Crunch time for Panamanian justice

De León
Supreme Court magistrate Hernán De León, whose move to reject criminal charges against Ricardo Martinelli in the Financial Pacific affair failed to get any support from his colleagues. Photo by the Supreme Court.

Four simultaneous situations may hold the keys to whether the public desire for accountability for crimes in high places is satisfied or thwarted

Crunch time for Panamanian justice

by Eric Jackson

September 9 brought us a Supreme Court plenary session at which the investigation against Ricardo Martinelli for the broadest, deepest and most serious of the 12 cases pending against him, the Financial Pacific investigation, might be thrown out but instead was put off for a rearrangement of the file. Thanks mainly to coverage in La Prensa, that’s the situation that has been getting the most attention.

Meanwhile, the National Assembly’s Credentials Committee is about to take up criminal complaints against magistrates of the high court, several of whom face multiple possible charges. In the legislature’s Budget Committee, there’s money for a Disney parade in Panama City but a proposed cut in the Electoral Tribunal’s fiscal 2016 budget that would hamper investigations of things still pending from the 2014 elections and rule out a constitutional reform process being put before the voters. And then, awaiting strokes of the presidential pen to approve or veto all or parts of it, there is Bill 214 that was sent to the legislature to reduce the impunity of public officials but amended to greatly increase it. Also in the Supreme Court there is a ruling pending on a motion to throw out the special short time limits on investigations of politicians, which might be resolved in a narrow technical way or might lead to a sweeping constitutional rejection of special privileges and immunities for the politician caste.

In the Supreme Court

After a two-month delay, the nine-member plenum of the Supreme Court met on September 9 to consider whether to accept the complaint against Ricardo Martinelli in the Financial Pacific case. This file was forwarded to the court by the Securities Market Superintendency (SMV) when in the course of investigating other people it found evidence of insider trading and money laundering by the former president. As Martinelli is a member of the Central American Parliament, the high court rather than ordinary prosecutors and lower courts is vested with jurisdiction over criminal complaints against him.

But magistrate Hernán De León, to whom the matter of whether to accept the case was assigned, argued that the matter should not be accepted because the file was sent by the SMV, which can only impose administrative sanctions. If the other magistrates — actually, six magistrates and two alternates who are in acting capacities after the removals of Alejandro Moncada Luna and Víctor Benavides for corruption, and in this actual session four magistrates and five suplentes — had given De León the five votes he needed to prevail on that, it would have suggested the dismissal of other matters referred to the courts by the Comptroller General and the Tax Tribunal.

But De León, who was appointed to the high court by Ricardo Martinelli, could find no support for rejecting this high-profile case. Instead the magistrates eventually came to a unanimous agreement to rearrange the file — and there is other material from the regular prosecutors and possibly other sources that might be added — and bring it back to be accepted for formal investigation as reformulated.

In and of itself the Financial Pacific case is the deepest, broadest and most serious of the ongoing Martinelli scandals. It’s the most serious because it probably involves a murder, the November 2012 disappearance of SMV senior analyst Vernon Ramos, who was investigating allegations that Ricardo Martinelli had used an account named High Spirit to conduct insider trades in shares of Petaquilla Minerals, the Canadian parent company of the Petaquilla gold mine. No body has been found and identified as the missing analyst, although one corpse was found in Colon and rejected by the medical inspector as that of Vernon Ramos without any DNA samples having been taken or tested. La Prensa cartoonist Víctor Ramos, Vernon’s brother, says that he has his doubts about that finding.

A basic rule of Panamanian securities law is that a brokerage account may only be in the name of one natural or juridical person and nobody else can put money into it, take money out of it or conduct transactions through it. In two accounts attributed to the former president, High Spirit and JAL Offshore, a rogue’s gallery of figures from other Martinelli scandals, generally through companies, moved money in and out, with the money for and proceeds of insider stock transactions treated as unspecified account credits or debits or misrepresented as other things. Martinelli’s brother-in-law Aaron “Ronny” Mizrachi, a key figure in the purchase of spy equipment illegally used by Martinelli to eavesdrop upon and harass opposition political figures and media people, was one of these. Former Vice President and ex-banker Felipe “Pipo” Virzi, who bribed now imprisoned former magistrate Alejandro Moncada Luna and used his former bank, Banco Universal, as something of a clearinghouse for bribery and kickback schemes, was another. Cristóbal Salerno, who has admitted to paying kickbacks in the Cobranzas del Istmo privatized tax collection scheme, was another player in Martinelli’s Financial Pacific accounts.Seven other individuals have been named in these transactions, including both of the former president’s sons and former La Prensa director Juan Luis Correa.

Martinelli had moved former Banco Universal loan officer Ignacio Fábrega over to the SMV to essentially serve as an informant about confidential regulatory matters related Financial Pacific. He has pleaded guilty, been sentenced to prison and turned state’s evidence in the case. He joins Mayte Pellegrini, another former Financial Pacific employee who was charged with embezzlement and jailed during the Martinelli years and who remains under house arrest but has never been brought to trial, as a star witness in the case. The brokerage house was started by West Valdés and Iván Clare, two friends of Martinelli’s sons without experience in financial services, and essentially run a an international money laundering scheme for all manner of criminals, including sticky fingered politicians from several countries. Records weren’t kept in any regular order, and notwithstanding that no clients complained, SMV auditors found a $12 million shortage according to such books as there were. That’s when Vernon Ramos got onto the case, and was soon thereafter removed by his disappearance. The insider trading scheme that he was investigating was canceled by Alejandro Moncada Luna, who as presiding high court magistrate at the time corruptly — against the plain letter of the law — ruled that insider trading in shares not traded on Panama’s Bolsa de Valores — as shares in the Canadian company Petaquilla Minerals were not — is not a crime in Panama.

(Article 249 of the Penal Code provides that “whoever for his or her own benefit or that of a third person uses or improperly divulges privileged information, obtained through a privileged relationship, with respect to securities registered with the National Securities Commission [now the SMV] or securities that are traded on an organized market, in a way that causes damages, will punished with six to eight years in prison.” Even were it held that insider trading on a foreign organized market is not a crime in Panama, any dealings with the proceeds of such foreign criminal activity amounts to the crime of money laundering in Panama.)

Ignacio Fábrega, on some points corroborating what Mayte Pellegrini had earlier said and apparently also backed by paper and money trails that have been discovered, said that Moncada Luna’s ruling gave Valdés and Clare time to sell the brokerage house. The buyers, however, were not investigated as would ordinarily be the case in an intervened brokerage. They were in form a Brazilian group called Banvalores composed of Mendo Sampaio, Carlos Osorio y Josué Absalón Chávez. However, Fábrega said that in reality these were front men and that the true buyers were Brazilians Mario Sampó and Mendo Sampaio, the Colombian-Panamanian former Tourism Minister Salomón Shamah and Ricardo Martinelli, the two Brazlians putting up $4 million each and the two Panamanians $3 million apiece. Mario Sampó would never have passed muster before any credible investigation — at the time he was facing a number of criminal charges for such things as running an unlicensed bank and had dozens of civil lawsuits pending against him. Martinelli and Shamah would not want their interests known at the very least for how bad it would look, and if the allegation that Shamah put up $3 million is true he would probably be vulnerable to charges of inexplicable accumulation of wealth while holding public office. (Martinelli denies that he had a stake in Financial Pacific.)

Fábrega claimed in open court that SMV chiefs Alejandro Abood and Juan Manuel Martans knew all this about Financial Pacific and its behind-the-scenes second set of owners, and that he was constantly reporting to Martinelli and Shamah about investigations.

So how deep does the Financial Pacific situation go, and how broad of a stream of corruption does it represent in the Panamanian financial system? That’s a set of rude and interesting questions, about which rumors abound. Who else participated in the insider trading? Do the scandals have anything to do with Bolsa de Valores founder Roberto Brenes’s announcement that he is leaving that institution? Above all, what happened to Vernon Ramos?

The backdrop and basis for rude questions includes two discomforting facts. First, since long before the days of Ricardo Martinelli the Panamanian justice system has treated frauds big and small in which foreigners are the victims as laughing matters. Second, the Bolsa de Valores has never operated like a normal securities market — it rarely enforces its own disclosure rules and there isn’t much relationship between prices and values.

Is the Financial Pacific scandal but a symbol of a much more widespread malady in Panamanian society and its public and financial institutions? If that’s the case, wouldn’t dominant elites perceive a vital interest in keeping inquiries from becoming more generalized?

In any case, it’s but one of a dozen criminal complaints that have been filed against Martinelli. In one of them, the matter of overpriced no-bid contracts with kickbacks for dried foods for school lunch programs, prosecuting magistrate Oydén Ortega has filed a constitutional challenge to the special short time limits on investigations of politicians and that’s probably the next big Supreme Court ruling to come down with respect to Mr. Martinelli.

In the National Assembly

On July 1 an alliance between Democratic Revolutionary Party president Benicio Robinson and Cambio Democratico founder and boss Ricardo Martinelli had as one of its principal aims the takeover of the Credentials Committee that hears judicial matters, so that all proceedings against people from the Martinelli camp would be shelved and instead an attempt would be made to impeach President Varela. It caused major revolts in both the PRD and CD ranks that left Robinson and the Martinelista loyalists stripped of influence and patronage. But now we are about to see how the strange coalition of members of five parties plus the legislature’s lone independent is going to run the Credentials Committee.

There are pending criminal complaints against all members of the high court, with many magistrates facing multiple accusations. Some are at first glance frivolous or at least legally deficient, but a bunch are not. In the coming weeks the committee will be reviewing these, one by one. We have already had two high court magistrates impeached — one was convicted and the other resigned and still faces charges before the ordinary courts. We may see more forced off of the bench.

Meanwhile, the president has not filled the two vacancies. At the end of the year more terms will expire, so he may have enough magistrate and alternate appointments to make a pork barrel deal that satisfies enough legislators to get his nominees ratified.

Since the 2014 elections old non-aggression pacts have broken down. The old unstated rule that legislators don’t impeach magistrates and magistrates don’t impeach legislators is suspended if not shattered forever. The old deal where parties would alternate in office and refrain from investigating one another was broken by Ricardo Martinelli, who ineptly went after a lot of people from Martín Torrijos’s PRD administration, but on the other hand used investigations to blackmail a lot of politicians from other parties into switching to the Martinelli camp. But now half of the legislature’s CD caucus is in the anti-Martinelli coalition and it does complicate calculations.

Bill 214

The Varela cabinet sent legislation to the National Assembly intending to repeal Martinelli administration changes that shortened statutes of limitations and periods to complete investigations when elected officials are involved. It was amended and passed such that it would make it harder to hold anyone in the legislative, executive or judicial branches of government accountable for any crime. The law awaits Varela’s signature or veto.

There is a “line item” partial veto option available to Varela under the Panamanian system of government. PRD legislator Pedro Miguel González, one of the anti-Robinson rebels, warns that in case of a veto he thinks that a two-thirds super-majority may be obtained to override it. But the legislature’s action is unpopular and any veto override vote would be, both among the deputies and in the public at large, quite acrimonious.

The Electoral Tribunal budget

Come the end of the year there will be a vacancy to fill on the Electoral Tribunal, as Erasmo Pinilla’s term is ending and he says that he doesn’t want another one. Already people are jockeying for that nomination, among them magistrate Harley Mitchell, will be leaving the Supreme Court as Pinilla is leaving the Electoral Tribunal.

The tribunal’s work is partially crippled by a sneering Martinelista crook, Eduardo Peñaloza, as Electoral Prosecutor. Criminal charges against him are on the back burner at the Supreme Court, which has jurisdiction over malfeasance in office and other complaints against him.

Meanwhile, Varela had promised that a constitutional convention would be convened by now, with elections of delegates to such a body. However, he has backtracked, claiming that the time is not right. The proposed 2016 fiscal year budget, for the 12 months starting on October 1, does not have money in it for elections of people to draft a new constitution.

So where are we at?

There are no mobs out in the street howling for politicians to go to the guillotine. Demonstrations of the “stop persecuting Ricardo Martinelli” variety draw negligible crowds. The man is hated and has lost control of his own party.

What’s missing at the moment is an alternative to what we have that has captured the public imagination. Surely what has happened with Bill 214 has weakened the political parties and any argument in favor of leaving constitutional reform to the seasoned professionals. But most of those who are most fervent for change are talking about procedure — whether or not delegates to a constituent assembly should take over the powers of the branches of government while they deliberate — rather than the specific changes they want in the way that we govern ourselves.

The political situation is not volatile. People are not passionate about Varela. Most Panamanians like him, even many who find him a bit plodding or even downright boring. The situation leaves room, however, for a charismatic leader or a popular movement — perhaps driven by dramatic unforeseen events — to arise and take hold across the country. None of those are visible on the horizon.


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