Two Former Panama Presidents Indicted for Corruption and Money Laundering

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The indictment of two former Panama presidents may mark a watershed development for the Central American nation’s fight against corruption.

On July 1, prosecutors announced corruption and money laundering charges against former presidents Ricardo Martinelli (2009-2014) and Juan Carlos Varela (2014-2019), summoning them for interrogation.

Martinelli’s indictment concerns his involvement in the “New Business” case, which centers on the alleged embezzlement of millions in public funds through the purchase of a publishing group, according to The Panama News.

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Meanwhile, Varela stands accused of accepting campaign donations as bribes from the Odebrecht construction giant when he was Martinelli’s vice president and then president himself. He has been under investigation since last summer, according to teleSUR.

Both men strongly denied the allegations on July 2.

What began in 2014 as a corruption probe in Brazil has since morphed into a massive regional corruption scandal, with the Brazilian construction conglomerate Odebrecht at its center. From Mexico to Argentina, investigators uncovered a pattern of the company bribing officials with campaign donations in exchange for infrastructure contracts across Latin America.

The investigations have ensnared dozens of high-ranking politicians and several hundred lower-level officials, lawmakers, and business tycoons.

InSight Crime Analysis

This is far from the first legal problem Martinelli has faced, but so far, he has sailed through them all. In 2017, he was arrested in the United States and extradited to Panama for a separate spying and corruption scandal. He spent two years in pre-trial detention before being found not guilty in court.

Martinelli appears confident that he will be exonerated once again in the “New Business” case. He reportedly refused to answer questions from prosecutors on July 2 but spoke to the press and claimed that he was the “greatest businessman in the country” and a victim of political persecution.

Martinelli ihas also been also embroiled in the Odebrecht scandal. According to Panamanian prosecutors, the Brazilian construction giant paid $59 million in bribes to secure public works contracts in Panama worth a total of $96 million during his presidency. Projects including road construction, the improvement of Panama City’s metro, and the expansion of the Tocumen International Airport. The preceding administration awarded just $5.5 million in contracts to the company.

However, charges were never brought against Martinelli.

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Panama’s Odebrecht investigation has been at a slow boil since the end of Martinelli’s presidency in 2014. By 2018, the country’s head prosecutor for the Odebrecht case, Zuleyka Moore, had launched investigations into 76 individuals, resulting in five convictions and the recuperation of more than $255 million. The investigations have included probes into the conduct of former economy minister Frank de Lima, former public works minister Jaime Ford and two of Martinelli’s sons.

Proceedings against Martinelli and now Varela have lagged, complicated by other investigations into the administration and the technicalities of Martinelli’s extradition from the United States.

In May, Attorney General Eduardo Ulloa rotated Moore off of the Odebrecht case. The subsequent indictments against Martinelli and Varela could be attributable to Ulloa’s more aggressive decision-making.

Despite this recent push from state prosecutors, Martinelli and Varela have remained defiant and their conviction is not a foregone conclusion.

Martinelli maintains that his indictment violates the “specialty principle” of the 1904 extradition agreement between the United States and Panama. The clause states that one cannot be charged for crimes other than those which provoked the extradition — in this case, the political spying allegations for which Martinelli was cleared in 2019.

For his part, Varela has no such extradition agreement to rely on but has denied the allegations. He maintains that the Odebrecht payments were donations, not bribes.

Varela is just the latest former Latin American president to be formally indicted or convicted in the Odebrecht scandal, following Rafael Correa of Ecuador, Ollanta Humala of Peru, Michel Temer and Luiz Inácio Lula da Silva of Brazil, and Mauricio Funes of El Salvador.

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