Juegos de manos por parte del Gobierno en el trato de la industria de juegos de azar

ID DOC: 79031

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FECHA: 0000-00-00 00:00:00

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FUENTE: Embassy Panama

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PRIVACIDAD: CONFIDENTIAL

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REFERENCIA: VZCZCXYZ0000RR RUEHWEBDE RUEHZP #1842/01 2631535ZNR UUUUU ZZHR 201535Z SEP 06FM AMEMBASSY PANAMATO RUEHC/SECSTATE WASHDC 8984INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

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C O N F I D E N T I A L PANAMA 001836



SIPDIS



SIPDIS



DEPT FOR WHA/CEN ELIA TELLO



E.O. 12958: DECL: 08/04/2016

TAGS: ECON, EFIN, EINV, KCOR, PM

SUBJECT: GOP SLEIGHT OF HAND DEALING IN GAMING INDUSTRY



REF: A. PANAMA 676



B. PANAMA 973



Classified By: CDA L. Arreaga for reasons 1.4 (b) & (d)



1. (C) SUMMARY. Despite overcoming two key bureaucratic

hurdles, U.S.-based Merit Management continues to encounter

what they believe to be high-level GOP obfuscation and delays

in securing the license for its $8 million casino in Colon.

Merit attributes its delay to financial incentives from the

existing gaming industry to GOP officials. Senior GOP

officials reiterated President Torrijos is personally opposed

to the proliferation of casinos (reftels A & B). In separate

incidents, the Embassy received documentary and verbal

evidence supporting allegations of President Torrijos'

thwarting the 2005 licensing application by the Panamanian

company Royal Games under pressure from former President

Ernesto Perez Balladares. Perez Balladares is reportedly a

major shareholder in a competing gaming company and aspires

to the Presidency of the ruling PRD party. The cartel-like

dominance of existing industry operators with the apparent

support of the GOP, and the public debate over the social

effects of gambling in a country with a 40% poverty level

combine to inhibit competition in the gaming industry. END

SUMMARY



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MERIT LICENSE APPLICATION DELAYED BY THE PRESIDENCY

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2. (C) After almost a year in limbo, the gaming license

application of U.S. investor Merit Management proceeded from

the Gaming Board to the Pleno on July 19 where it was

approved. (The Pleno consists of the Minister of Economy and

Finance (MEF), Vallarino, the Controller Dani Kuzniecky and

Legislator Juan Hernandez). Post attributes this forward

movement to two factors. First, the replacement of Council

for Public Security and National Defense (CONSEJO) Director,

Leonel Solis, who had been accused of seeking bribes to

complete the processing of CONSEJO background checks

purportedly required by Merit's licensing application (Ref

A). Secondly, inquiries by Embassy to Controller Dani

Kuzniecky alerted the Pleno to the length of time the

application had been pending and began a series of inquiries

as to why the Gaming Board had not scheduled a Pleno meeting

in several months.



3. (SBU) Despite difficulty getting timely submissions from

Gaming Board Director Raul Cortizo for each step in the

approval process, Merit's contract with the MEF was signed

August 21 and approved by the National Economic Council

(CENA) on September 5. (The CENA consists of Minister

Vallarino, Controller Kuzniecky, Minister of Commerce Ferrer,

Banco Nacional Manager Juan de Dianous and a rotating member

of the Assembly.) After CENA approval, the application was

scheduled for Executive Cabinet review on September 6.



4. (SBU) On September 6, VP/FM Lewis reportedly informed

Merit executive and their local legal representation (Jimmy

Arias, close friend and advisor to Torrijos) that Merit's

license was not on the Cabinet agenda for that day. Later

that week, Merit reported they were advised they would be on

the agenda the following week. Merit had already received

written approval from the Gaming Board to install its gaming

machines and planned a "soft opening" (unadvertised) the week

of September 11 with a grand opening October 12.



5. (SBU) The September 13 Cabinet meeting also failed to act

on Merit's application, preventing its "soft" opening that

week. Merit executive told Econoff that Vallarino did not

show at the meeting purportedly due to an unrelated fall out

between Vallarino and Torrijos. According to Merit's

attorney and close friend of Torrijos, Jimmy Arias, Torrijos

claims he needs to make up to Vallarino but is not yet ready

to do so and doesn't want to exacerbate the alleged conflict

by ruling on Merit's application in Vallarino's absence.

With Torrijos scheduled to be out of the country at the UN

General Assembly opening, the earliest this application can

be reconsidered is September 27th. (Note: Torrijos is

scheduled to meet with various USG officials on the margins

of UNGA. End Note.)



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ROYAL GAMES ALLEGES HIGH LEVEL GOP CORRUPTION

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6. (C) Representatives from Panamanian company Royal Games,

Jose Ventura, Sr. and Jr., told Econoffs they had an

application for a bingo establishment before the Pleno in

April 2005. The evening of the Pleno meeting (April 18),

they received a phone call from Cortizo advising them that

their application had been approved. When no resolution was

received, they contacted an attorney at the Gaming Board and

recorded this conversation. This attorney at the Gaming

Board reportedly stated Director Cortizo received an irate

phone call from President Torrijos on Tuesday April 19 who

demanded this license be "unapproved" and said he didn't want

any more such establishments approved for 5 years.



7. (C) Royal Games' source at the Gaming Board further

alleged former Panamanian President Ernesto Perez Balladares

expected Torrijos to preserve the existing oligopoly in

Panama's gaming industry comprised of Thunderbird (Canada),

Codere (Spain), and Cirsa (Spain). The gaming industry in

Panama was privatized during the Perez Balladares

administration and the source stated Perez Balladares is a

major shareholder in Cirsa. Royal Games was directed to

approach the incumbent gaming companies and not the GOP to

move their license forward.



8. (C) Instead, Royal Games sought and received a directive

from the Supreme Court that the Pleno publish its resolution

from the April 18th meeting. On May 30, 2006 (one year

later), they received an official denial signed by Controller

Dani Kuzniecky, Minister Vallarino (who was not present at

the April 2005 meeting) and Assembly president Elias Castillo.



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WHAT'S AT STAKE

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9. (U) Press accounts of Gaming Board statistics report

Panama has officially licensed 13 full casinos and 26 gaming

rooms. Between slot machines and table games, $238 million

USD was wagered in 2005, up 10% from 2004. Citing the social

impact of gambling on Panama's poor families, National

Assembly Deputy Jorge Hernan Rubio (Partido Popular) proposed

modifications to Panama's Gaming Law 22 to limit casino

entrance to non-resident foreigners and "certified"

Panamanians/Panamanian residents with a monthly income of

$1000 USD or more. The legislation faced opposition from the

Gaming Industry and appeared to have died in committee.



10. (U) NOTE: According to media accounts, Thunderbird's

tribal gaming operations in California ceased operations in

1998 amid scandal and litigation. Leading Codere

shareholder, Joaquin Franco (grandson of Spanish dictator

Francisco Franco) was arrested in Arizona in 2004 for

allegedly skimming gambling proceeds, falsifying records and

attempting to bribe a gaming official. END NOTE.



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COMMENT

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11. (SBU) The explanations of the continued delay of Merit's

license application raise questions about transparency. In

conjunction with Royal Games' allegations, Merit's experience

suggests that powerful GOP and gaming industry interests may

be actively preventing other, perhaps more reputable players,

into their lucrative games.

ARREAGA