The Riego de Tonosi contract contemplated two multimillion dollar surety bonds that backed up both the design and execution of the project. Nevertheless, the government of Juan Carlos Varela failed to exercise them and chose instead to launch penal investigations into the case.
A report by the comptroller is general's office to which this newspaper had access (Num.DAL-003-ADM 2012) confirmed the existence of a surety bond worth $23.2 million, whose maturity extended three years after the completion and delivery of the project.
Additionally, there existed another surety bond worth $15.5 million, covering 100% of the money the government had put up in advance for the project, some $31.16 million representing 20% of the total project consideration.
The Riego de Tonosi project was worth an estimated $155m: its aim was to improve agricultural production in the area through better irrigation techniques.
Conflict of interest
Upon signing the contract with the Agriculture and Fisheries Ministry (Mida) in 2012, project winner
Hidalgo & Hidalgo produced two surety bonds issued by insurance company Suramericana S.A. The bonds issuance was handled by Jose Joaquin Riesen, then general manager of the insurer at the
time.
On January 6 2015, President Juan Carlos Varela appointed Mr. Riesen to head the Panamanian Insurance and Reinsurance regulator.
A few months earlier, Mr. Riesen had left Suramericana S.A. for no apparent reason, only to be appointed by the president to the regulatory body that played a key role in cases where state institutions were supposed to execute surety bonds on allegedly nonperforming contracts.
Panama America enquired with Mr. Riesen over his involvement in this project: he chose to keep silent.
In a formal questionnaire this newspaper sent to the former general manager of Suramericana S.A., the issue of whether third parties were involved in reinsuring the surety bonds in question was raised; additionally, the rationale behind an extension in one of the surety bonds, and whether the project works were physically inspected and a progress report prepared, where addressed. But none of the questions this newspaper raised received an answer.
According to sources linked to the case, Mr. Riesen was directly implicated in the structuring of the two surety bonds that Suramericana S.A. issued for a total value of $36m in relation to the Riego de Tonisi project. Remarkably, Mr. Riesen was not called to declare in the case that the public ministry has launched into the supposed project irregularities.
Expiry
The ministry for agriculture and fisheries (Mida) has so far failed to initiate any process whereby the Riego de Tonosi surety bonds could be exercised.
During the administration of former Mida minister Jorge Arango, who today is an adviser to the president, the ministry's legal team chose unilaterally to cancel the contract with Hidalgo & Hidalgo rather than exercise the surety bonds.
The rationale behind that was that the surety bonds had supposedly expired and that exercising them would not affect the penal process that anti-corruption prosecutor had launched.
Nevertheless, lawyers consulted by this newspaper confirmed that Mida should have acted in the interest of the state by demanding adherence to the contract. Preferring to remain anonymous, lawyers confirmed that " there was greater interest in launching a penal case than in a executing the surety bonds", and that "exercising the surety bonds would have considerably weakened the prosecutor's case against the 33 people involved". That, considering that one of the surety bonds even contemplated an early exercise option should the state have considered that the contract was not been properly executed.
And the contract is back
In a blow to the investigation that prosecutor Zuleika Moore launched into this case, the Court for Public Contracts overruled the earlier contract cancellation, stipulating that the contract between Mida and Hidalgo & Hidalgo stands to this day.
Resignation at insurance regulator brings back to life complaints against Riesen
The controversial appointment of Jose Joaquin Riesen as head of the insurance and reinsurance regulator was met with complaints across the board at the time of its announcement. It has now also resulted in a senior resignation at the institution he heads.
This is what internal sources have concluded in the wake of the resignation of Nadiuska Lopez de Abood, president of the board of directors of the regulator.
Ms. Lopez de Abood confirmed her resignation on July 6 in a letter she sent to the president of the Republic. Asked about the rationale behind the departure, Ms Lopez de Abood chose not comment.
Nevertheless, internal sources confirmed that her decision to leave is linked to the controversial head of the regulator.
