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).

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Summary
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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.

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What Happened?
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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.

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Who's Involved?
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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.

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Comment
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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