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