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Property Theft in Panama

By Pablo Guzman Reyes


The idea that somebody would steal your
property seems an inconceivable
notion. However, in Panama it can and does
happen more often than anyone outside of
Panama would expect. I will point out how it
happens and what you can do to minimize your
risk should you consider investing in Panama.
In Panama all title to property is centralized and
recorded in the Property Section of the National
Registry of Panama. The Mission Statement of
the National Registry is to protect recorded
rights offering legal security. Every properly
owner places their trust in the National Registry
to ensure that property titles are safe and
secure.
In order to file a property transfer in the National
Registry the general public must rely on the
services of a Panamanian licensed Notary
Public. In Panama all Notaries serve as a
political appointment under the current
presidential administration.
Both the National Property Registry and
Panamanian Notary Public are under the
umbrella of the Panamanian Ministry of
Justice. This structure should make us all feel
nice and cozy. After all it is the Ministry of
Justice which is overseeing the security of our
most valued possession, our property.
However, making that assumption could be a
costly mistake. I was recently asked to help a
client who had discovered that a property that
was recorded in the National Registry and which
they had owned for twenty five years was sold
out from under them. In the past I had read
about isolated cases of property theft in Panama

but never really imagined the magnitude of the


problem until I began to research it further. I
talked to other victims of property theft and a
specific pattern used by property theft gangs
began to emerge. In most of the cases there is
complicity from officials in the National Registry
and the Notary Public that drafts the property
transfer deed or both. Beginning in the 1990s
and continuing until today, there have been
thousands of property thefts, some, like the
murder of the Governor of Cocle province, Dario
Fernandez captured national headlines for over
a year until the group was convicted of land theft
and murder. Unfortunately, most of these cases
are not reported in the media because there is a
sense that if the media reports this type of crime,
foreigners will not invest. It is primarily the
foreigners and the elderly and the poor that are
targets of this type of crime.
Even in those cases where there is no direct
involvement of government officials there is
negligence on the part of the National Registry
system in perpetuating the problem due to their
inability to act promptly. If a property owner is
the victim of a property theft his recourse is to
file a criminal complaint against the individuals
that perpetrated the fraudulent deed, to file a
report with the National Registry and if
successful in a criminal case, to file a civil case
to recover the property. However these cases in
Panama take years to work themselves through
the judicial system. It is not unusual for these
cases to take five to seven years to resolve. As
such, the property owner is victimized first by the
criminals that stole the property and then a
second time by the inability of the judicial system
to promptly and efficiently revert the criminal
acts and return the property to the rightful
owner. To complicate things, the laws in
Panama state that if an innocent third party
relies on a record in the public registry, they
cannot be harmed. This means that the

property owner who has lost his property to land


thieves can generally not recover his land if it
has been sold to someone who claims that they
did not know that the property in question was
stolen. Therefore, the pattern typically used by
the gangs that steal land is to forge documents
with the aid of a corrupt notary and usually
someone inside of the National Registry and
then flip the property several times.
Panamanian law also states that once a
property has been sold 3 times beyond the theft
and then sold to someone claiming to be an
innocent third party, the property is lost forever
to the original owner. Adding insult to injury, if a
civil case is instituted by the original owner they
must post a bond amounting to one third of the
value of the property just to initiate a civil suit for
recovery of their own land. Most people simply
cant afford to pay this amount up front and in
the event that they do not prevail after years of
litigation, they will lose their bond to the people
who stole the property in the first place.
How does this happen. Two simple words
Public Faith (Fe Pblica). A Notary Public in
Panama as an officer of the state has Public
Faith which has been delegated to the Notary
Public by law. This means that any
manifestation made by a Notary Public must be
accepted as true unless proven otherwise in a
judicial proceeding. Article 31 of the Notary
Code states that The Notary Public has Public
Faith . As a result all manifestations made by
the Notary Public in documents and instruments
authorized by the Notary Public must be
accepted as true.
What happens when a crooked Notary Public
introduces a fraudulent document into the
National Registry recording
system?. Nothing! - The recording officer
must take the manifestations of the Notary
Public as true and record the document. This in

turn exacerbates the problem because the


National Registry itself has administrative
Public Faith. This means that when you
request a Certificate of Title on a property
recorded in the Property Section of the National
Registry that report has the full Public Faith of
the National Registry that the information
contained there is absolutely true and
correct. If you are familiar with the term
garbage in garbage out it is an appropriate fit
for the scenario that I just described. If the
Notary Public submits garbage in the way of a
fraudulent deed and the National Registry
records it and then turns around and issues a
certified title report on that property guess
what you were just handed more garbage. The
irony of this all is that this garbage is being
validated by the Ministry of Justice which has
the oversight body for both the National Registry
and the Notary Public.
The victims then begin to pile up as innocent
purchasers relying on the certificate of title
issued by the National Registry begin to
purchase the property without knowing of the
initial fraudulent transfer.
The Public Notary system in Panama is adopted
from the civil law system and it is used
throughout Latin America and most of
Europe. However, there are two types of Notary
Systems, the territorial system and the open
system. In the territorial system a country is
divided into different districts and a single Notary
is awarded the right and privilege that goes with
it to act as the Notary for that district. This
system is used in Mexico and Panama for
example. Costa Rica on other hand adopted the
open system. This means that all Attorneys that
elect to be a Notary may do so. The only
current requirement in Panama is that a Notary
pass a Notary Specialization course and be
appointed by the President. In Panama where

only 23 Notaries are licensed in the entire


country the system is highly geared toward
political favors and that is where the corruption
begins.
In Panama all authorized Notaries must
document all property transactions by recording
the transfer deed in their assigned Notary
Protocol book and then having all parties to the
transaction sign the Protocol book. The Notary
then has the power by law to create an extract
called a Testimonio of that entry and certify
that the signatures of all parties were placed in
the original protocol book. As such, when the
document enters the National Registry system it
does not bear the original signatures of the
parties only the manifestation (public faith) of the
Notary Public that the original signatures are in
their original protocol book. In my opinion this is
a major defect in the system that facilitates
fraudulent transactions. Notaries often will have
copies of passports for foreigners on file if they
have purchased property in the past and that
makes it easy for signatures to be forged to
illegally transfer land whether it is held by a
corporation or by an individual.
How are the fraudulent documents created?
1. The Notary Public simply lies indicating that
a particular property owner personally
appeared before him and sold the
property. This is a case in many instances
of property theft that I am aware of. Juan
and Long Mocks Chong, a Chinese family
that I interviewed is one example. The
family owned two residential homes in
Panama City and while they were travelling
in Thailand in 2007 a Panamanian Notary
Public indicated they were in his office
selling their home. After 7 years that case
is still pending resolution however the
property has been sold at least 4 times and

therefore it is unlikely that they will recover


their home. They have also lost in criminal
court on their original case and their appeal
because the judge found that although he
could see that the property was stolen, he
could not take it away from the current
owner because he could not see that the
current owner was involved in the theft.
In 2007, I also spoke to North American
Louis Avolio from New Jersey. Louis Avolio
had purchased a large tract of land which he
intended to develop. The property was very
large, worth millions of dollars, and was very
close to the international airport. Not long
after he had purchased the land in 2005 he
found people on the property bulldozing over
some of the structures that were there. As it
turned out, the corporation which held the
land had been illegally seized by some of
the same people who later murdered the
Governor of Cocle Provence in 2011. They
filed a change of the board of directors and
then sold the land enough times to make it
impossible for him to recover it. The same
group of thieves to one degree or another
were involved in many of the thefts that I
studied and have written about.
There are several similar cases of
corporations owned by foreigners holding
large tracts of land that were set for
development. For example, British Citizen
Mathew Whant lost several properties in
Volcan and Bocas Del Toro on the Western
Caribbean side of the country to the same
group of thieves that have stolen numerous
properties around the country. Mathew
Whant lost nearly 4500 acres worth millions
of dollars. His projects were already
partially developed and lots had been sold to
other foreigners when the theft occurred. To
date, he has not recovered any of his

holdings.
A group of Irish Investors that included P.J
Daley and David Clark and Adrian Hillard
had invested in a large parcel of land in
Sonadora, Penonome in the middle of Cocl
Provence. A month after their project
received approval from the government to
allow for the sale of close to 400 residential
lots, it was stolen through illegal changes
made to the board of directors which
allowed their corporation to change hands.
Then once hijacked, the land was quickly
sold to a third party. The process is similar
in so many of the stolen property cases and
yet very few of these cases ever make it
through the courts largely due to the
corruption in the system and control exerted
by the group of insiders who perpetrate
these acts.
These cases seemed improbable at first, but
since then I have literally found over a hundred
similar cases. Typically a foreigner or an older
person who is not able to defend themselves are
the victims because of the complexity and
corruption within the legal system in Panama.
2. The Notary Public revives the dead. In
another case in Juan Diaz the Notary Public
simply indicated that the corporate
representative of a corporation that owned some
land personally appeared before him and sold
the property. The problem is that the individual
had died 5 years before! In yet another case,
the individual whose name appeared on the first
fraudulent transfer was also a dead man but the
other names on the documents showed that the
same notaries and attorneys were involved in
the transaction.
3. In some cases the Notary Public is also
duped by the criminals and not an accomplice in

the crime. In these cases the criminals have


assumed the identity of the property owner and
falsified their identification documents. They
then appear before the Notary Public pretending
to be the property owner and producing the fake
identification documents. My opinion is that this
in not as typical as the bulk of the cases where a
corrupt notary, corrupt registry employee, and
corrupt lawyer carries out the land theft.
In one case the criminals rented a property and
then assumed the identity of the property
owners with identification cards and all. They
then tried to get a mortgage loan from a third
party using the property they had rented as
collateral and without the knowledge of the
property owner.
Currently, the Economic Crimes Division of the
Prosecutors Office of Panama City has at least
800 active criminal investigations regarding
property theft. Sadly, I have only found one
case where the property was recovered by court
order. This has turned out to be one of those
dirty little secrets that no one will talk about in
Panama because its bad for business in the
country!
So how do I Prevent This?
Most of the targets of property theft are
absentee foreign owners in areas that have high
property values. There are some steps you can
take to make your property less appealing to
property thieves and those include:
1. Keep your undeveloped property well fenced
and with signs indicating a local contact
number.
2. Check your property title every couple of
months to ensure that no registrations have
been filed against the property. You may need
the help of a Panamanian national to get an

account set up as last I heard foreigners were


not able to have a National Registry account.
3. Check your property every couple of months
to ensure that no one has taken physical
possession of the property.
4. If you intend to purchase land and then
leave the country then purchase in areas or
community where your neighbors or a property
administrator can keep an eye on your property
while you are absent. That said, I am aware of a
property owned by a Chinese family that was in
Hong Kong when their property was stolen by
friends of the property manager.
The Panamanian government needs to place
closer attention to this problem and implement
policies and procedures to deter and punish this
activity. A recent Supreme Court case in 2013
did address the issue and stated that there was
a grey area in the land registry laws that did not
protect the rightful owners rights but fell short of
calling for the legislature to institute changes
that would protect the rights of owners who fall
victim of these crimes.
My opinion is that until the laws are changed, no
property title in Panama is safe. There has
been a lot of noise about fixing the problem, but
then the only legislation that Ive seen passed is
a law that prevents victims of white collar crime
(which technically property theft is under certain
circumstances) from filing charges in criminal
court to recover their property if they are
foreigners.