business & economy

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FRENADESO members, many flying the red flags of the SUNTRACS construction workers' union, gather at the Ministerio Publico to file a criminal complaint that alleges influence peddling in the "BANISTMO Law" that reduced capital gains taxes in time to give hundreds of millions of dollars in tax breaks to Vice President Samuel Lewis Navarro and other members of politically influential families. Photo by FRENADESO

Assault on BANISTMO Law continues on more than one front

by Eric Jackson, in part from other media

On September 14 members of the FRENADESO labor/left umbrella group appeared at the Attorney General's offices in Perejil to file a criminal complaint against a number of prominent individuals, alleging influence peddling and corruption in the passage of a tax law that gave a small group of shareholders a windfall of hundreds of millions of dollars at government expense on the occasion of the sale of BANISTMO to HSBC. Named as defendants are Minister of Economy and Finance Carlos Vallarino, former presidential candidate and BANISTMO vice president Alberto Vallarino, HSBC Panama president Joseph Salterio, BANISTMO president Samuel Lewis Galindo. The complaint also specifies that there are accomplices who should be added as an investigation progresses. One of the principal beneficiaries of the change in capital gains tax laws is the Vice President Samuel Lewis Navarro, a BANISTMO shareholder.

Because all three branches of government essentially operate on the principles of influence peddling and bribery, it's unlikely that the case would stand up in court even if Attorney General Ana Matilde Gómez takes it seriously. However, because BANISTMO had branches in a number of countries it's not only the Panamanian government that must approve of the sale. The Torrijos administration's new banking superintendent, an irrigation engineer from Texas A&M by education, has quickly approved the acquisition.

The Panama News has also been hearing critiques from people in banking and business circles, some of them alleging very complex political and financial maneuvering with respect to the tax law change. All of these accounts presume that bribery was involved, but none of them can point to any solid evidence of this.

One observer close to the banking industry notes that, while the big windfall to the principal BANISTMO shareholders is the most obvious fact that people who would for whatever reason would want to allege a scandal to point out, HSBC and its executives may actually be the principal if indirect beneficiaries of the law via a lower sales price. That source also notes that HSBC executives both here and in London are set to receive large bonuses if the deal goes through and, most unusually, those payments were pegged to BANISTMO stock prices on Panama's Bolsa de Valores, which historically have only a very theoretical relationship with a company's actual value, rather than prices established on more reputable European exchanges.

The sale of BANISTMO to HSBC must be completed by January of 2007 or the deal is off.

Also in this section:
Teachers lose pay dispute, go back to work
The ACP's scandal plagued consultant, Parsons Brinckerhoff
Influence peddling alleged in BANISTMO Law
US child labor report criticizes Panama
Business & Economy Briefs