Corrobrating witness in Financial Pacific case, the ACP’s lead balloon about Corcione and widespread negative reaction to house arrest for national security ex-chiefs show that the storm hasn’t blown over
Songs Martinelli didn’t want to hear
by Eric Jackson
Fábrega comes in from the cold and sings
On August 25 Ignacio “Nacho” Fábrega, who had been underground, turned himself in and went to a pretrial hearing on charges of leaking confidential information about government investigations to criminals. The former chief supervisor for securities investigators and the Securities Markets Superintendency (SMV) had been the supervisor for securities analyist Vernon Ramos when the latter disappeared in November of 2013. Not a stock and bond market person himself, he had been moved by the Martinelli administration into the job from his prevous post as credit director of the Virzi family’s Banco Universal.
That bank is now taken over by the government and its records have breathed new life into countless Martinelli administration corruption scandals. Its principal figure, former Vice President Felipe “Pipo” Virzi, is accused in multiple bribery and money laundering cases, under house arrest and said to be cooperating with investigators. Related by marriage and business ties to former President Ricardo Martinelli, Virzi is a man whose downfall is taking many others down with him, both because of the things that he knows and because of the records seized at Banco Universal. But if Virzi’s fate sealed that of Nacho Fábrega, the latter’s downfall speeds up an investigative chain reaction.
In the middle of the hearing Fábrega changed his plea to guilty of public corruption charges. Anti-corruption prosecutor Zuleika Moore asked for an eight-year prison term and Fábrega was jailed in preventive detention pending sentencing. But before the hearing ended the former SMV supervisor testified that he was personally given specific orders to report all details on any investigations to the brokerage house being investigated, Financial Pacific, by Ricardo Martinelli and the ex-president’s tourism minister and key operative Salomón Shamah. Fábrega also said that his former bosses, then SMV superintendent Juan Manuel Martans and acting superintendent Alejandro Abood, knew all about it.
Financial Pacific was a money laundering mill for racketeers from all over the world. It hardly ran like a brokerage, for example without the detailed accounts of depositors’ portfolios that would be expected of a normal stock and bond broker. But it ran into trouble not because clients complained of being cheated, but because SMV auditors doing a routine check-up found its books wildly out of balance. The finger was pointed at a brokerage employee, Mayte Pellegrini, who was accused of stealing some $12 million and causing the brokerage’s problems. That amount of money did pass through her and her relatives’ accounts, but the brokerage’s accounts still never added up and Pellegrini has testified that in part these funds were the unusual way that her bosses insisted on paying her but mostly they were using her and her relatives to launder money. She also testified that Financial Pacific was home to a special account called High Spirit, which was owned by Ricardo Martinelli and dedicated to insider trades in shares of Petaquilla Minerals, the Canadian parent company of the now abandoned Petaquilla gold mine.
Fábrega’s subordinate Vernon Ramos was investigating the High Spirit allegations when he disappeared. Now imprisoned former Supreme Court presiding magistrate Alejandro Moncada Luna quashed the High Spirit investigation by ruling that insider trading is not a crime if the shares are not traded on the Panamanian market. That ruling cleared the way for the brokerage’s private sale to lesser-known shady characters. The scandals at Financial Pacific continued under the new management, to whom Fábrega continued to provide information about ongoing investigations.
The High Spirit scheme, according to Pellegrini an paper trails uncovered by investigators, had shares in the Canadian company being bought and sold on Canadian and European markets through an account in a Danish bank, with proceeds being laundered through a South Korean company. Whether or not shares were traded on the US over the counter market, US electronic facilities would have been used for at least some of the transactions and at least some of Martinelli’s fortune has ended up in the United States, where the former president is living. Martinelli has long claimed that he had nothing to do with Financial Pacific, but at other times made contradictory claims that he had an account there before he was president — that is, before the brokerage existed. Attorneys for Pellegrini, who remains under house arrest after many months in prison, claim that Fábrega’s account vindicates their client. Martinelli is calling it all a pack of lies invented by President Juan Carlos Varela
Meanwhile, the Financial Pacific and High Spirit affair is probably a murder case, although no trace of Vernon Ramos has yet been found. Prior findings of Financial Pacific investigations have been forwarded by Attorney General Kenia Porcell to the Supreme Court, which has jurisdiction over Martinelli. The file is about to get thicker, but this is one of about a dozen Martinelli cases that the high court has yet to decide whether to accept.
ACP would pretend that Corcione isn’t their problem, but…
Anti-corruption czarina Angélica Maytín and many lawyers and civic groups had called on the Panama Canal Authority (ACP) to use its disciplinary rules to expel or suspend board member Nicolás Corcione. Based on the testimony of witnesses and records from Banco Universal, he’s charged with coordinating a bid-rigging, bribery, kickback and money laundering scheme for construction and renovation of court facilities. His partners in these crimes are alleged to include Alejandro Moncada Luna and Pipo Virzi.
Corcione’s defense so far is not that he didn’t do it — although he has made no admissions. It’s that because he’s a member of the ACP board ordinary prosecutors have no jurisdiction over him, and because prosecutors have illegally investigated him without jurisdiction all charges must be dropped and are forever barred. It’s an obnoxious and legally groundless defense, which could only stand up if the Supreme Court were bribed to accept it. Prosecutors have considered and rejected the argument and ordered him to appear for an indagatoria, or criminal deposition.
Meanwhile Minister of Canal Affairs Roberto Roy rejected calls for the ACP to take action against Corcione, saying that only the courts can do this. (Surely it’s a claim that some day a union representing an ACP employee fired for something will remember.) The rest of the board of directors, over which Roy presides, has maintained its silence about their embattled colleague.
So at a time when the canal expansion project is having trouble and various conflict of interest issues affecting either the ACP or Roy in his capacity as head of the Metro commuter train project floating unresolved out there, will the situation be aggravated by board meetings with Corcione at the table?
Roy and the ACP were spared that fate when they received a letter dated August 16 from Corcione stating that he would not participate in board activities while charges are pending. That may not have been such a magnanimous and civic-minded gesture. It seems that Corcione has fled the country and does not care to show up at a board meeting or other public event at which he might be arrested.
Ricardo Martinelli says that Corcione is being framed by Varela in order to create a vacancy on the ACP board of directors for the current president to fill.
Flight to Miami + closed hearing + house arrest order = spy case uproar
The illegal electronic eavesdropping case has been drawing the attention of not only regular prosecutors but also investigators from the administrative prosecutor’s office and auditors sent by the comptroller general. That’s not to count the Supreme Court investigation against Ricardo Martinelli himself about this issue, which is hanging in limbo pending a ruling on a constitutional challenge to time limits for criminal investigations of politicians.
The money trails have led to the former president’s brother-in-law Aaron “Ronny” Mizrachi, whose company Caribbean Holding Services (CHS) turns out to have been the intermediary for the overpriced purchase of Israeli eavesdropping equipment. CHS is registered not in Panama but in the British Virgin Islands and doesn’t just operate in Panama. The actual spying hardware went missing as Martinelli was leaving office. On July 29, as soon as Mizrachi found that prosecutors wanted to talk to him, he went to Albrook, got onto Ricardo Martinelli’s private jet, and flew off to Miami.
Now it’s turning out that CHS was the intermediary for many more suspicious government purchases of technological goods or services. These included maintenance of government telephones, burial of urban utilty cables, the system of video surveillance cameras, a system to block prisoners’ cell phone calls that never worked, installation of various government software programs and so, often in the role as a subcontractor for Cable & Wireless Panama. Mizrachi’s ability to get such contracts was aided not only by his marriage to Ricardo Martinelli’s sister but also by his being a large Cable & Wireless stockholder.
How much of a scandal will Mizrachi’s role turn out to be? There are two important limiting factors. First, Cable & Wireless is a major advertiser for virtually all of Panama’s corporate mainstream media and these hesitate to report unflattering things about this company, its subcontractors or its major shareholders. Second, there are potential foreign policy complications, as the British tend to be protective of the UK-based Cable & Wireless and the Israelis tend to be protective of their security industries.
The most media attention to recent developments in the spying scandal, however, came during three days of closed pretrial hearings for former national security directors Alejandro Garuz and Gustavo Pérez for the spying itself.
Closed hearings? We know that in the first instance the surveillance of political adversaries and journalists was known from retrieved surveillance summaries of about 150 people, edited from data collected from and about a larger number of people. The post-Martinelli government has never gone out to notify everyone whose electronic communications were intercepted, or whose computers and cell phones were turned into bugs by remote control. Nor has much been said in public about any investigation getting to the true scope of Martinelli’s spying. But for the record the Public Ministry said that the pretrial was closed to press and public to protect the privacy of the victims.
At those hearings Judge Enrique Pérez granted the defendants’ motion to change their pretrial detention from jail cells to house arrest, and this elicited both appeals from the Public Ministry and private prosecutors for some of the victims who are joined with the government as accusers in the case and much public criticism. When Pérez and Garuz were first jailed they made a constitutional appeal (“amparo de garantías”) to the Supreme Court, which rejected their arguments. In this case the trial judge accepted defense arguments that the high court had rejected. However, Panama is a Civil Code jurisdiction and unlike in the Common Law system that prevails in the United States lower courts are not bound by higher courts’ precedents. The two former spymasters remain in jail while an appeals court will consider the prosecution appeals of their release from jail to house arrest.
Whatever the legal technicalities, polls show that a substantial majority of Panamanians are annoyed by Martinelli’s alleged henchmen and henchwomen being released with only travel restrictions or under house arrest while they await trial. Most of those jailed in pretrial detention are locked up under conditions much lighter than the Hell that most ordinary prisoners awaiting trial face. People consider it an unfair set of privileges and for many it arouses bitter class resentments.
That Martinelli’s plane was not grounded, that Mizrachi was allowed to flee in it, that a class of apparently corrupt contracts has been treated differently because of the foreign companies involved, that former top officials are given much lighter treatment than ordinary offenders whose crimes are minor in comparison and the constant claims of immunity by Ricardo Martinelli and his entourage annoy Panamanians. There has been a sea change in public attitudes about corruption and its casual, fatalistic acceptance is no longer the norm. If the Martinelli crowd is waiting for things to get back to “normal,” that has yet to happen.