He was associated with the Panama scandal.

After building the Eiffel Tower, Gustave Eiffel became embroiled in a scandal that significantly damaged his reputation at the time. Eiffel was involved in the canal-building project over the Panama Isthmus in 1887. The French canal business recruited Eiffel to design the locks that would be utilized as a part of the canal in order to finish the project, which had been eager to finish for a while.

In his whole business career, this deal was the largest and most dangerous one he had ever signed. Due to the risk, he was taking, he received significant financial benefits and strong assurances that allowed him to start collecting his profit as soon as the job started. Despite the care that Eiffel took with the project, the liquidation of the canal construction company, Compagnie du Canal, on February 4, 1889, resulted in his own indictment for fraud along with De Lesseps and his son, and a sentence of two years in prison and a fine of 2000 francs, even though nothing could be really blamed on him personally.

He retired from business after severely compromising his honor and dignity. The decision was eventually overturned by the highest appeals court, the Cour de Cassation, freeing him from all legal responsibilities related to the charges and ending any ongoing legal proceedings against him.