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Mitchell probing judges in bankruptcy fraud cases
by Eric Jackson, largely from other media

Part of the problem with bribery-prone courts in which the rich and powerful can buy their way out of anything is that this sometimes compromises the interests of other rich and powerful people or institutions.

Take, for example, the bankruptcy frauds allegedly perpetrated by Carlos and Aquilino de la Guardia, who are accused of cooking books and transferring assets on the eve of the 2001 collapse of Grupo ADELAG, which included the Triangulo department store, Financiera El Roble, Tecno Auto, Tecno Taller, Comercio Total y Enafin Internacional. Some $100 million in debts went uncovered and several banks subsequently discovered that, with the help of the Arthur Andersen accounting firm, the insolvent de la Guardias had misrepresented its financial state and obtained loans that are unpaid. Then it was discovered that the de la Guardias weren't actually so personally insolvent, as they had transferred large sums from their Grupo Adelag businesses to other investments in other persons' names.

However, the disgraced businessmen went on the lam for awhile as their lawyers negotiated bail and interposed various delaying tactics, and then a succession of prosecutors and judges allowed endless delays until, on Tuesday, March 18, the statute of limitation on the criminal charges against the brothers had run.

The Supreme Court's presiding magistrate, Harley Mitchell, called it "a national disgrace." In a series of meetings with judges and prosecutors he assessed the status of the ADELAG cases and what could be done. It does seem that one criminal charge, related to the alleged falsification of records submitted to the Comision Nacional de Valores in connection with a $120 million bond issue, is yet viable.

Meanwhile, Mitchell has ordered a review of all the actions taken in the case and may take disciplinary action against lower court judges or functionaries. The ultimate delay in the ADELAG bankruptcy fraud case was that a scheduled January 2007 trial was put off when the de la Guardias' lawyers interposed a habeas corpus motion and the higher courts never resolved it so the trial was never held.

There are several civil cases still pending from the ADELAG collapse, and the running of the criminal statute of limitations does not directly affect them.

In another high profile bankruptcy fraud case, it is alleged that members of the extended Nandwani family faked the insolvency of their Fotokina business, declared bankruptcy and attempted to continue in business under different names with the company's assets. It is alleged to be a $35 million fraud. Since the case was opened in mid-2002 there have been five different judges in charge of the file, without any trial ever being scheduled. The day after a meeting with Mitchell, judge Zulay Rodríguez called a trial for five Fotokina defendants.

Meanwhile, the Banking Association of Panama, whose members say they lost tens of millions of dollars in these two bankruptcy frauds, is most unhappy. Association president Alexis Arjona protested that the banks had provided all of the proofs needed to successfully prosecute the de la Guardias and the Nandwanis, and that the legal system's manipulation to allow these delays "places into evidence the scant judicial security that our country provides for investors."