BY KEN SILVERSTEIN-APRIL 6, 2016
When I wrote about the Panamanian law firm Mossack Fonseca in 2014, the company was virtually unknown beyond the world of money-laundering practitioners and specialists, which is just the way the company liked it. My
story, which ran in
Vice, revealed that Mossack Fonseca had helped an astonishing range of oligarchs, dictators, and corrupt white-collar businessmen hide their loot offshore. Earlier this year, the story was
cited in an indictment in Brazil that charged three members of the state oil company, Petrobras, with laundering proceeds abroad.
Now, thanks to a flood of news stories based on the leak of 11.5 million internal company records — the so-called “
Panama Papers” — Mossack Fonseca has become globally infamous. The records show that the firm helped clients launder cash, evade international sanctions, and avoid taxes. More than 100 politicians — including roughly a dozen current or former heads of state — from more than 50 countries have been implicated in the scandal.
The perps include Russian President Vladimir Putin, whose bagmen collectively owned at least seven British Virgin Islands companies linked to Mossack Fonseca; Syrian President Bashar al-Assad, whose cousins ran loot through a maze of offshore accounts; British Prime Minister David Cameron, whose now-deceased father helped create an investment firm cleverly named Blairmore Holdings Inc.; Saudi King Salman bin Abdulaziz Al Saud, who was tied to secret companies that held tens of millions of dollars’ worth of British real estate, as well as a yacht named
Erga; and Iceland’s prime minister, Sigmundur David Gunnlaugsson, whose wife reportedly held nearly $4 million in bonds through a shell firm called Wintris Inc. On Tuesday, protests in Iceland led to Gunnlaugsson’s resignation.
So far, few Americans have been identified as Mossack Fonseca clients. However, the BBC has
reported that a Mossack Fonseca executive offered to set up a bogus shell company for Marianna Olszewski, a life coach and
authorof Live It, Love It, Earn It
: A Woman’s Guide to Financial Freedom. “Since this is a very sensitive matter, fees are quite high,” the executive wrote her in an email. (Olszewski, who was once allegedly engaged to Charlie Butter, godson of Queen Elizabeth II, could not be reached for comment for this story.)
But there is a major, lesser-known American component to the Panama Papers scandal. Mossack Fonseca, which has “
over 500 staff members across every continent,” has minted a swath of shell firms in the United States, where state laws are often as flaccid as those found in traditional secrecy havens, such as the British Virgin Islands, Malta, the Cayman Islands, and Singapore.
In Nevada, where the only names that must appear on a shell’s incorporation records are those of the resident agent and the company “manager,” which can be yet another anonymous front, Mossack Fonseca set up
more than 1,000 dummy companies through an affiliated firm called M.F. Corporate Services. It’s impossible to know who really owns most of these companies — secrecy, after all, is the whole point — but a number have been traced to
Lázaro Báez, a reputedly crooked Argentine oligarch linked to the late President Néstor Kirchner and his successor and wife, Cristina Fernández de Kirchner. Prosecutors in Argentina allege that the Nevada shells were part of a network that Báez used to move more than $65 million offshore, in funds he allegedly diverted from public infrastructure projects.
Leticia Montoya, a Mossack Fonseca employee based in Panama, served as a registered agent for a number of Báez-linked dummy companies. She also has been the registered agent or nominee director for at least six anonymous companies that were busted in major scandals, among them
Mirror Development Inc., a Panamanian shell firm that corporate giant Siemens used to funnel $40 million in bribes to government officials in Argentina, Bangladesh, and Iraq under Saddam Hussein. (In 2008, Siemens paid a
$1.6 billion fine, the largest ever for corporate bribery, for perpetrating the scheme.)
Mossack Fonseca also has set up shell firms for clients in Florida, where money laundering is more or less the state sport. As a test of this procedural laxity,
Michael McDonald, a former IRS criminal investigator, once successfully incorporated an anonymous company there using the name of a friend’s dog on the registration papers as the firm’s president.
The Panama Papers show that Mossack Fonseca helped nearly a score of foreigners anonymously buy luxury properties in Miami. One of them, Paulo Octávio Alves Pereira, is a Brazilian developer and politician currently under indictment at home, according to the
Miami Herald.
Mossack Fonseca used to aggressively market its ability to incorporate shell companies in the United States, but its website no longer touts its American services, so it’s not clear if the firm still operates there.
But all this raises the question: Why would the head of state of Russia or Iceland, or an American millionaire, go to a Panamanian-based law firm to set up an anonymous shell company instead of walking down the street to a local bank? The short answer is anonymity. There’s nothing inherently wrong or illegal with setting up a shell company; but often, these financial vehicles serve as secret holdings for ill-gotten wealth. Shell companies are designed specifically to hide the true owner’s identity — and the registration agents who set them up typically demand little documentation from clients.
That has been Mossack Fonseca’s specialty since it was founded back in 1977. The firm, which occupies the top three floors of a four-story glass building that has a dental clinic at ground level, was created by German-born Jurgen Mossack, whose father served in
Hitler’s Waffen-SS, and Ramón Fonseca,
who
stepped down as a special advisor to Panamanian President Juan Carlos Varela after the indictment came down in Brazil. Its other director is Christoph Zollinger, a Swiss lawyer who has been a member of the “Council of Experts” of the
Sovereign Society of Delray Beach, Florida, a research investment firm that helps clients stash their cash offshore to “create an international fortress of wealth and prosperity” beyond the reach of “onerous taxation and frivolous lawsuits,”
according to its website.
Mossack Fonseca offers wealthy clients all sorts of investment advice, but it specializes in setting up shell companies. Panama, of course, is a traditional tax haven with strict secrecy rules on banking and corporate ownership and has a class of financial professionals known to be remarkably uninquisitive about their clients’ background and wealth.
Mossack Fonseca helped create the British Virgin Islands as one of the world’s top offshore havens after laying anchor there in 1987. Mossack Fonseca then
moved on to the South Pacific island of Niue. In the mid-1990s, the firm mysteriously won
exclusive rights to register shell firms on Niue and within four years had established 6,000 companies there. Mossack Fonseca’s due diligence apparently wasn’t rigorous. Russian mobsters and South American drug cartels
reportedly used Niue to register shell firms, which led to the
imposition of U.S. sanctions that forced the shutdown of the island’s
corporate registry in 2006.
The United States was ranked as the second-easiest place in the world for criminals to set up shell companies, behind only Kenya, according to a 2012 Griffith University study. A report two years later by the NGO Global Witness
documented dozens of scams and crimes pulled off with American shell companies, including massive Medicare fraud by an Armenian-American crime syndicate and money laundering by Mexico’s Los Zetas drug cartel (which used some of the laundered funds to buy race horses, including one named “Number One Cartel,” that won millions of dollars at the track).
For years, Sen. Carl Levin of Michigan, who retired in 2015, spearheaded efforts to pass legislation that would make it harder to incorporate anonymous companies in the United States. Despite widespread support — from groups that include the Fraternal Order of Police, the Society of Former Special Agents of the FBI, transparency advocates, and financial watchdogs — he never came close to getting it passed due to opposition from then-Senate Majority Leader Harry Reid of Nevada and Sen. Tom Carper of Delaware.
President Barack Obama’s administration and various Western governments have been calling for a
crackdown on offshore havens for years, but it’s as easy as ever to set up dummy companies. “For every country that cracks down on money laundering, two pop up,” Richard Bistrong, who went to prison in 2012 for paying bribes through a Swiss shell company while serving as a sales executive of a major defense contractor, and who often used a Swiss bank account to avoid detection, said in a phone interview. “Switzerland made it harder to launder money after the
UBS scandal, but there’s still Lichtenstein, Monaco, Singapore, the British Virgin Islands, and plenty of other options.” (Bistrong got a reduced sentence for serving as an undercover FBI informant and now heads a group called Front-Line Anti-Bribery.)
When I wrote about Mossack Fonseca two years ago, the firm declined comment. It sent a demand for retraction to
Vice but swiftly backed off. In the end, it didn’t challenge a single fact in the article, which ran under the headline, “The Law Firm That Works with Oligarchs, Money Launderers, and Dictators,” and said it had “served as the registered agent for front companies tied to an array of notorious gangsters and thieves.”
On Monday, I reached Pablo Rodriguez, a firm spokesman in Panama. He promised me a reply to a request for comment about Mossack Fonseca’s role in abetting international crime, as alleged in the wave of news stories prompted by the Panama leaks, but thus far has offered none.
However, in the aftermath of the Panama Papers revelations, the company has issued a statement defending itself from the mountain of evidence alleging misconduct. In a nutshell, it argues that it has never knowingly opened up a shell company for criminal purposes and that it performs strict due diligence on anyone who approaches the firm to open up an offshore account. Or, to put it another way: Sure, we may open offshore firms for a few bad apples, but we don’t know who’s behind the shell companies because we’re dealing with foreign lawyers, accountants, or other third parties.
Well, that may be true, but in the face of 11.5 million documents, willful ignorance may not prove to be a good enough defense. An international financial manager I spoke to who has met with Mossack Fonseca told me the firm performs “zero” due diligence on clients because it assumes that the foreign attorney is responsible for that. Hence, if a dictator or bagman sends an attorney to Mossack Fonseca on his or her behalf, they’ll have no problem opening up a shell firm. It’s hear no evil, see no evil, set up a shell for evil.
“Mossack Fonseca’s attitude is that it doesn’t need to know anything and doesn’t want to know anything, and if tax or law enforcement authorities come knocking and the attorney has told them nothing, then they know nothing,” the financial manager said.
In its
statement, Mossack Fonseca says it “has never been accused or charged in connection with criminal wrongdoing.” But with the wealth of new evidence now available to global law enforcement, it may not be able to brag about never being charged for much longer.
( April 10, 2016, Colombo, Sri Lanka Guardian) The Illicit Financial Flow from Sri Lanka during the 2004 – 2013 period has been US$ 19967 million states Global Financial Integrity in its report financed by Finland.
According to Global Financial Integrity the illicit money taken out of the country is:
