Panama Supreme Court Ruling May Leave Lawyers and Money Launderers Jobless
(http://narcosphere.narconews.com/) Panama's Supreme Court took a decision the 17th of this month in a libel case brought by HSBC bank USA/Panama against a Canadian expatriate that has far reaching consequences for the country's (in)famous banking and corporate secrecy which has made it a money laundering and tax dodging haven over the years.
The decision will hit hard in that - substantial - part of the offshore finance business where secrecy is essential for survival: (drug) money laundering and (corporate) tax evasion. Investigations and arrests of narco kingpins invariably lead to Panama where drug trade profits are laundered and then hidden in numerous corporate structures. The real estate construction boom thrives on dirty money, and the DEA described the industry as follows:
"Panama is one of the world's largest offshore financial centers. Panama's offshore financial sector includes international business companies, offshore banks, captive insurance companies and fiduciary companies. Approximately 34,800 new offshore corporations were registered in Panama in 2007, as of October 2007. As of June 2007, Panamas had 85 commercial banks: 2 official banks, 14 local banks of general license, 26 foreign banks of general license, 34 banks of international license, and nine representative offices. Shell companies are permitted and have been used by a wide range of criminal groups around the world. Bearer shares are permitted for corporations and nominee directors and trustees as are allowed by law. The Government of Panama (GOP) regulates casinos, but does not regulate Internet gaming sites."
Panama's banking and money laundering industry is not, as one may gather from the frowned comments of the State Department, a Panamanian invention: Turning Panama into a tropical version of Switzerland has been an entirely US affair. Soon after the military coup of 1968, Nelson Rockefeller visited dictator Omar Torrijos. Rockefeller's position as a special envoy of the Nixon government neatly coincided with the interest of the Chase Manhattan Bank - owned by the Rockefellers - to establish a financial center in Panama with firm banking secrecy and no other rules to speak of whatsoever. Upon writing and implementing the necessary laws - a convieniently easy process under a dictatorship - a plethora of other banks set up shop in Panama, heaps of lawyers saw opportunities as well, and quickly the place bustled with legitimate and illegitimate financial activity.
HOW IT WORKS, AND WHAT HAPPENED
It's a common way to protect assets against frivolous lawsuits, creditors and the tax man - or for people who just value their financial privacy: Funds are put in a "Private Interest Foundation" which has no apparent relation with the original owner other than that he can open and manage bank accounts in its name. Panama corporations, which allow for bearer shares to be issued, are also frequently used for this purpose. Or a combination of both. In Panama, where using criminal fraud complaints and asset seizures as a tool to resolve common business disputes is an essential part of the business climate, these asset protection structures are widely touted by banks, the many law firms and other financial services outfits as "safe" and even "bullet proof". That, however, is no longer the case.
Peter Gordon, a wealthy Canadian retiree, moved his money to a foundation and then the foundation opened accounts with HSBC bank Panama. However, Gordon was unhappy with the services of that bank, closed the accounts and wired the foundation's funds to another Panamanian bank. He then posted a number of messages criticizing HSBC's service and excessive fees on a Yahoo forum for expatriates in Panama.
These messages very much upset one Joseph Salterio, manager of HSBC Panama. Together with some friends, American dentist Charly Garcia (who is also president of the American Society), insurance broker Kevin Bradley (who sells health insurance to expatriates for an HSBC-owned company) and later retired air force man Donald Winner (who is now a PR man for underworld figures), a plan was hatched to get even and make some money in the process. HSBC Panama/USA sued Gordon for alleged damages for $5 million, and then proceeded to have all his assets in Panama sequestered. It made the front page in the local press.
In itself, the case wouldn't be worth mentioning as it is typical for the wonderful Panamanian business and expat scene where this type of cloak and dagger, bickering and backstabbing is simply part of daily life. However, what makes it important is that not just Gordon's assets were sequestered, but those of the supposedly "bullet proof" foundation as well. The foundation's lawyers sought remedies in the courts, but now the Supreme Court has decided that indeed such foundations may be sequestered even when they have formally nothing to do with a person who is accused of libel.
This will have many consequences that the HSBC gang and the court haven't thought of. Trust in Panama's asset protection industry had already suffered from these antics and the Supreme Court decision will no doubt shy away more money being deposited in Panama; depositors look for privacy, not high profile court cases and frivolous asset seizures by rogue bankers. It was already extremely easy to sequester anyone's possessions in Panama - dream up a case, post a bond, off you go - and now one may include those (anonymously) held by corporations and foundations. This doesn't just hurt legitimate business or innocent retirees. It's the nightmare of every money launderer or con man who thought his ill-gotten gains were safe under the corporate veil: They no longer are.
