Pana­ma­nian gov­ern­ment was never com­mit­ted to trans­parency, real change - econ­o­mist Joseph E. Stiglitz

Malta Independent - - NEWS -

The real scan­dal be­hind the Panama Papers scan­dal is that the Pana­ma­nian gov­ern­ment set up a sham com­mis­sion that would not com­mit to trans­parency or real change, ac­cord­ing to one of its former mem­bers.

In a hard-hit­ting piece pub­lished in Van­ity Fair, No­bel prize win­ner Joseph E. Stiglitz re­counts how the Pana­ma­nian gov­ern­ment acted fast af­ter the leak of over 11 mil­lion doc­u­ments on se­cret off­shore ac­counts ear­lier this year.

The leaks ex­posed the off­shore com­pa­nies of Min­is­ter Kon­rad Mizzi and OPM Chief of Staff Keith Schem­bri.

They used a lo­cal agent for the in­fa­mous Mos­sack Fon­seca le­gal firm to open their com­pa­nies. Mos­sack Fon­seca had made a re­quest for the open­ing of three com­pa­nies – two of which be­long to Mizzi and Schem­bri, and a third – Egrant – whose ul­ti­mate ben­e­fi­cial owner is still un­known.

But Stiglitz quickly found out that the com­mis­sion was only a smoke­screen and that there would be no real change.

Stiglitz says he was ap­proached, a few weeks af­ter the scan­dal broke, by Panama’s Vice Pres­i­dent, Is­abel Saint Malo, who asked him to serve on a spe­cial com­mis­sion that Panama was set­ting up.

“The pur­pose was to rec­om­mend steps that Panama could take to pro­mote trans­parency in its off­shore fi­nan­cial-ser­vices in­dus­try—not just the banks but the full ar­ray of ‘ser­vice providers’, in­clud­ing its law firms, one of which had in­ad­ver­tently opened a win­dow onto what was go­ing on.”

The former World Bank econ­o­mist says he ac­cepted be­cause the Vice Pres­i­dent of Panama had flown to New York to meet him and also be­cause Panama had also asked Swiss anti-cor­rup­tion ex­pert Mark Pi­eth to join the com­mis­sion.

Stiglitz co-chaired the 7-mem­ber com­mis­sion, along with Pana­ma­nian Al­berto Alemán Zu­bi­eta.

“No sooner had the preliminary work got­ten un­der way than the in­ter­me­di­ary be­tween the gov­ern­ment and the com­mis­sion, a pri­vate-sec­tor lawyer named Maruquel Pabón de Ramirez, sent the group an email where an item at the top of her pro­posed agenda was ‘con­fi­den­tial­ity of the re­port.’ Per­haps naïvely, Pi­eth and I had as­sumed that a gov­ern­ment ask­ing us to pro­duce a re­port on trans­parency would com­mit it­self to trans­parency in the re­lease of the re­port.”

At a later meet­ing the com­mis­sion agreed that it would re­quire that the gov­ern­ment com­mit it­self to re­leas­ing the full re­port, what­ever the find­ings might be.

“At the same time, the gov­ern­ment of Panama would be per­mit­ted a pe­riod of time to pre­pare its re­sponse be­fore the re­port went pub­lic.

“The group came to a con­sen­sus that the re­port goes through a process of con­sul­ta­tion with the pres­i­dent and that the re­port be made pub­lic by De­cem­ber 1, 2016.”

The com­mis­sion also asked the Pana­ma­nian gov­ern­ment for funds in or­der to be able to carry out its in­tended task.

Nine weeks later the gov­ern­ment re­fused to de­liver the re­quested funds and ig­nored the com­mit­tee’s in­sis­tence on a com­mit­ment to trans­parency.

The other co-chair, Al­berto Alemán Zu­bi­eta, met Stiglitz in New York.

“They rec­om­mended that the com­mis­sion be dis­banded. My view was that a joint res­ig­na­tion by all mem­bers would have the most im­pact on the gov­ern­ment.

“As the group at­tempted to agree on a com­mon res­ig­na­tion let­ter, Pi­eth and I be­gan to sus­pect that some­thing was afoot be­hind the scenes—that hid­den agen­das were at play.

“In ver­sion af­ter ver­sion of the res­ig­na­tion let­ter, some of the Pana­ma­nian mem­bers in­sisted on ob­fus­cat­ing the true rea­son for our res­ig­na­tions: the fail­ure of the gov­ern­ment to af­firm a com­mit­ment to make our re­port pub­lic, no mat­ter what it said.

“They sug­gested that say­ing that there were di­vi­sions within the com­mis­sion on mat­ters of sub­stance im­peded its work. This was not true.

“There was one other odd event in our deal­ings with some of the mem­bers of the com­mis­sion that contributed to an in­ti­ma­tion of dou­ble deal­ing,” Stiglitz writes.

“Alemán had ap­par­ently on his own de­cided to write up an in­terim re­port, in­clud­ing draft rec­om­men­da­tions that were his own. The group had briefly dis­cussed some pos­si­ble rec­om­men­da­tions in our New York meet­ing, but had not gone into de­tail.

“I for one would have gone much fur­ther than Alemán was propos­ing. To be­gin with, there should be a Free­dom of In­for­ma­tion Act, so that there wouldn’t have to be this squab­ble over whether a re­port to the pub­lic was made pub­lic. Ev­ery cit­i­zen would have the ba­sic right to know.

“There were other mea­sures I would have added—or at least would have wanted to dis­cuss thor­oughly.

“There should be a pub­lic registry of the true own­ers of all cor­po­ra­tions reg­is­tered. Be­cause cor­po­ra­tions op­er­at­ing in tax-free zones (Panama has a cou­ple of such zones) are es­pe­cially at risk of be­ing used for money laun­der­ing, the true own­ers of any firms re­ceiv­ing pref­er­en­tial tax treat­ment should be known, and none should be of the sort that might want to make use of these taxfree op­por­tu­ni­ties for money laun­der­ing.

“Fur­ther, law firms and other ser­vice providers as­so­ci­ated with il­licit ac­tiv­i­ties should lose their li­cense to prac­tice. In some ar­eas, Panama had al­ready put trans­parency on the books—the ques­tion was en­force­ment.

“Pi­eth and I in­de­pen­dently wrote un­equiv­o­cal e-mails say­ing that the “in­terim re­port” should not be sent to the gov­ern­ment. Nev­er­the­less, Alemán sent the in­terim re­port to the gov­ern­ment any­way.

“It in­creas­ingly be­came clear that the gov­ern­ment, with the as­sis­tance of at least some of the Pana­ma­nian mem­bers of the com­mis­sion, had a pur­pose other than re­form­ing the sys­tem in a trans­par­ent way.

“What it re­ally wanted was to get the pos­i­tive glow of an an­nounce­ment while avoid­ing the need to make any real changes. Un­der the cir­cum­stances, Mark Pi­eth and I had no choice but to re­sign.

“The ‘Independent Com­mit­tee of na­tional and in­ter­na­tional ex­perts’ was es­tab­lished in part to per­suade ad­vanced coun­tries that Panama was clean­ing up its act.

“The rump com­mis­sion that con­tin­ues in op­er­a­tion is un­likely to take sig­nif­i­cant steps that would truly force Panama to do so.

“Af­ter our first meet­ing, back in New York in June, the gov­ern­ment did make one sig­nif­i­cant change in the sta­tus quo, agree­ing to the mul­ti­lat­eral au­to­matic ex­change of in­for­ma­tion.

“But much more is needed, start­ing with a pub­lic registry of the ben­e­fi­cial own­er­ship of cor­po­ra­tions reg­is­tered in Panama. That would en­able a news­pa­per in some coun­try—to take a com­pletely hy­po­thet­i­cal ex­am­ple—to find out, for in­stance, who the real owner is of a min­ing com­pany that was just awarded a gov­ern­ment con­tract un­der suspicious cir­cum­stances—and to dis­cover, say, that it was none other than the brother-in-law of the pres­i­dent. Were it to adopt such a pol­icy, that would say some­thing. We will see.”

http://www.van­i­ty­fair.com/news /2016/09/the-real-scan­dal-be­hindthe-panama-papers

No­bel prize win­ner Joseph E. Stiglitz

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