Martinelli and Varela are accusing each other

The fate of Panama's Martinelli administration may have been shaped by a December 1 board meeting of an Italian corporation. The giant aerospace and defense conglomerate Finmeccanica had to decide a power struggle between CEO Giuseppi Orsi and board chairman Pier Francesco Guarguaglini. Orsi won, and Guarguaglini was jettisoned with €4 million (a bit more than $5.355 million) in severance pay, with another €1.5 million in a year's time if he has not gone to work for a competitor. Guarguaglini is probably not going to get a job with someone else, but his household is likely to get even more severance pay: his wife Marina Grossi is the president of Finmeccanica subsidiary Selex, which makes radar installations and is at the center of the scandal that forced her husband out. Although she was still at her post as these words were written, she will be forced out and will very likely be put on trial for various acts of corruption.

Finmeccanica is partly state-owned, with the Italian government holding just a little more than 30 percent of the shares but appointing eight of the 11 voting board of directors members. The power struggle was essentially decided by the new prime minister, Mario Monti, who had his directors vote against the Berlusconi-aligned Guarguaglini. The move suggests that there will be little or no protection for Berlusconi's people, which in turn means that people who want to keep their jobs with Finmeccanica or its subsidiaries will fully cooperate with Italian prosecutors' investigations. Certain transactions that would be shielded from view in Panama by this country's corporate, banking and government secrecy have shown up in Italian records and been leaked to the press. In addition to the now more open Finmeccanica records, police have raided L'Avanti and taken away Lavitola's computers and many other files.

It is alleged that Selex overcharged for radars it sold to foreign governments and to Italy's state-owned ENAV air traffic control company, and used the excess for a slush fund that was distributed to Italian and foreign government officials. The fixer for the foreign contracts was former Prime Minister Silvio Berlusconi's confidante and editor and publisher of L'Avanti, Valter Lavitola. Italian prosecutors believe that padded government publicity contracts with L'Avanti and front companies set up by Lavitola were conduits through which money was siphoned off  from the exaggerated sales contracts, and that these funds were then channeled through other fronts to the corrupt officials.

A sale of 19 Selex radar installations to Panama was one of the larger deals, and it has been revealed that an "intermediary" company with Valter Lavitola's fingerprints all over it received a 10 percent "commission." It has been suggested on the floor of the Italian Senate that money may have been funneled to the law firm in which  Minister of Security José Raúl Mulino is a partner under the guise of legal fees incurred by Francesco Pozzessere, a Casco Viejo restaurateur and hotelier and the son of Finmeccanica's former sales director Paolo Pozzessere..

The Martinelli administration's reaction to all of this has been panicky and uncoordinated. Officially, this country's entire security budget, including the details of the purchases of Italian radar installations, helicopters, patrol boats and digital mapping services, is a state secret. Mulino has issued blanket denials about receiving anything out of the deal or having any knowledge of an intermediary. Martinelli has denied knowing Karen De Gracia Castro, the figurehead president of the intermediary company (Agafia, SA), but hasn't actually denied the unusual arrangement --- he just says that if such a thing existed, it was on the Italian end of the deal, not Panama's. But Mulino's immediate subordinate, Vice Minister of Security Alejandro Garúz, says that he knew about the intermediary company taking a cut.

Shortly after the scandal began to break in Italy, this reporter tracked down all available reports from both Panama and Italy that could be found online and noticed discrepancies of up to $87 million as to how much Panama was to pay for all of the military equipment and services it was buying from Italy.

The patrol boats were purportedly a gift  from Italy to Panama, and in any case are not Finmeccanica products. The records of this transaction in the possession of the Italian government raise questions, but so far it has not been suggested that such queries would be about bribery.

The radars, helicopters and mapping services, however, were bought from Finmeccanica subsidiaries Selex, AgustaWestland and Telespazio respectively. A number given by various Italian government and media sources fior the total amount of Panama's purchases from Finmeccanica companies was $333 million. That would mean a more than $33 million cut for Agafia, which is purportedly owned by Argentine businessman and Berlusconi friend Gustavo Franchella and whose president of record is 23-year-old Karen De Gracia. Franchella has talked to the pro-Martinelli El Panama America, but declined to say anything abou tthe Selex contract. The younger Pozzessore left  the country. De Gracia and Lavitola, wherever they are, have made themselves unavailable for comment.

Also silent, although she would have had to examine and approve the purchases, is Comptroller General Gioconda Torres de Bianchini. Mrs. Bianchini came to her post from her previous job as the in-house accountant for President Martinelli's private businesses and although she is formally an appointee of the National Assembly rather than the president, she is a symbol of presidential control over the other branches of government.

So now comes Minister of Economy and Finance Frank De Lima Gercich with one prong of the Martinelista counter-attack. Notwithstanding that the security budget is officially a state secret, he criticized the Italian and Panamanian media for exaggerating the story. The total amount of the purchases, he says, is only $252 million, so the intermediaries' cut would only be a little more than $25 million.

On another avenue of attack, the Martinelistas are claiming that the whole mess is Vice Presidet Juan Carlos Varela's fault, as he was foreign minister when the deal with the Italians was made. But Varela is saying that the deal was made by Martinelli and, in light of revelations about the unusual intermediary situation, he's calling for rescission of the contract.

The PRD and the left, for their parts, are bashing both Martinelli and Varela over the situation.

So why the panicky, disorderly rout? It seems that both on the Panamanian end there were reasonably intelligent people who made the common political error of mistaking such power as they held, or that the people with whom they were associated held, was absolute and eternal. Thus the failure to make effective use of Panamanian corporate, banking and government secrecy by leaving a paper trail in Italy. Thus the failure of Martinelli and his followers to consider the consequences of not only breaking with Varela, but firing thousands of members of Varela's Panameñista Party from their government jobs. Thus Martinelli's failure to consider the vulnerabilities created by his long-running feud with the Motta family, which among other things controls the TVN television network and COPA Airlines. Thus the failure on the Italian side to consider the pressures from the European Union to crack down on corruption as part of the price of a bailout, and the obliviousness to the anger of many Italians --- particularly the labor movement --- about platinum parachutes like Guarguaglini's at a time when they are told that they must accept austerity measures. These were miscalculations born of arrogance.

The result is an accelerating and ever more damaging bombardment of new revelations. The "blame Varela" tactic and the "we have the figures that we concealed from you and your numbers are off" ploy become even less effective when it is revealed that:

• Valter Lavitola was assigned a driver from the SPI presidential guards, in a transaction handled by the president's personal secretary Adolfo de Obarrio.

• This past August 22 Valter Lavitola flew from Rome to Barcelona with Karen De Gracia, and also on August 22 Ricardo Martinelli made an unannounced stop in Rome on his way to Germany to show off  a new tunneling machine that the government is buying. The purpose of the visit to Italy has never been explained and whether Martinelli met Lavitola on this stopover is at this point an unanswered question.

• A prosecutor in Naples is now looking into suspicions that Finmeccanica paid bribes to Panamanian journalists.

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