Panic in Panama over Panama Papers

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Chief of Staff Alvaro Aleman and unshaven Ali Baba types give press conference (photo credit Presidencia)

Government struggles to formulate comprehensive response

IT'S NOT EASY to be a member of the ruling political class in Panama these days. The Panama Papers scandal, which in just one day caused the resignation of Iceland's Prime Minister, the head of Transparency International in Chile and provoked difficult questions for a plethora of other prominent politicians, has taken the country by storm.

To long-time Panama observers such as ourselves, a familiar pattern is starting to emerge. Over the years, when we exposed fraud and corruption, the responses of the culprits invariably followed the same sequence: First denial ("this can't be happening"), then rage ("we are unfairly under attack!"), then trying to kill the messenger ("the journalists have hidden motives and are out to get us for unknown but certainly sinister reasons!"), then some sort of legal reasonings and actions ("We'll sue! This isn't even legal, to publish those stolen documents!"), and then, having made irreversible fools of themselves, the schemes collapse.

I've learned to use this as a benchmark to judge legitimacy. Do responses follow the above pattern? Then in 99 out of 100 of cases you're dealing with rogues and/or crooks. For all practical purposes, this method is fail-proof.

And indeed, in Panama, the official response to The Panama Papers so far is a colorful mix of all the above, typical for financial shysters and fraud artists - or in this case, shady politicians - that fill the hallowed pages of this website.

Responsible businesspeople or political leaders act very differently; they take responsibility, admit wrongs, and announce a clear path towards the matter being resolved and the guilty punished.

None of that is happening in Panama. Ramon Fonseca isn't in some prosecutor's office answering hours of difficult questions about his shadowy activities while the police is raiding his offices and homes; instead he's on TV talking about how there's nothing illegal about what he did. And then he'll complain about being tried in the media, no doubt.

Clueless responses from the Odebrecht government

Panama's image.

Panama's image.

What's coming out of the government is not much better. President Varela announced that the country would cooperate with international investigations but would also "defend its image" - apparently unaware that there's not much of an image left that anyone would want to defend.

On the website of the Presidency, we find various press releases dealing with the subject, telling us how committed Panama is to - again - defend its "image" through continued efforts to be transparent in its legal affairs and some new regulations concerning bearer shares.

We are also treated to this prose by the Panamanian government:

Panamanian authorities are calling on organizations, countries and media thoroughly review the content of publications, before calling into question our country´s commitment on transparency.
Panama is a serious country, a major player in the globalized world and is not fair to discredit work of an entire country that benefits the international community into disrepute.

"Panama is a serious country" - to say that in an official government statement means acknowledging that the seriousness of your country is indeed in doubt. What does that even mean, "a serious country"? As opposed to what? How serious? Serious in what?

The statement then goes on about how Panama has adopted laws against financial shenanigans. Anyone with just a bit of knowledge about this country knows how laughable that is: Panama's laws are not the problem; the problem is the institutionalized corruption that circumvents those laws and the hapless enforcement by a thoroughly corrupt judiciary.

After all, this statement comes from a government that just very recently manipulated the public bidding process for the new sidewalks in Panama City so that scandal-ridden Odebrecht would get the contract - the Brazilian company of which the head is in jail and that sparked a corruption scandal that involves - gasp - Mossack & Fonseca.

The #TryingToSaveFacePapers

In a series of tweets, our Foreign Affairs Ministry had this to say:

Meanwhile, at a press conference, President Varela's Chief of Staff, Alvaro Alemán, defended Panama's laws that allow Mossack & Fonseca to hide the fortunes of dictators and criminals, reported USA Today:

Alemán complained that France and other countries have unfairly blamed Panama for encouraging widespread corruption and said his government would fight back against the "campaign against Panama."

"We will not allow Panama to be used as a scapegoat," Alemán told a news conference.

"We will not allow?" What does Alemán plan to do about it, launch promotional videos for tourism? Arrest those who "use Panama as a scapegoat"? Invade France? What kind of amateurish crisis management is this anyway, to say this kind of stuff in a press conference? But really, this is how childish it gets on the isthmus: President Varela just tweeted that we would "continue to defend our institutions, Panama's name, and our financial system. We are Panama." He then linked to this video, with images of the metro and people telling how advanced Panama really is!

The #WhiteWashPapers

schemeThe graphic on the left (click it for the whole thing) shows the various uses of shell companies like those which Mossack & Fonseca was selling to its clients. It goes from green/legit uses to red/illegal uses. The official Panamanian response pretends that what happens in Panama is only and exclusively that what's listed as green. The illegal stuff simply doesn't exist in Panamanian government spin. A Panamanian law firm of a presidential advisor who launders money for mass murderers like Bashar al-Assad or Muammar Gaddafi - it doesn't exist in the fairy tale world painted by Panama's ruling class. In the face of massive evidence of the contrary published around the globe, this is a laughable, immature and even delusional response. Memo to Varela: Nobody is going to fall for the #DenialPapers.

Last but not least - take it from the leaking experts

Of course, we all want to know who leaked the files from the offices of Mossack & Fonseca. Our good friend, convicted money launderer and international fantasy man Kenneth Rijock, ran a completely fabricated Friesneresque story on some website telling us that is was an angry mistress of one of the two founders of the firm. We had a good laugh about that piece of fiction.

Cause, we can assure you, dear reader, that none of that is true. After all, we are experts at leaked data from law firms here at Bananama Republic. Please allow us to point you in the right direction: Remember how then-president Ricardo Martinelli in 2012 launched a scathing attack on Mossack & Fonseca, accusing them of laundering money for Muammar Gaddafi? And notice now, today, how mellow Mr. Martinelli - himself on the lam because of corruption cases against him in Panama - is about the whole affair? That's one clue.

Another is that Mossack & Fonseca certainly had no security in place on their computer systems. See Forbes on the matter:

FORBES discovered the firm ran a three-month old version of WordPress for its main site, known to contain some vulnerabilities, but more worrisome was that its portal used by customers to access sensitive data was run on a three-year-old version of Drupal, 7.23. That platform has at least 25 known vulnerabilities at the time of writing, two of which could have been used by a hacker to upload their own code to the server and start hoovering up data. Back in 2014, Drupal warned of a swathe of attacks on websites based on its code, telling users that anyone running anything below version 7.32 within seven hours of its release should have assumed they’d been hacked.

That critical vulnerability has been open for more than two-and-a-half years on Mossack Fonseca’s site. It remains a valid route for hackers to get more data from the firm and its customers. On its site, the company claims: “Your information has never been safer than with Mossack Fonseca’s secure Client Portal.” That boast now looks somewhat misguided.

Yet at the same time you don't just syphon off 2.6 terrabyte of data over Panama's internet. So it must have been done inside, by someone who knew what he/she was doing and knew what to look for and where. Intriguing, huh?


2 thoughts on “Panic in Panama over Panama Papers

  1. Thank you!!! I waited so long for more of your insighful articles. Martinelli must be grinning, even more happier if it came out that Varela and family has accounts too

  2. As one who has experience in IT Network administration, I can assure others reading this that 2.6 Tb. of Data would be nearly impossible to dribble out over the Network here in Panama (Okke is spot on about that point). It was most certainly accomplished from inside…the perp likely cloned the drive(s) and there by had a one-to-one copy of all Data residing on the drives at MF. The lack of hardened security within their offices is also not surprising one bit. Penny wise pound foolish comes to mind with all businesses when it comes to allocating proper IT budgets…and especially those here in Panama.
    It also would not surprise me in the least to find out Martinelli is certainly behind this.
    Who has the most to gain and lose here, the motive, and benefit???
    (The old follow the money rule as it were)
    Why, when looked at this way, that trove of Data would make for an awfully nice bargaining chip, a get out of jail free card if you will for someone in Martinelli’s position. If not scot free, then he certainly is the type of person to take all down with him..!!
    Scorched Earth policy is exactly how I imagine he would handle the last and ultimate card he could try to play since things certainly are not going his way in the legal system down here.

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