New York Times
WALT BOGDANICH,ANA GRACIELA MÉNDEZ , JACQUELINE WILLIAMS
In August of last year, Panama sought to shed its image as a magnet for shady deals and narco traffickers by paying at least $2 million to host the world’s largest anticorruption conference, now taking place in Panama City. At the time, it seemed like good idea.
Now, some prominent Panamanians aren’t so sure. Eight months after agreeing to host the conference, the nation was deeply embarrassed when confidential records leaked to journalists revealed that a single Panamanian law firm had created thousands of offshore companies, allowing the wealthy to hide income, some of it from illicit activities. The records became widely known as the “Panama Papers,” a term that so upsets Panamanian officials that some can’t bring themselves to utter it in public.
After the leak, involving millions of legal documents, the president, Juan Carlos Varela, appointed a seven-member commission in April to recommend how to make its financial sector more transparent. That did not work out exactly as planned, either.
For credibility, the president had included Joseph E. Stiglitz, the Nobel laureate economist and a fierce critic of tax havens — onshore and offshore — which he views as the dark side of globalization. What happened next should surprise no one familiar with Panamanian politics or the resolve of Mr. Stiglitz.
The commission, if not dead on arrival, quickly ended up on life support. Mr. Stiglitz and another board member, Mark Pieth, a Swiss anticorruption expert, resigned after only one official meeting because the government, they said, would not promise to make their final report public. “You can’t have a committee on transparency and not be transparent,” Mr. Stiglitz said.
The repercussions of this contretemps continued in the months leading up to the anticorruption conference. Each faction issued its own report. A prominent Panamanian lawyer publicly chastised professors at Columbia University, where Mr. Stiglitz teaches, for using the words “Panama Papers” in a course title, saying it unfairly singled out his country. And at the university’s World Leaders Forum in September, Mr. Stiglitz gently confronted Panama’s vice president for rendering what he said was an inaccurate account of why the commission had broken apart. With the world’s economic powers intensifying their attack on tax havens, the commission’s failure to speak in one voice illustrates the difficulty of trying to reform a financial system, particularly in a small country where familial ties run deep and the financial interests of elite lawyers and bankers are embedded in offshore businesses. Panama has taken some steps toward transparency. After initially balking, Panama did agree this year to a multilateral deal to provide the names of the real owners of offshore companies when other countries request them. And President Varela spoke at the opening ceremony of the anticorruption conference.
But more needs to be done, said Mr. Stiglitz, a former co-chairman of the committee. He and Mr. Pieth said they were not bitter, but rued Panama’s lost opportunity to serve as a model for other nations — including the United States — that do not fully comply with international standards of transparency.
Other commission members blamed internal conflicts, not the government, for resignations. “All institutions have been open and willing to share information, documents and even opinions,” Roberto Artavia Loria, a commission member, wrote in an email to Mr. Stiglitz
Even so, an examination by The New York Times of the business connections of the four Panamanian commission members — the fifth was Costa Rican — points to the challenges that Mr. Stiglitz and Mr. Pieth had to overcome.One member, Nicolás Ardito Barletta, a former president of Panama under a dictatorship, helped to create the country’s offshore industry in the 1970s as minister of planning. Mr. Barletta also championed the country’s free-trade zone, a prime target of Mr. Stiglitz, who views lightly regulated, tax-advantaged zones as an invitation to money laundering. A second member, Gisela Porras, was once a partner in a law firm that recently advertised: “Our corporate law is attractive for many reasons. First of all, shareholder information is not filed at the Public Registry, therefore granting confidentiality to beneficial owners.” The commission’s other co-chairman, Alberto Alemán, is an independent director of Global Bank, one of three Panamanian banks whose outlook was recently revised by S & P Global to negative from stable, reflecting “shortfalls in regulation, supervision, governance and transparency in the Panamanian financial system.” Mr. Alemán, a former canal administrator, had previously owned stock in a company that did millions of dollars in business with the Panama Canal. He also has three cousins who are or were partners in law firms with offshore services. President Varela is also closely tied to law firms that handle offshore accounts. One Alemán cousin is now his chief of staff, and both his vice minister of foreign affairs and the minister of economy and finance came from the Morgan & Morgan Group, which includes a law firm known for its offshore business. And one of the president’s closest advisers until early this year was Ramon Fonseca Mora, a partner in Mossack Fonseca, the law firm that generated the Panama Papers. The German newspaper Süddeutsche Zeitung obtained the data and later shared it with the International Consortium of Investigative Journalists, a nonprofit group based in Washington. Mr. Stiglitz initially wondered whether the government was serious about his appointment, but he said two things had convinced him that it was. Panama’s vice president, Isabel de Saint Malo, flew to New York to personally ask Mr. Stiglitz to join, and Mr. Pieth was also asked to serve.
