Panama scandal

The Panama scandals (also known as the Panama Canal Scandal or Panama Affair) was a corruption affair that broke out in the French Third Republic in 1892, linked to the building of the Panama Canal. Close to a billion francs were lost when the French government took bribes to keep quiet about the Panama Canal Company's financial troubles, in what is regarded as the largest monetary corruption scandal of the 19th century.

On 4 February 1889, the Tribunal Civil de la Seine ordered the winding up of the Panama Canal Company in Paris. Work on the isthmus was stopped in the meantime, while the court-appointed liquidator arranged to maintain the existing buildings, tools and machinery. Within a few years, however, high losses were incurred due to the damp, warm climate. The French government delayed the liquidation further and further, because the take-over offers by various American companies seemed insufficient. An intermediate company could not be started for lack of capital. The liquidator appointed a commission of inquiry, whose 1890 report recommended continuation of the sluice canal and renewal of the 1878 contract with Colombia. This was agreed on in 1890 in Bogotá, to run until 1904.

The dimensions of the bankruptcy were clear by 1892. Some 800,000 French people, including 15,000 single women, had lost their investments in the stocks, bonds and founder shares of the Panama Canal Company, to the considerable sum of approximately 1.8 billion gold Francs. From the nine stock issues, the Panama Canal Company received 1.2 billion gold Francs, 960 million of which were invested in Panama, a large amount having been pocketed by financiers and politicians.

In 1892/1893, a large number of ministers (including Clemenceau) were accused by French nationalists of taking bribes from Ferdinand de Lesseps in 1888 to permit of the stock issue, leading to a corruption trial against Lesseps and his son Charles. Meanwhile, 510 members of parliament – including six ministers – were accused of receiving bribes from the Panama Canal Company to hide the company's financial status from the public. Lesseps, his son Charles, members of the management as well as the engineer Gustave Eiffel, were at first given long jail sentences, later annulled. (Site number: 12079499789)

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