(C) VISAS DONKEY: CORRUPTION 212(F) VISA

C O N F I D E N T I A L SECTION 01 OF 06 PANAMA 001553

SIPDIS

DEPARTMENT FOR WHA/CEN

E.O. 12958: DECL: 07/25/2025
TAGS: PREL PGOV PM POL CHIEF
SUBJECT: (C) VISAS DONKEY: CORRUPTION 212(F) VISA
REVOCATION: WINSTON SPADAFORA

REF: A. 04 PANAMA 1274

B. 03 PANAMA 3294

C. 04 PANAMA 0823

D. PANAMA 0629

E. PANAMA 0778

Classified By: AMBASSADOR LINDA WATT FOR REASONS 1.4 (B) AND (D).

Action Request
--------------

1. (C) Embassy Panama is seeking a security advisory opinion
under section 212(f) of the Immigration and Naturalization
Act in accordance with Presidential Proclamation 7750,
suspending entry into the United States and revoking the visa
of Winston Spadafora (DPOB: 22 DEC 1941; Panama). Embassy
information indicates that during his ongoing tenure as a
Supreme Court Justice, Spadafora has directly benefited from
public corruption, specifically bribery, which has had and
continues to have a direct and serious adverse effect on U.S.
national interests, as defined narrowly and broadly. End
Action Request.

Who Is Winston Spadafora?
--------------

2. (C) Widely rumored to be Moscoso's lover, Winston
Spadafora ran Mireya Moscoso's successful 1999 presidential
campaign. He then served as Minister of Government and
Justice until Moscoso named him to the Supreme Court in 2001.
The Legislative Assembly by a single vote confirmed him and
fellow Supreme Court magistrate Alberto Cigarruista on
January 9, 2002 in a proceeding marred by egg throwing and
accusations against President Moscoso for allegedly bribing
legislators. Spadafora entered politics following the brutal
torture and murder of his brother, Hugo Spadafora, in 1985 at
the hands of Manuel Noriega's Panama Defense Forces. The
murder marked a turning point for the dictatorship's
fortunes. Spadafora worked unceasingly to publicize
Noriega's involvement in his brother Hugo's murder, meeting
frequently with U.S. congressional staff, and even going on
an extended hunger strike. Blacklisted by Noriega, Spadafora
was forced to close his law practice for lack of business.
Not surprisingly, the experience left Spadafora a rabid
opponent of the Democratic Revolutionary Party or PRD, which
at that time was the party of the dictators.

What Did Winston Spadafora do?
--------------

3. (C) Embassy possesses credible and compelling information
indicating that during his 2002-2005 tenure as a Panamanian
Supreme Court Justice (magistrado),Spadafora has willfully
participated in and personally gained from an established
system of bribery in which payoffs are actively solicited or
accepted from claimants with cases before the high court. In
some cases he actively solicited and accepted bribes on his
own. Spadafora is hardly alone. He is part of a group of
seven justices on the nine-member Court, who routinely accept
bribes and issue legal decisions contrary to reason. He
epitomizes everything that is wrong on the Court, where
unbridled venality and a culture of entitlement to ill-gotten
riches continue to reach new depths. (Note: Embassy may seek
security advisory opinions for several more Court magistrates
of varying political stripes. End note.)

Panama's Justice Problem
--------------

4. (C) The Supreme Court's corruption, exemplified by
Winston Spadafora, is a fundamental cause for the Panamanian
public's lack of confidence in the rule of law. The
politicized judiciary stands at the axis of a dangerously
delegitimized political system. Increasing public disgust
and cynicism about the system are fueled by accurate
perceptions of official impunity, a culture of shameless
entitlement, and growing indices of poverty and income
disparity. The Court's actions and the attitudes they breed
directly undermine Panama's democratic institutions. The
Supreme Court is the final arbiter of disputes relating to
interpretation of the law and must rule on issues relating
directly to Panama's constitution. To the extent that
justices base their decisions on personal enrichment instead
of applicable law, they undermine not only the Court, but the
legislative branch which enacts the laws and the executive
branch which enforces them.

How Judicial Corruption Affects U.S. Interests
-------------- -

5. (C) Panama's politicized, corrupt Supreme Court damages
U.S. interests in two ways: narrowly, through corrupt Court
actions that negatively affect specific U.S. policy
objectives; and broadly, by undermining respect for the rule
of law, taxing an already impoverished polity, and corroding
the bases of popular support for democracy. Both are serious
impositions on U.S. interests, though the broad effect is the
more dangerous one over time, as poor, cynical voters may
turn for relief to anti-democratic populist demagogues, a la
Venezuela's Hugo Chavez. More concretely, the Embassy's
principal Mission Program Plan objectives include
anti-corruption and increasing transparency in government.
The actions of the Court have thwarted both objectives and,
in the process, frustrated a sizable USAID program (see Para
12). The Embassy's Narcotics Affairs Section also is a major
contributor to improving judicial processes, in particular
with its "Culture of Lawfulness" program.

The Corrupt Court and the Torrijos Government
--------------

6. (C) How to reform Panama's judicial system is a conundrum
for President Martin Torrijos. Torrijos, who was elected in
2004 on a "zero corruption" pledge, has not yet found a
method of legally attacking the corrupt justices and forcing
Panama's dysfunctional judicial system to take action against
the obviously corrupt figures from the previous
administration. In February 2005, after public name-calling
among Magistrates unloosed a public outcry for Torrijos to
fire them all, the president appointed a commission to
investigate judicial reform. That commission will make its
findings known in August 2005. (See PANAMA 0629, "PANAMANIAN
SUPREME COURT FRACAS BLURS GOVERNMENT FOCUS ON SOCIAL
SECURITY REFORM," Reftel D.) Embassy believes that revoking
Spadafora's visa will give a big fillip to Torrijos's resolve
to "do something" about the Court.

Shameless Cases, Senseless Decisions
--------------

7. (C) Panama's Napoleonic-law-based legal code requires the
Supreme Court to adjudicate every case brought before it.
Thus, virtually every important Panamanian legal case, quite
regardless of merit, eventually winds up before the Court.
And anything can become a legal case. (See Para 12.) Must
the former President's sister account for $8.5 million in
public funds donated by Taiwan? Must the former President
produce receipts and vouchers to show how she disposed of $25
million in "discretional" spending? Is a company under
investigation for fraudulently obtaining government subsidies
entitled to "damages" because of the investigation? Can a
known drug trafficker be investigated and tried in Panama?
Is a Panamanian-flagged ship illegally carrying arms to
Colombian guerrillas and bearing falsified Panamanian police
documents a proper subject for investigation? Does a
developer (and close associate of Spadafora's) have to pay
$2.1 million back taxes to the authority that administers the
reverted areas in the former Canal Zone? All these and more
are standard fare for the Court, which always seems to come
out on the wrong side of justice, contrary to the dictates of
reason, with Magistrate Spadafora in the lead.

Running the Court as a Racket
--------------

8. (C) The Court sets the tone for society which has grown
ever more cynical by the Court's own example, and that tone
can be summed up as, "Everyone lies, cheats, and steals and
no one is punished, so why shouldn't we?" Crudely put, the
Justices run the Court as a racket. Panama's Supreme Court
magistrates decide cases based on a careful calculation of
political or financial benefits, to themselves, their
friends, and their political patrons. They run the Court as
a money-making venture, without regard for the law, the needs
of the country, or the public good. Very often, the arcane
legalisms and arguments that are the Court's stock-in-trade
make it very difficult for the average person to follow what
is going on and act shields the magistrates from public
scrutiny. Nonetheless, people assume that venality rules at
the Court and they are right.

For Sale to the Highest Bidder
--------------

9. (C) A well-placed, reliable source recently detailed for
EmbOff the path of a typical Supreme Court case in Panama.
He explained that in virtually every case brought before the
high court, Justices openly discuss among themselves the size
of the payments they expect and exactly how each Justice will
rule. The Justices decide cases based on each party's
perceived ability to pay. They then negotiate the price of
their votes with the attorney from the designated "winning"
party. They even prepare well-argued dissenting opinions to
elicit money from the losing clients and attorneys, who pay
to maintain good relations with the Court in the future.
Legal arguments are irrelevant. Precedents are used
arbitrarily, if they fit the Court's needs of the moment.
"There is no such thing as a successful trial attorney in
Panama," the source said. Everything depends on money. (See
04 PANAMA 1274, "SOMETHING'S ROTTEN IN PANAMA'S SUPREME
COURT," Reftel A.)

Follow the Money
--------------

10. (C) The Magistrates ask those who come before the Court
"What ruling do you want? What do you want us to do? And
how much are you prepared to pay?" After decisions are set,
negotiations begin between the Justices and parties to the
case. Once the bribe money is agreed upon, the Justices
split it evenly, including those who lodge dissenting
opinions. Settlements often are six figures and up. The
source noted that even attorneys who believe they have an
iron-clad case are willing to pay off the magistrates to
build "good will" for future cases. (Comment: Magistrate
Adan Arjona, whose personal relations with the other
magistrates are bad, verging on openly hostile, appears not
to participate in this graft. His frequent lone, dissenting
vote is an indication of his probity. End Comment.)

Institutionalized Conflict of Interest
--------------

11. (C) The orchestrated logistics of the Court's purchased
decisions are chillingly crass. Many of the Justices'
alternates (Suplentes) work for and receive salaries from
both the high court and influential Panamanian law firms
pleading cases before the Court. They are the nexus between
the Supreme Court and prosecution and defense attorneys.
(Comment: "Conflict of interest" does not exist as a concept
in Panamanian political culture, including the courts.
Politicians and Supreme Court magistrates routinely use
public office for private gain. The heart of the Supreme
Court's business, in other words, is routine,
institutionalized conflict of interest. End Comment.)

Thumbnails of the Court's Misdeeds and Spadafora's Role
-------------- --------------

12. (C) The Court's already notorious judicial behavior
seemed to decline even further during the nine-month tenure
of Cesar Pereira Burgos as Chief Justice, and continued after
his October 2004 ouster (having passed the retirement age of
75 for public officials).

During 2004-2005, Panama's Supreme Court has

-twice ordered restitution of a controversial government
contract and freeing of assets blocked by Comptroller Alvin
Weeden, concerning the Ports Engineering Consulting
Corporation (PECC) scandal (see Reftel B). (Spadafora voted
with the dissenters on 6/11/2004 in the 6-3 vote, apparently
to protect his good friend Weeden, who had gone after former
president Ernesto Perez Balladares and Martin Torrijos's
cousin, Hugo Torrijos.)

-quashed an investigation (9/17/2003) of several legislators
who allegedly took bribes to approve the controversial CEMIS
case, even after one legislator admitted taking a bribe on
television. (Spadafora voted with the 6-3 majority. Arjona
dissented. See Para 16.)

-in separate cases, threw out well substantiated charges
against an Israeli arms trafficker on 3/30/2004 (see Para 13
below),and a Colombian narcotrafficker on 4/30/2004 (see
Para 14 below),and freed them both. (In both cases,
Spadafora voted with the 8-1 majority and Arjona dissented.)

-thumbed its nose in (late May 2004) at $170,000 in FY2004
USAID funds to improve judicial transparency by pulling the
plug on instant internet publication of Court decisions, an
Arjona initiative. (This decision involve a ruling by chief
justice Pereira Burgos, not a formal Court vote. According
to a Court insider and Embassy confidant, Chief Justice
Pereira and Spadafora in particular were "very interested" in
keeping the Court's activities and decisions as much out of
the public eye as possible.)

-blocked an investigation and public disclosure (5/11/2005)
of how former presidents Moscoso and Perez Balladares each
spent $25-million-plus in "discretional" funds. (Spadafora
was not involved in this provisional decision. Arjona was
the lone dissenter.)

-blocked an audit (2/28/2004) into the use of $12 million in
funds donated by Taiwan, purportedly to build Museo del Tucan
and a public hospital, because the funds were deposited in
Mar del Sur, a private foundation controlled by former
president Moscoso's sister, Ruby Moscoso. (Spadafora voted
with the 8-1 majority. Arjona was the lone dissenter.)

-blocked an order (6/22/2005) from a state finance bureau
requiring the Figali Convention Center to pay $2.1 million in
back taxes. (Spadafora voted with Magistrate Hoyos in this
2-1 provisional decision. Arjona dissented. Jean Figali is
a close friend and business associate of Spadafora. See Para
19 below.)

-blocked an ongoing investigation (6/24/2005) at Pana
Habanos, a Panamanian cigar company under suspicion for
fraudulently collecting $2.3 million in state subsidies, and
ordered the state to pay hundreds of thousands of dollars in
damages. (Spadafora again voted with Magistrate Hoyos in
this 2-1 decision. Arjona dissented. See Para 20.)

Yelenik-Otterloo -- Insufficient evidence?
--------------

13. (C) The Yelenik-Otterloo case (See 04 PANAMA 0823,
"PANAMANIAN SUPREME COURT THROWS OUT CHARGES AGAINST ISRAELI
ARMS SMUGGLER," Reftel C) involved a group of alleged
conspirators, led by Israeli citizen Shimon Yelenik, who used
a Panamanian-flagged vessel (the Otterloo) to smuggle arms
(among them 5000 AK-47s and 2.5 million rounds of ammunition)
from Nicaragua to Colombia, for use by the Colombian AUC
Paramilitary Forces (Autodefensas Unidas de Colombia).
Investigators of the Organization of American States (OAS)
determined that Shimon Yelenik had fraudulently claimed to
represent the Panamanian government in making the arms
purchase and had used forged Panamanian National Police
purchase orders to arrange the sale. The Otterloo filed
documents claiming its destination was Panama, though in fact
its true destination was Turbo, Colombia. Panama's Supreme
Court Justices found the evidence did not link the case
"sufficiently" to Panama and ruled they had no jurisdiction.
They ordered Yelenik, who at that time was incarcerated in
Panama, to be released immediately.

What About Henao Montoya?
--------------

14. (C) Reminiscent of Yelenik, the Court more recently
ruled (date) that Panamanian prosecutors had not presented
sufficient evidence to continue to hold known drug trafficker
and money launderer Lorena Henao Montoya. They ordered her
immediate release. La Prensa reported the ruling in an
article titled "Another Ruling to Remember" that begins,
"While the Supreme Court of Justice frees presumed
narcotraffickers in Panama, in Colombia they put them behind
bars." (Note: Colombian authorities arrested Lorena Henao
Montoya immediately upon her arrival in Bogota. She is the
sister of convicted drug dealer Jesus Arcangel Henao Montoya,
who was remanded to USG custody in DATE after residing for
several months in Panama under an assumed identity. Arrested
in Panama in January 2004, she also was the wife of Ivan
Urdinola Grajales, who headed the Colombian Valle Norte drug
cartel until his murder in prison in 2002. Lorena later
married Urdinola's bodyguard; both were suspected to be
complicit in Urdinola's murder. End note.)

28 Volumes of Evidence Were Not Enough
--------------

15. (C) Supreme Court Magistrate Adan Arjona (protect),the
Court's outspoken reformer and one of only two justices not
in the Embassy's 212(f) cross hairs, gave AID Director and
POL Counselor a copy of his dissenting opinion in the Henao
Montoya case. Arjona's dissent notes that the arrest order
contained 28 volumes of evidence and alleged that Lorena
Henao Montoya used her driver's name to register her illicit
property in Panama. Investigators presented evidence that
allegedly identifies her as "the true leader of a
macro-criminal apparatus." Arjona said that the Court's
ruling on Lorena Henao Montoya and similar cases have had an
extremely demoralizing effect on dedicated government
prosecutors. (Note: The other justice who has not attracted
negative attention from the Embassy is Esmeralda Arosemena de
Troitino, whom President Torrijos appointed in September 2004
to finish out the term of then-Chief Justice Pereira Burgos.
End note.)

A Good Month For Bribes
--------------

16. (SBU) Spadafora's role in the CEMIS corruption case has
linked his name inextricably with a scandal that probably has
evoked the most public revulsion in Panama's history. CEMIS
-- an ambitious, $400 million air, land, and sea
infrastructure project, to be built on reverted land near
Colon -- was approved by the Assembly on December 29, 2002.
In highly contentious, controversial votes on January 9, the
Assembly confirmed Winston Spadafora and Alberto Cigarruista.
Then-President Mireya Moscoso allegedly bribed several PRD
legislators in the PRD-controlled Assembly, one of them
Carlos Afu, to ensure the confirmations. The new justices
took the oath of office on January 12, and Moscoso signed the
CEMIS bill on January 15. On January 14, 2002, PRD
legislator Balbina Herrera (now Minister of Housing) publicly
denounced Afu for taking a bribe to vote for Spadafora and
Cigarruista. On January 16, 2002, Afu appeared on TV waving
a large wad of cash, claiming it was a $6,000 down-payment on
a $20,000 bribe to vote for CEMIS and crowing that he was not
the only PRD legislator whose vote had been bought. (Note:
During 1/16/2002 news conference, Afu kept his mouth shut
about any Spadafora/Cigarruista bribes. Afu got away with
bucking the PRD on the Spadafora/Cigarruista and CEMIS votes,
kept his seat in the Assembly, never was prosecuted, and
finally won reelection as an Arnulfista (Panamenista) in the
2004 election. The CEMIS bribes allegedly came from the
privately owned San Lorenzo Consortium. See PANAMA 0778,
"PANAMA ATTORNEY GENERAL TESTS TORRIJOS ADMINISTRATION,
REOPENS CEMIS AND SUPREME COURT BRIBERY CASES." See Reftel

E. End note.)
CEMIS And Spadafora
--------------

17. (C) Following Afu's widely viewed TV escapade, the
Public Ministry mounted an investigation into CEMIS for its
allegedly corrupt practices, which CEMIS challenged before
the Supreme Court. The Embassy has developed specific and
credible information of a substantial payoff made to
Spadafora for a favorable ruling in the CEMIS case.
According to Embassy information, Spadafora, though his
agent, solicited a bribe of $500,000 to rule in the
claimant's favor. The claimant eventually was successful in
negotiating the payoff amount down to $250,000. After the
payoff, the case was decided in the claimant's favor.
Following a Public Ministry investigation, in September 2003,
with Spadafora voting with the majority, the Supreme Court
voted 6-3 to close and nullify the Public Ministry's
investigation. CEMIS construction never got under way.

Spadafora Shakes Down a Banker
--------------

18. (C) A Panamanian banker recently told POL Counselor the
following story that implicates Spadafora in what essentially
was a shakedown. A year or two ago a Panamanian company
stopped making payments on a six-figure loan to his bank,
only several months after the loan was made. The banker
moved swiftly to seize the firm's major new equipment assets,
which the firm had bought with the loan, as was his right
under the terms of the loan. The firm's partners protested
the seizure and threatened to sue. The banker then received
a visit from one of the attorneys regularly associated with
the Supreme Court. The attorney said, "We think you'll have
to settle for 30%." "Why should I settle for 30%?" the
banker countered. The lawyer then made a call on his cell
phone. "Winnie," he said, "can you fax over that decision
(fallo)?" (The banker confirmed that the lawyer was talking
to Winston Spadafora.) The case had not actually reached the
Supreme Court yet, the banker explained to POL Counselor, but
Spadafora had written a decision in advance, with the
expectation of spurring a speedy out-of-court settlement and
pay-off. The "decision" finding in favor of the plaintiffs
arrived by fax and the banker read it. The banker said he
had no choice but to settle out of court for 30% of the
principal. He assumed some portion of the remaining 70% was
split between Spadafora and the attorney.

Figali Convention Center
--------------

19. (C) The Moscoso administration awarded a development
permit to Jean Figali under terms that critics called overly
generous. The result was the Figali Convention Center on the
Amador causeway outside of Panama City and within the
"reverted areas" under the jurisdiction of the Interoceanic
Region Administration (ARI). An Embassy contact told EmbOff
that in return for a "favor" Spadafora had done for him at
ARI, Figali had paid part of the costs of Spadafora's luxury
apartment. Figali by 2005 was in arrears to the tune of $2.1
million in back taxes owed to ARI. Spadafora's Court
decision suspended Figali's payments.

Pana Habanos
--------------

20. (C) Pana Habanos collected $2.3 million in export
subsidies based on what the Comptroller General claimed were
inflated cigar export figures. The amount of subsidy due to
the firm based on what the Comptroller determined to be the
firm's actual level of exports should have been $472,000.
Thus the firm owed the state something over $1.8 million,
exclusive of damages and a criminal fraud prosecution. But
in the world of Panama's Supreme Court the ordinary laws of
physics don't always apply. Spadafora's Court decision
reversed logic and found that the state had falsely accused
Pana Habanos and owed it an unspecified amount of damages.

Why Proclamation 7750 applies
--------------

21. (C) Through sustained action that represents serious
adverse effects on the national interests of the United
States and severely undermines the democratic institutions of
Panama, Winston Spadafora knowingly chose to abuse his
position in Panama's highest court for his own personal
enrichment. Spadafora represents much of what is wrong with
Panamanian politics and exemplifies the overwhelming
difficulty the GOP faces in enacting meaningful judicial
reform. If corruption is rampant and unpunished at the
highest levels of the its judicial system, Panama has little
hope of success in confronting entrenched corruption
elsewhere in government and the business community.

Current Visa/Travel Plans
--------------

22. (SBU) Spadafora has not been informed that he may be
covered by Presidential Proclamation 7750, under section
212(f) of the INA. Spadafora currently has a valid B1/B2
visa that will expire on 18-DEC-2005. Embassy is not aware
of any specific or immediate travel plans.

Embassy Recommendation
--------------

23. (C) Based on the facts of the case, Embassy recommends
that Spadafora's visa be revoked, that he not/not be
permitted to travel to the U.S., and that no waiver be
granted should he apply for one.


24. (SBU) If Department authorizes visa revocation, Embassy
plans to confirm the statutory grounds for revocation and the
fact that it occurred if consulted by the press.

WATT