The commission, if not dead on arrival, quickly ended up on life support. Mr. Stiglitz and another board member, Mark Pieth, a Swiss anticorruption expert, resigned after only one official meeting because the government, they said, would not promise to make their final report public.
“You can’t have a committee on transparency and not be transparent,” Mr. Stiglitz said.
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Arnulfo Franco/Associated Press
The repercussions of this contretemps continued in the months leading up to the anticorruption conference. Each faction issued its own report. A prominent Panamanian lawyer publicly chastised professors at Columbia University, where Mr. Stiglitz teaches, for using the words “Panama Papers” in a course title, saying it unfairly singled out his country. And at the university’s World Leaders Forum in September, Mr. Stiglitz gently confronted Panama’s vice president for rendering what he said was an inaccurate account of why the commission had broken apart.
With the world’s economic powers intensifying their attack on tax havens, the commission’s failure to speak in one voice illustrates the difficulty of trying to reform a financial system, particularly in a small country where familial ties run deep and the financial interests of elite lawyers and bankers are embedded in offshore businesses.
Panama has taken some steps toward transparency. After initially balking, Panama did agree this year to a multilateral deal to provide the names of the real owners of offshore companies when other countries request them. And President Varela spoke at the opening ceremony of the anticorruption conference.
But more needs to be done, said Mr. Stiglitz, a former co-chairman of the committee. He and Mr. Pieth said they were not bitter, but rued Panama’s lost opportunity to serve as a model for other nations — including the United States — that do not fully comply with international standards of transparency.
Other commission members blamed internal conflicts, not the government, for resignations. “All institutions have been open and willing to share information, documents and even opinions,” Roberto Artavia Loria, a commission member, wrote in an email to Mr. Stiglitz
Even so, an examination by The New York Times of the business connections of the four Panamanian commission members — the fifth was Costa Rican — points to the challenges that Mr. Stiglitz and Mr. Pieth had to overcome.
One member, Nicolás Ardito Barletta, a former president of Panama under a dictatorship, helped to create the country’s offshore industry in the 1970s as minister of planning. Mr. Barletta also championed the country’s free-trade zone, a prime target of Mr. Stiglitz, who views lightly regulated, tax-advantaged zones as an invitation to money laundering.
A second member, Gisela Porras, was once a partner in a law firm that recently advertised: “Our corporate law is attractive for many reasons. First of all, shareholder information is not filed at the Public Registry, therefore granting confidentiality to beneficial owners.”
The commission’s other co-chairman, Alberto Alemán, is an independent director of Global Bank, one of three Panamanian banks whose outlook was recently revised by S & P Global to negative from stable, reflecting “shortfalls in regulation, supervision, governance and transparency in the Panamanian financial system.”
Mr. Alemán, a former canal administrator, had previously owned stock in a company that did millions of dollars in business with the Panama Canal. He also has three cousins who are or were partners in law firms with offshore services.
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After a Spanish-led consortium won the right to build locks for bigger ships at a rock-bottom price, internal arguments soon gave way to larger problems.
President Varela is also closely tied to law firms that handle offshore accounts. One Alemán cousin is now his chief of staff, and both his vice minister of foreign affairs and the minister of economy and finance came from the Morgan & Morgan Group, which includes a law firm known for its offshore business. And one of the president’s closest advisers until early this year was Ramon Fonseca Mora, a partner in Mossack Fonseca, the law firm that generated the Panama Papers. The German newspaper Süddeutsche Zeitung obtained the data and later shared it with the International Consortium of Investigative Journalists, a nonprofit group based in Washington.
Mr. Stiglitz initially wondered whether the government was serious about his appointment, but he said two things had convinced him that it was. Panama’s vice president, Isabel de Saint Malo, flew to New York to personally ask Mr. Stiglitz to join, and Mr. Pieth was also asked to serve.
The group met officially for the first time in June in New York. The honeymoon did not last long.
“Everyone was guilty of bad Googling,” said one person who knew the commission members. Mr. Pieth added, “We didn’t spend an awful amount of time on due diligence on our colleagues.”
Potential conflicts quickly became apparent, according to notes taken by an attendee. One member expressed concern about damage control, since the expanded canal was about to open — a moment of great national pride — and, the member said, “we will use that moment to say this is who we are and where our future is headed.” When the subject of a public registry of beneficial owners was raised, Mr. Stiglitz said, “you could see them blanch.” And, he added, there was no serious discussion about closer monitoring of tax-advantaged, free-trade zones, or the strong enforcement of the open-records law.
The group agreed that it should secure a promise from President Varela that its final report would be made public. “They said they would go to the government and get it, and they never did,” Mr. Stiglitz said.
Instead, on July 29, the group received a stern note from the government, saying that the presidential decree establishing the commission stipulated that the report “will be the property of and used by the Republic of Panama” and that it would decide what to share with the public. The government also said funds requested for operational expenses would not be coming.
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Rodrigo Arangua/Agence France-Presse — Getty Images
Compounding matters, Mr. Stiglitz and Mr. Pieth said they had been shocked to learn, other members had surreptitiously sent an “interim” report to President Varela without their knowledge or approval. That report, Mr. Stiglitz said, was too narrow and poorly written.
Mr. Pieth wrote his own stinging response. “I cannot help feeling that the president asked you to participate in the committee exactly for what you have done: to pull the emergency brakes when matters seemed to get tight for the Panamanian services industry.”
Around that time, Mr. Alemán, the co-chairman, visited Mr. Stiglitz in New York to tell him that the commission should disband.
The rump commission recently filed a final report, which Mr. Stiglitz said was not substantively different from the interim report. “They’re making a valiant effort to sound tough,” he said. “But the key weaknesses in the transparency framework have not been addressed.” He emphasized the importance of making all the names of beneficial owners public. “We are very big on the notion of a searchable registry, and they are very opposed to that,” he said.
Recent corruption investigations underscore their concern.
This year, United States officials publicly identified Nidal Waked and Abdul Waked and their associates as running a major money-laundering ring that allegedly helped drug traffickers hide illicit profits in dozens of shell companies and a Panamanian bank. Both men, who dispute the allegations, have long had a power base in the Colón Free Trade Zone, which is next to the Panama Canal.
In a statement, the United States Treasury’s Office of Foreign Assets Control said that by publicly identifying this ring and freezing the ring’s assets under United States control, it had disrupted the group’s ability “to launder drug-trafficking proceeds using trade-based methods, duty-free retail, real estate development and financial services throughout the region.”
In an unrelated investigation that has rocked Brazil’s political establishment, prosecutors there said they had the Panama Papers law firm, Mossack Fonseca, in their sights. “It is clear to us that there were at least two crimes committed by Mossack Fonseca’s office in Brazil — financial crime and organized crime,” said Jerusa Burmann Viecili, a Brazilian federal prosecutor.
She added: “Mossack Fonseca’s registering of offshores had an objective that was quite clear — to hide the truthful beneficiaries of these shell companies.”
Mossack Fonseca said its Brazil affiliate, or franchise, operated independently of the main office.
Brazil’s investigation, called Operation Lava Jato, or Operation Car Wash, has also alleged that workers of the Brazilian construction company Odebrecht, one of the largest in Latin America — and one of Panama’s public-works contractors — used shell companies to cover its tracks in a bribe-paying scheme.
Panamanian banks are alleged to have held some of the bribe money. Multibank, formerly known as Multi-Credit Bank, is cited in court documents as one of the places where funds were deposited. This financial institution’s outlook was recently revised downward by S & P Global.
An earlier version of this article misidentified who obtained the leaked documents known as the “Panama Papers.” They were obtained by the German newspaper Süddeutsche Zeitung, not the International Consortium of Investigative Journalists.
