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Volume 15, Number 10
June 16, 2009

economy

Also in this section:
Networking: a cautionary tale
Legal and political battle looms over civil service packing
High court OKs information sharing with the USA in PECC scandal
Report shows upper end housing prices starting to dip
US-RP free trade off Congressional agenda until at least September
The Panama News readership figures
ITUC report on worldwide repression of labor unions


After years of delay, high court approves information sharing with US authorities in a high profile corruption case
New life to an old scandal?
by Eric Jackson

Panama has a reputation as a place that runs on bribery, with those who make and receive such payoffs enjoying a high degree of impunity. Maybe so, but it's mostly the cases where that system breaks down that create the public scandals that give rise to the reputation.

Consider, however, that if you are a foreigner, for you all of the legendary games may not be just a matter of circumventing Panamanian law. The United States, for example, has the Foreign Corrupt Practices Act (FCPA) and most of the other industrialized countries have similar laws. The FCPA makes it a crime to bribe foreign public officials.

Once there was a great hue and cry, mainly in the pages of La Prensa, about a crooked arrangement in the contract for the private maintenance of part of Panama's vital maritime safety infrastructure, those lighthouses and buoys outside the purview of the Panama Canal's administration. At the time, during the Pérez Balladares administration, the National Ports Authority (APN) had responsibility for these navigation aids. (Later, in a government reorganization, the APN's job was absorbed into the Panama Maritime Authority, or AMP.)

The head of the APN at that time was Martín Torrijos's cousin, Hugo Torrijos, and the number two man at the authority was Rubén Reyna, whose wife Dorita de Reyna was President Ernesto Pérez Balladares's press secretary. The contract for buoy and lighthouse maintenance went to what was purported to be the Panamanian subsidiary of a US-based company, Ports Engineering & Consultants Corporation (PECC), whose representative and face to the world was one Charles Jumet. But it turned out that Jumet was a minority shareholder, with only some 10 percent ownership. The biggest owners were two anonymous Panamanian companies, Warmspell Holding and the Soderville Corporation, each with a 30 percent stake. Due to Panamanian corporate secrecy we don't know for certain who owned Warmspell --- but its address was the same one used for Hugo Torrijos's companies. La Prensa managed to identify the owners of Soderville --- Rubén Reyna and his relatives. It also turned out that there were three anonymous "bearer" stakes in PECC, worth a total of 20 percent of the shares. A search down the paper trail of the premiums paid to one of the bearers of 7.5 percent of the company ended up in a Cayman Islands account belonging to one Ernesto Pérez Balladares. The damning documents all appeared in the pages of La Prensa.

By that time Mireya Moscoso was president --- Pérez Balladares having left office in September of 1999 --- and it's very likely that the source for the documents La Prensa published was her Comptroller General, Alvin Weeden. Weeden began an investigation, canceled PECC's contract and in a complex series of civil and criminal cases a number of assets belonging to Hugo Torrijos and Toro Pérez Balladares were ordered frozen by the courts.

However, Toro was a member of the Central American Parliament and as such immune from investigation or prosecution unless and until the Supreme Court lifted his immunity, and Weeden had proceeded with his investigation without such authorization. For his part, Weeden argued that the immunity applied only to the prosecutors' work, as he was just doing his job overseeing public spending and not investigating a crime as such. In a ruling that did much to promote public corruption, the high court ultimately held that what Weeden had done was improper and because of it no investigation of any sort could proceed against the former president.

In the United States, however, a US Attorney in Virginia began an FCPA probe against Jumet. The published appearances were that Jumet, an American citizen, was a front man in Panama for an illegal insider contract for the benefit of top officials of the Panamanian government, arguably in violation of US law. Most of the relevant papers, however, were in the possession of Panamanian courts, in the files of the ill-fated court cases here. A US district court in Virginia asked, via a US-Panama mutual legal assistance treaty, for copies of the documents in order to proceed with the FCPA investigation.

Years later, this past May, Panama's Supreme Court approved the US request for documents.

Assuming that the official record has not been sanitized by the extraction of incriminating material and that the US Attorney can make the case against Jumet --- and those are huge assumptions, given that not only has there not yet been a conviction, there hasn't even been an indictment --- the US proceeding would be of little legal consequence in Panama, but could have big political repercussions. The Panamanian constitution does not allow for the extradition of Panamanian citizens. The Bush and Clinton administrations had a practice of waiting until an allegedly corrupt Panamanian public official was not in a position to grant or deny something that Washington wanted, then cancel or order the denial of visas for such officials and their immediate families to travel to or through the United States. Now that there are a number of direct Panama to Europe air connections, the practical effect of a visa denial for a crooked politician with kids of a certain age would be a rerouting of the rabiblanco hajj from Disney World in Orlando to Euro Disney in Paris.

However, we have not seen how the Obama administration deals with FCPA prosecutions or how it treats crooked current or former foreign public officials. The visa denial wrist slap is but one possible action that could be taken.

Meanwhile, here in Panama Attorney General Ana Matilde Gómez, whose office has made little progress in prosecuting hundreds of high-profile corruption cases from the Pérez Balladares, Moscoso and Torrijos administrations, is in a finger-pointing match with the outgoing Comptroller, Carlos Vallarino, over whose office should bear the brunt of the blame for the lack of action on public sector peculations and other political scandals. The two have met and agreed to tone down the war of words.

There had been talk in PRD circles of a constitutional amendment to cut the term in office of the Attorney General (Procuradora de la Nacion) from ten to five years, but it seems that this will not happen. If, indeed, Torrijos administration officials stymied Gómez's efforts to fight public corruption, then that might change after Ricardo Martinelli puts on the presidential sash on July 1.



Also in this section:
Networking: a cautionary tale
Legal and political battle looms over civil service packing
High court OKs information sharing with the USA in PECC scandal
Report shows upper end housing prices starting to dip
US-RP free trade off Congressional agenda until at least September
The Panama News readership figures
ITUC report on worldwide repression of labor unions


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