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Panama suffers back-to-back financial scandals

By RICK JERVIS | USA Today | Published: June 28, 2016

PANAMA CITY (Tribune News Service) — The sting from the global outcry over the Panama Papers had barely receded when Kent Davis was hit with news of another scandal enveloping his adopted country.

Davis, a real estate broker originally from Hawaii who deals with U.S. clients, said he was stunned and dismayed when he heard that Nidal Waked, one of Panama’s most prominent businessmen, was indicted by U.S. authorities in May on money laundering charges.

“It was like, ‘Oh my God, we don’t need this,’” said Davis, a partner and managing director of Panama Equity Real Estate. “All we can do is get our head down and trudge forward.”

While the world lauded the opening of the $5.4 billion expansion of the Panama Canal last weekend, Panama continues to grapple with how best to emerge from back-to-back financial scandals.

First came the leak in April of 11.5 million documents from Panamanian law firm Mossack Fonseca detailing how world leaders or their relatives use off-shore corporations to hide assets and avoid financial disclosures. The leak of the documents, dubbed the Panama Papers, kicked off investigations by governments around the world into the secret world of off-shore accounts. The law firm has denied any wrongdoing.

A month later, U.S. embassy officials in Panama announced the Waked indictment, which accuses him of laundering and moving cash for drug traffickers and could land him 50 years in a U.S. federal prison. His assets, which include shopping malls, hotels, airport duty-free shops and a bank, were seized, putting hundreds of Panamanians out of work. Waked was arrested in Colombia and faces extradition to the U.S.

The scandals and negative press arrived at a time when Panama is trying to shake its long-held reputation as a haven for illicit money. Two years ago, lawmakers here passed stricter anti-money laundering laws, and earlier this year the country was removed from a global money laundering watch list.

After the Panama Papers surfaced, Attorney General Kenia Porcell appointed a special prosecutor to look into the case and investigators confiscated computer files and shredded documents from two Mossack Fonseca buildings.

Prosecutors haven’t spoken about the case since then, and there’s little expectation they will soon, said Luis Burón, an investigative reporter with La Prensa newspaper, part of the global media team that originally reported on the leak. A founder of the law firm, Ramon Fonseca, is a former adviser to President Juan Carlos Varela, he said.

Burón pointed out that no names of Panamanian officials have surfaced in the papers.“I really can’t say what’s going to happen,” he said. “I don’t have a clue if they’re going to act on this or not act on this. It’s a pretty strange scenario.”

U.S. officials here applaud steps taken by the Panamanian government in the wake of the Panama Papers, including establishing a high-level commission to investigate money laundering in the country, calling in experts to look at the offshore banking sector and agreeing to a better exchange of information with the Organization for Economic Co-operation and Development, a group composed of most of the world's advanced nations.

“They immediately responded in a way that for us signifies that this is a very responsible global citizen,” said John Feeley, the U.S. ambassador to Panama.

Feeley said creating off-shore accounts to hide illicit activity is a global scourge that warrants cooperation between nations and international debate. “Once again, Panama finds itself in the middle of a global conversation,” he said.

Mari Carmen Aponte, acting assistant U.S. Secretary of State for Western Hemisphere Affairs, in town for the canal expansion opening, said she visited with Porcell over the weekend and was impressed with the prosecutor’s tenacity and commitment to the investigations, no matter where they lead.

She also commended Panama for passing tougher anti-corruption laws. “These are the types of laws that strengthen a society and will make Panama a strong ally not just to us but to other countries in the region,” she said.

Some locals said they weren’t surprised by the extent of hidden financial activities revealed by the Panama Papers. Jaime Silvera, 29, who works for various law firms in town, said Mossack Fonseca was known as the go-to firm for offshore banking, though other firms offer the service as well.

He said he didn’t expect the attorney general’s office to announce charges any time soon. “There’s not a lot of hope for that happening,” Silvera said.

Davis, the real estate broker, said many of his clients often used Mossack Fonseca lawyers for legitimate real estate transactions. “Some of our best clients used them,” he said. “They were easy to work with.”

When the scandal broke, he saw a noticeable drop in business from U.S. clients, who make up about 40% of his firm’s business, said Davis, who moved here nine years ago.

Still, he’s optimistic. The government’s done a good job of addressing the issues and bolstering confidence in the economy, which is expected to grow by 6% this year and remains one of the shining beacons of Central and South America, he said.

With time, Panama will be a better place for it, Davis said.

“This is a real awakening for Panama,” he said. “It’s time to clean out and get real.”

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©2016 USA Today
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