ROME — Five years after it signed on the dotted line, the government of Panama is seeking to cancel a €180 million (US $200.8 million) deal with Italy's Finmeccanica for radars, helicopters and digital maps over allegations of corruption.
This month, the government of the Central American nation applied to its own supreme court to overturn one of three contracts that made up the 2010 deal, covering the sale of Lyra radars for coastal surveillence by Finmeccanica unit Selex.
In the near future, the government will ask the court to rule on canceling the other two contracts, said the country's ambassador to Italy — one for digital mapping signed with Finmeccanica unit Telespazio, and one for six AW139 helicopters signed with the group's helicopter unit AgustaWestland.
The Panamanian move is based largely on evidence being heard in the trial now underway in Rome of a former Finmeccanica manager and a former consultant, who are accused of offering a 10 percent kickback on the €180 million deal to Panama's then-president, Riccardo Martinelli.
"Our request to the supreme court to cancel the deal is based largely on Italian evidence of corruption," said Fernando Berguido, the Panamanian ambassador to Italy, who was appointed by Martinelli's successor, President Juan Carlos Varela.
"Finmeccanica has learned about the request placed by the Panamanian government to the local Supreme Court of Justice to cancel a contract awarded to the Group in 2010," Finmeccanica said in a statement. "Finmeccanica clarifies that the request — regarding the sole contract for the coastal surveillance radar network — seems to be based on an alleged corruption attempt and that, as of today, no corruption attempt has been proven in the relevant courts. Also, as far as we know the Panamanian Court had already dismissed the case."
The deal and the subsequent investigation recall AgustaWestland's €560 million deal in 2010 to sell AW101 helicopters to India. After Italian prosecutors launched a probe into alleged corruption in that deal, India canceled the contract.
However, the ensuing trial of Giuseppe Orsi — CEO of AgustaWestland at the time of the deal — ended in his acquittal on charges of corruption, although he was convicted on lesser charges of false bookkeeping. That led Italian commentators to claim Finmeccanica had lost a huge deal thanks to overzealous Italian prosecutors.
The same prosecutors' office in Naples which launched the India probe also launched the probe into the Panama deal.
The Panama deal, which was signed in August 2010 without an open tender, followed on the heels of an industrial cooperation deal signed that year between Italy and Panama. A central figure to the deal was Valter Lavitola, an Italian journalist and Latin America-based entrepreneur hired by Finmeccanica as a consultant.
Lavitola is now on trial in Rome, alongside former Finmeccanica manager Paolo Pozzessere. Prosecutors allege Lavitola was involved in creating a front company called Agafia to channel an €18 million payment to President Martinelli.
"We believe the money was never paid because Lavitola's activities began to come to light shortly after the deal, but since the €18 million was built into the €180 million Panama paid Finmeccanica, it means Panama overpaid," Berguido said.
Eighty percent of the contract price has now been paid by Panama and all six helicopters are now in use, said Berguido. The maps are not yet in use, while only seven out of 19 radars have been installed, he added.
Berguido said the radars had not proved suitable for the job they were purchased to carry out.
"We needed to monitor small, fast drug traffickers' boats coming from Colombia, but the fixed radars leave blind spots," he said. "Airborne radars would have been better, a solution that could have been identified if a tender procedure had happened, rather than a direct purchase. The deal was rushed — it came just 34 days after the Italy-Panama cooperation deal was signed."
In 2014, Varela took office, promising to crack down on alleged government corruption in Panama. Martinelli is now facing corruption probes in Panama pertaining to government contracts. These probes are not related to the Finmeccanica deal. Earlier this year, Varela visited Italy and shared his concerns about the radars with Finmeccanica management.
"He was offered drones to cover the gaps left by the radars, but that solution was rejected," Berguido said.
While the Panamanian supreme court is being asked to consider the allegations of corruption, it will not tackle the supposed technical shortcomings of the radars.
The contract has "an arbitration clause, which we could invoke over the radars, but that could undermine our case that the whole deal is illegitimate," Berguido said.
Since 2010 Finmeccanica has undergone a series of management upheavals, culminating in the appointment last year of CEO Mauro Moretti, who has instituted new anti-corruption measures at the firm.
"Although already fully compliant with the highest international standards in business ethics," the firm said in a statement, "in early 2015 it decided to enhance its ethics governance with the introduction of a specific anti-corruption code in order to protect its business and reputation in national and international markets." ■
Email: tkington@defensenews.com.
Tom Kington is the Italy correspondent for Defense News.
