paying an opposition lawmaker $15,000 in an apparent bribe to switch sides.

RESOURCES Alberto Fujimori pictoral timeline: a decade in power   MESSAGE BOARD Peru in transition     ALSO Peru legislators lobby Panama to deny Montesinos asylum Fujimori loses majority in Congress

President Alberto Fujimori responded by announcing he would call new elections in which he would not run. He also said he would deactivate the SIN.

"According to my criteria and due to the evidence presented, I have decided to shelve the case," Nina Rodriguez told Reuters. Her superior will have to review the decision and either uphold it or order Rodriguez to investigate further.

Even though Rodriguez's ruling is not final, it was a encouraging sign for Montesinos, whom diplomats say has powerful friends in the judiciary.

Although officially a Fujimori adviser, Montesinos was widely considered the power behind the presidency and was accused of corruption, wiretapping and ordering torture.

The scandal sparked fears that pro-Montesinos military leaders would stage a coup, but the armed forces last week gave their backing to Fujimori, calming the tensions.

Talks resume amid sharp criticism

Rodriguez's decision came shortly before the government and opposition parties headed into a new round of talks brokered by the Organization of American States (OAS) to discuss the transition to elections the government expects in March.

Main opposition leader Alejandro Toledo blasted the decision. "It seems absolutely counterproductive for the talks that are underway to resolve this crisis," he told reporters.

"Peru's in deep crisis. We should not throw more wood on the fire," he added.

The government was already facing escalating criticism from the opposition and human rights groups after it helped Montesinos flee to Panama and then lavishly praised him in a resolution in which it accepted his resignation. The government agreed to rewrite the resolution for Tuesday's talks.

In the original document published on Monday, Fujimori, his prime minister and justice minister thanked Montesinos for his work fighting guerrillas and drug traffickers and for securing peace with Ecuador. But they made no mention of the scandal.

Montesinos is waiting for an answer from the Panamanian government after entering the country on a tourist visa. Panama had initially denied asylum, but the United States and OAS stepped up pressure to accept Montesinos, saying he could spark a coup if he were in Peru, diplomatic sources said.

The presidency crumbles

Pressure on Fujimori also mounted as lawmakers abandoned his ruling alliance. Five legislators have jumped ship in recent days, leaving Fujimori's Peru 2000 alliance with just 59 seats in the 120-strong Congress, stripping him of a majority as he needs to rally support to approve new electoral laws.

"Every day the president is weaker," said political analyst Mirko Lauer. "Just look back a couple of weeks and you can see that his administration is quickly crumbling."

Lawmakers began quitting the government coalition after the Montesinos scandal broke. Some opposition figures had previously switched to the government ranks after Fujimori won a May runoff election overshadowed by allegations of fraud.

With tension rising, U.S. Ambassador John Hamilton and the new chief of U.S. military operations in neighboring Colombia, Peter Pace, met with Fujimori and military leaders on a "familiarization tour" of Peru. The United States has played a key role in trying to defuse the crisis over Montesinos.

In the meantime, two opposition legislators flew to Panama on Monday to lobby the government not to take in Montesinos.

Former Panama President Guillermo Endara said his country's policy of accepting dubious fugitives had turned it into a "dustbin," but "the sacrifice means we are giving the Peruvian people a possibility of ... reaching a successful outcome."

But in Costa Rica, the Central American Commission for the Defense of Human Rights said: "The price of Peruvian democracy should not be impunity."

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