PANAMA: TORRIJOS ADMINISTRATION SILENT AS MAJOR

C O N F I D E N T I A L PANAMA 001817 SIPDIS SIPDIS E.O. 12958: DECL: 11/27/2017 TAGS: PGOV KCRM PREL PM SUBJECT: PANAMA: TORRIJOS ADMINISTRATION SILENT AS MAJOR CORRUPTION SCANDAL BREAKS Classified By: POLCOUNS Brian R. Naranjo. Reason: 1.4 (d). -------------- Summary -------------- ¶1. (C) Though thirteen days into its first major corruption scandal, no senior Torrijos Administration official has yet to speak out publicly regarding the alleged embezzlement of approximately USD 892,932 from the Fund for Educational Equality and Quality (FECE). The scandal, which broke on November 16, has already ensnared seven governing Revolutionary Democratic Party (PRD) members. Press reporting on November 28 indicated that this scandal had spread to Chiriqui Province in western Panama where allegedly an additional estimated $128,000 was embezzled in 13 "irregularities between January 1, 2003 and August 31, 2005." While a number of opposition political leaders -- Democratic Change (CD) Party President Ricardo Martinelli, Patriotic Union (UP) President Guillermo "Billy" Ford, and UP VP Jose Raul Mulino -- have condemned this emerging scandal, PRD Youth Secretary Joaquin Vasquez has been the highest ranking PRD member to make any comment, assuring the media that Torrijos "would condemn" this alleged corruption. End summary. -------------- What Happened? -------------- ¶2. (SBU) According to a Ministry of Education (MEDUCA) audit, MEDUCA employees in the Panama City area wrote a total of 378 checks to corporations they either owned, had an interest in, or with whom they had close relationships. FECE monies, intended for projects to improve the quality of and equality of access to education, were allegedly diverted into the hands of the conspirators. Allegedly none of these disbursements were supported by any documentation such as bills, work orders or receipts. At least eleven public schools in San Miguelito formally complained to MEDUCA about school improvements that were never executed as requested in extensive paperwork. Allegedly, MEDUCA only conducted its audit under significant pressure from Panama's independent Comptroller General's Office. The Chiriqui Province portion of this scandal is only just now breaking. -------------- Who's Involved? -------------- ¶3. (SBU) To date, all the individuals implicated in this scandal are PRD party members and those holding GOP positions were appointed by the Torrijos Administration. From press reporting, seven individuals have been implicated: a) Betzy Guzman -- This MEDUCA Regional Educational Director for San Miguelito was appointed by former Education Minister Juan B. Bernal who is currently serving as Panama's Ambassador in Brasilia. Though not charged, she has been suspended from ministerial duties. Media reports indicate that she may be back working as a teacher in a public high school. b) Joaquina Maria Gallardo Torregrosa -- Joaquina Gallardo was an accountant at the Regional Educational office in San Miguelito and worked for Guzman (see a above). Her sister, Margarita Gallardo (see c below),has also been implicated. Both sisters are alleged to be close friends of Guzman's. Joaquina has been charged and her bail has been set at USD 200,000, though her whereabouts are currently unknown. c) Margarita Esther Gallardo Torregrosa de Aldeano -- Though not yet charged, Margarita Gallardo's name has come up repeatedly in connection with this case. She is the sister of Joaquina Gallardo (see b above). Presently, Margarita is the National Director for Housing Improvements at the Ministry of Housing (MIVI),a position to which she was appointed by Minister of Housing Balbina Herrera. Along with Minister of Education Belgis Castro, she is a delegate to the PRD's National Directorate Commission (CDN) for San Miguelito and is a board member of the PRD's San Miguelito regional branch. d) Augusto Garcia -- Garcia is the National Director for FECE. He is also the husband of Democratic Change (CD) National Assembly Deputy Dalia Bernal who is the sister of former Minister of Education and current Ambassador to Brazil Juan B. Bernal (see a above). e) Mitzi Miranda -- This San Miguelito FECE employee has been charged and is in custody. f) Pedro Pablo Saenz -- A teacher at the Republic of France public school in San Miguelito, Saenz has been allegedly involved in passing bad checks. His whereabouts are unknown. (Note: This school has no formal affiliation with France or the GOF. Schools in Panama often are named for countries.) The Gallardo sisters noted above (see b and c) are nieces of current Vice Minister of Education Zonia Gallardo de Smith. -------------- Comment -------------- ¶4. (C) This matter has the potential to evolve into a major corruption scandal. For an administration that campaigned to a large extent on its "zero corruption" pledge, the silence from senior Torrijos Administration officials is deafening. To date, the highest ranking PRD official to comment has been PRD Youth Secretary Joaquin Vasquez who, in an aside to independent daily La Estrella, assured readers that President Torrijos "would condemn" this scandal. How the Torrijos Administration deals with this emerging debacle will provide unique insight into this Administration's commitment and willingness to combat corruption not only within its own government, but its own party. EATON