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LETHAL NEGLIGENCE: THE PANAMA CASE'S MESSAGE FOR TODAY


Drugs in bottles

This article discusses the concept of state-facilitated corporate crime, the blurred line between legal and criminal behavior in corporate actions, and the role of negligence by the involved governments through the exploration of a tragic incident that occurred in 2006 in Panama. The scandal involved the contamination of cough syrup with diethylene glycol, resulting in numerous deaths. The article also highlights the complexity of investigating and criminalizing such cases and underscores the importance of public awareness and attention to prevent similar incidents in the future. Ultimately, the Panama case serves as a cautionary tale about the potential dangers of blindly trusting authoritative entities and the critical need to scrutinize details to avoid devastating consequences.


Introduction

What do antifreeze, cough syrup, and ice-skating rinks have in common? Apparently nothing, but in 2006 they all shared a common denominator, diethylene glycol, a sweet-tasting, colorless, non-odoriferous poison.


Diethylene glycol (DEG) is an organic compound used in a wide range of industrial products, but in 2006 it was erroneously employed in pharmaceutical preparations. This is the Panama case, during which dozens of people died from ingesting a government-provided cough syrup that had been contaminated by diethylene glycol.

State-facilitated corporate crime

The facts: Pharmaceutical counterfeiting

At the beginning of September 2006, dozens of people in Panama started showing the same, mysterious symptoms, such as weakness and inability to breathe, which 50 percent of the time culminated with death [5] Official assessments identified 119 deaths by diethylene glycol poisoning between June and October 2006, but the number of people affected by diethylene glycol exposure that is still undiagnosed to this day is much higher [15]. The cause is to be found in 46 barrels of toxic syrup that were made in China and were labeled as 99.5 percent pure glycerin by the manufacturer [5]. After receiving the ingredients from a Spanish trading company, the Panamanian government mixed the diethylene glycol with the other ingredients to make the cough syrup and distributed it to the population. Soon after, people began to die. This is a prime example of pharmaceutical counterfeiting, in which a falsified bulk ingredient traveled across the world unsuspectedly and caused the death of a huge number of people.


The actors 1.0


The Panama case is a multi-actor, multi-country crime that developed on different levels. This crime can be classified as an instance of State-facilitated corporate crime, in that it “involve[s] offenses committed by companies or their agents against members of the public, the environment, creditors, investors or corporate competitors” [6]. These offenses, which in this case were committed against the public and general health system, were “made possible by government failure to restrain deviant business activities through lack of regulations and/or enforcements” [3]. In other words, corporate reckless actions and State lethargy caused the intoxication of Panamanian citizens.

The first corporate actor that needs to be called out is the factory that manufactured the diethylene glycol. Investigators identified the Taixing Glycerine Factory in the eastern province of Jiangsu, China as the producer of the falsified glycerin. Born as a chemical materials factory, it was not suited for producing pharmaceutical ingredients [14]. Lacking governmental authorization and expertise, the Taixing Glycerine Factory named its product “TD” glycerin – “TD” standing for the Chinese word “tidai”, meaning “substitute” [5]. The label, virtually present on all shipping documents, represented a warning for the falsified ingredient that was ignored altogether.

In 2003, the Taixing Glycerine Factory sold the falsified product to the first distributor, the Beijing-based trading company, CNSC Fortune Way. This is a State-owned business that, upon brokering the Taixing syrup, issued a certificate confirming that the batch was pure glycerin – but no official statements were disclosed on whether the company actually ran the tests [5]. The document was translated into English and the barrels were re-labeled to carry the CNSC Fortune Way name and shipped to the European broker. Investigations revealed that just like the producing factory, also the Beijing broker did not operate in the dark, as it was not classed as a ‘pharmaceutical sales business’ [14]. Despite this, the batch was shipped West, reaching the second phase of the supply chain.

The actors 2.0


From China, the batch of tainted syrup was then received by a Spanish company, Rasfer International, based in Barcelona. Again, no checks were run on the actual composition of the barrels, and the company copied the chemical analysis provided by the Chinese broker and added its own logo to it [5]. Later investigations discovered that the company was unaware that the product was meant for human consumption, thus claiming to have labeled it correctly [7]. From Spain, the barrels were shipped to a Panamanian broker, the fourth actor of the case, the Medicom Business Group. Inspections on the case revealed that the agency never ran quality tests but allegedly changed the expiration date of the syrup [5]. This small forgery permitted the barrels to sit unused for more than two years until they were bought by the Panamanian government in 2006 and used to make cold medicine. The government is, therefore, the fifth and last actor in this case: it manufactured the cough syrup and distributed it to the population, failing to detect the poison in it, and causing the death of an undefined number of people.


Corporate crime


The Panama case presents a stratified intensity of crime: on the surface, it appears that no other explicit criminal act has been committed after the initial fraudulent production of glycerin. This is also backed up by the fact that all the actors are legitimate and part of the legal trade of pharmaceutical products.

There is a legal-illegal continuum [16], in which the criminal acts get confused and concealed by the other legal transactions that the corporations are involved in. This means that there is a fundamental ambiguity in the offenses by corporations because deviant behavior is made very similar to ordinary legal behavior [16]. This is because corporations do not exist with the prime purpose of carrying out criminal acts, but pressures to deliver results may encourage criminal behavior. This behavior is theorized by Tittle’s control balance theory, according to which corporations try to increase the degree of control they exercise in relation to the amount of control they experience, through offenses that do not necessarily entail direct interactions with victims [16]. Just like in the production of diethylene glycol by the Taixing Glycerin Factory, the fraud was carried on following the careful calculation that the victims – civilians on the other side of the world – would not be able to do much about it, and the company’s own surplus of control could be expanded further.


The Role of the State


The Chinese, Spanish, and Panamanian companies do not operate in a vacuum but are instead subjected to the jurisdictions of their governments. This means that if these companies managed to get away with the production and supply of tainted syrup, it is because their States were not sufficiently prepared to control these businesses. If anything, the States played a role in facilitating the crime through forms of negligence and lethargy. State negligence happens when, through “crimes of omission”, the State fails to prevent loss of human life, suffering, and deprivation that are all in its power to prevent [8].


Both China and Panama were negligent in their practices but in two different ways. The Chinese government could be seen as committing acts of nonfeasance – meaning “failing to do something you are required to do” [8], in that it failed to detect the counterfeiting taking place in the factories. This is true because the first trade company, the CNSC Fortune Way, is a unit of a State-owned business [5]. The Panamanian government, on the other hand, could be considered a negligent State through acts of misfeasance, that is “performing a permissible act in an improper manner” [8] because they carelessly mixed cough medicine with the toxic ingredient.


In this case, State negligence becomes a tool to ignore criminal activities and allow them to advance, but some level of neglect was also implemented in the aftermath of the poisoning. Even though the Chinese and Panamanian States did not play an active role in the unfolding of the criminal events, their lethargy was pivotal for the life loss to happen in the first place. In other words, State negligence is actually the engine that powers harmful, even fatal consequences and unnecessary economic losses [8].


Theorizing corporate crime

This crime can be described through the concept of the “white-collar crime committed with an ostensible unawareness of the criminal implications” by Gobert and Punch [9]. These types of crimes encompass all those behaviors where it is “consciously planned but where the outcome is not intended and where some mechanism operates which ‘hide’ the illegal dimensions of the behavior for those involved” [9]. In other words, the crime unfolds in a ‘slippery slope’, in which relatively minor offenses grow into serious law-breaking. We can clearly see this connection in the Panama case, where fraud provoked the death of more than a hundred people. Along the ‘slippery slope’ of the criminogenic process, there is no full intention or awareness of the dimensions and magnitude of the crime committed. This in a way makes the crime easier to rationalize and neutralize and the offenses become easier to commit [9].


The aftermath

The victims and harms


The Panama case produced harm on two levels. It had direct, physical consequences on the patients and indirect effects on Panamanian society. What is the most striking about this case, and about victimization by organizational violence in general, is that there is no “ideal victim”, meaning a feature or victimizing event that automatically calls for the term “victim” [17]. This is because victims of corporate crimes do not even realize that they have been the target. We saw this happen in the Panama case with the undefined number of patients that never went to the hospital or died unknowingly of the causes [13]. Because cough syrup is so diffused in society, anyone regardless of their age, gender, and status could become a victim of diethylene glycol.


Moreover, corporate violence and pharmaceutical counterfeiting can have indirect consequences on society and institutional structures. They deteriorate health resources because fake medicines reduce access to effective treatments and contaminate the supply of legitimate medicines [2]. Pharmaceutical counterfeiting also affects governments in the form of increased regulatory and enforcement costs [10] of securing the supply chain [2] and in loss of State funds for all those State-produced medicines that are tainted with toxic ingredients. In other words, not only the Panamanian government took care of producing the cough syrup and distributing it to the population, but it also had to trace back the contaminated bottles and run tests, whose ultimate cost is borne by the patients and the victims.


Criminalization


The criminalization of corporate crimes is usually difficult and inconclusive, especially when the State is involved as a facilitator. The Panama case is no exception to this. As soon as the case became public, the three countries involved started pointing fingers at each other.


In China, the Taixing Glycerine Factory was shut down, but the country denied any implication [11] because they concluded that the plant was not certified to make medicine. The same conclusion was then applied to the broker agency CNSC Fortune Way, saying that “as an exporter, it was not engaged in the pharmaceutical business” [5]. According to Chinese investigators, there was no explicit evidence that the companies had broken any laws, so an investigation was never opened.

In Panama, twelve people were arrested, including six employees of the third trading company, the Medicom Business Group, and several government officials [12]. It still remains unclear, however, how (and if) the Panamanian government retrieved the contaminated bottles of cough medicine and upgraded the laboratories where the medicines are manufactured.


The criminalization, in this case, is aimed at the short-run, while the issue of pharmaceutical counterfeiting and negligence in testing ingredients has not been addressed. As a matter of fact, there have been other recent cases of poisoning by diethylene glycol. In 2007, a toothpaste imported from China to the United States was found to contain traces of diethylene glycol [4]. A year later, in Nigeria, dozens of children died after using a contaminated teething medication [1]

Conclusion


Two main lessons can be drawn from this case. The first one is that traditional investigation and criminalization might not be effective in cases of corporate crime, especially in State-facilitated ones. The Panama case is among the most lethal instances of pharmaceutical counterfeiting, yet it is not widely known. Public naming of the actors involved can be far more effective in preventing new, similar cases to happen in the future. The second one is simply to pay attention to the details and not automatically trust powerful entities. The barrels of falsified diethylene glycol carried a “TD” symbol, hinting at the fact that the content was a substitute for glycerin, thus not fit for human consumption.


White-collar crimes are able to proliferate because we tend to trust people in authoritarian positions because ‘they know better’. If only one employee in one of the three trade agencies that moved diethylene glycol across the globe had not ignored the label, many lives would have been spared. What the Panama case really teaches us is that the devil is in the details.

References

[1] Abubukar, A., Awosanya, E., Babaru, O., Haladu, S., Nguku, P., Edwards, P., Noe, R., Wolkin, A. Lewis, L., Nguyen, M. (2009). Fatal poisoning among young children from diethylene glycol-contaminated acetaminophen - Nigeria, 2008-2009. MMWR, 58(48), pp. 1345-1347. https://www.cdc.gov/mmwr/preview/mmwrhtml/mm5848a2.htm

[2] Acri, K. M.L. (2018). Pharmaceutical counterfeiting: Endangering public health, society and the economy. Fraser Institute. https://www.fraserinstitute.org/sites/default/files/pharmaceutical-counterfeiting-endangering-public-health-society-and-the-economy.pdf

[3] Barak, M. (2015). Collaborative state and corporate crime: Fraud, unions and elite power in Mexico. In G. Barak (Ed.), The Routledge International Handbook of the Crimes of the Powerful, pp. 373-385. Routledge.

[4] Bogdanich, W. (June 2, 2007). Toxic toothpaste made in China is found in U.S. The New York Times. https://www.nytimes.com/2007/06/02/us/02toothpaste.html

[6] Burns, R. (2015). Corporate crimes and the problems of enforcement. In G. Barak (Ed.), The Routledge International Handbook of the Crimes of the Powerful, pp. 157-171. Routledge.

[7] Ceberio Belaza, M. (May 5, 2013). Panama takes Spain to Human Rights Court over lethal cough syrup. El País. https://english.elpais.com/elpais/2013/05/05/inenglish/1367755589_618163.html

[8] Friedrichs, D. O. (2010). Governmental crime: State crime and political white collar crime. In D.O. Friedrichs (Ed.), Trusted Criminals: White Collar Crime in Contemporary Society, pp. 127-159. Wadsworth Cengage Learning. http://justicediwan.org/userfiles/David%20O_%20Friedrichs-Trusted%20Criminals_%20White%20Collar%20Crime%20in%20Contemporary%20Society%20%20-Wadsworth%20Pub%20Co%20(1995)(1).pdf

[9] Gobert, J. & Punch, M. (2007). Because they can: Motivations and intent of white-collar criminals. In H. Pontell & G. Geis (Eds.), International Handbook of White-Collar and Corporate Crime, pp. 98-122. New York: Springer

[10] Harley, K. (2018). The alarming rise in the costs of drugs and the irresponsible behavior of pharmaceutical companies. The Corporate Social Responsibility and Business Ethics Blog. https://corporatesocialresponsibilityblog.com/2018/06/14/costs-of-drugs/

[11] Harley, K. (2018). Thalidomide’s Return: A dark shadow still lurks within the pharmaceutical industry. The Corporate Social Responsibility and Business Ethics Blog. https://corporatesocialresponsibilityblog.com/2018/02/04/thalidomides-return/

[12] Kraul, C. (June 21, 2007). Sloppy controls blamed in Panama syrup scandal. Chicago Tribune. Retrieved from https://www.chicagotribune.com/news/ct-xpm-2007-06-21-0706200969-story.html

[13] Rentz, D. E., Lewis, L., Mujica, O. J., Barr, D. B., Schier, J. G., Weerasekera, G., Kuklenyik, P., McGeehin, M., Osterloh, J., Wamsley, K. Lum, W., Alleyne, C., Sosa, N., Motta, J. & Rubin, C. (2008). Outbreak of acute renal failure in Panama in 2006: a case-control study. Bulletin of the World Health Organization, 86, pp. 749-756.

[14] Reuters Staff (May 8, 2007). China says fatal drug outside scope of regulators. Reuters. https://www.reuters.com/article/us-china-medicine-panama-idUSPEK24493820070508

[15] Rosa, N. R., Rodriguez, G. M., Schier, J. G. & Sejvar, J. J. (2014). Clinical, Laboratory, Diagnostic, and Histopathologic Features of Diethylene Glycol Poisoning – Panama, 2006. Annals of Emergency Medicine, 64(1), pp. 1-10. DOI: 10.1016/j.annemergmed.2013.12.011

[16] Ruggiero, V. (2007). It’s the economy, stupid! Classifying power crimes. International Journal of the Sociology of Law, 35, pp. 163-177.

[17] Whyte, D. (2007). Victims of corporate crime. In S. Walklate (Ed.), A Handbook of Victimology, pp. 446-464. Willan/Routledge. file:///Users/federicanappa/Downloads/Whytevictims%20(1).pdf


Suggested citation


Bluebook: Federica Nappa, Lethal Negligence: The Panama Case's Message for Today, CORPORATE CRIME OBSERVATORY, (August 17, 2023), www.corporatecrime.co.uk/post/panama-pharma-case


Harvard: Nappa, F. (2023) ‘Lethal Negligence: The Panama Case's Message for Today’. Corporate Crime Observatory. Available at: www.corporatecrime.co.uk/post/panama-pharma-case


OSCOLA: Federica Nappa, ‘Lethal Negligence: The Panama Case's Message for Today’, (Corporate Crime Observatory, August 2023),<www.corporatecrime.co.uk/post/panama-pharma-case>


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