Palestinians pop up in Panama Papers

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Adnan Abu Amer writes: Ever since the inception of the Palestinian Authority (PA) in 1994, local and international organizations have repeatedly issued reports on the rampant corruption plaguing its ministries and departments. The problem is not limited to administrative and financial excesses committed by irresponsible individuals for personal motives, but rather is seems entrenched in the PA’s structure.

The most recent corruption case was revealed by the so-called “Panama Papers,” which were published April 4. The Panama Papers exposed the involvement of international figures in tax evasion and money laundering.

Tareq Abbas, the son of Palestinian President Mahmoud Abbas, was among the Palestinian names contained in the papers. According to these documents, Abbas secretly owns, in partnership with the PA, a holding company worth more than $1 million in the British Virgin Islands. [Continue reading…]

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Offshore in central London — the curious case of 29 Harley Street

The Guardian reports: On 10 November, 2003, Gerry Florent, and Ralph Abercia, plus his son, Ralph Jr, left the Bellagio Hotel in Las Vegas, and drove to the Stirling Club, a high-end private venue just off the Strip. They were to attend separate meetings with Sir Richard Benson, but had met each other that morning, when they were collectively coached on the etiquette expected of them: speak only when spoken to, stand when he comes in. They were happy to comply. This was a man who had bailed out the Queen, after all.

Both Florent and the Abercias wanted the same thing from Sir Richard: money, of which he had plenty. Sir Richard, who was portly, balding and elderly, explained to them that he owned a company named Sherwin & Noble, which was worth billions and was prepared to finance their business projects. At their meetings, the prospective investors received a glossy spiral-bound summary of S&N’s balance sheet, which showed it to be a financial firm of significant size.

Florent wanted $55m to buy land on which to build a hotel in Florida; the Abercias needed $105m for an “aquarium/entertainment complex” in Houston. In return for the money, all Sir Richard asked was that they pay advance fees (two payments of $412,250 each from Florent, and two payments of $787,500 each from the Abercias) to signal their commitment to the projects. If S&N decided not to go ahead with the loans, the fees would be repaid.

The investors left Las Vegas, instructed their lawyers to wire the first tranche of the fees over, and settled down to wait for their money. They waited. And they waited. When they rang or faxed the S&N office in London, they were reassured that there was nothing to be concerned about. But, over the next few months, Florent and his business associates became suspicious. They held off wiring the second half of the fee, and brought in a private investigator, who discovered that S&N, far from being worth billions, was an empty shell company. The glossy booklet detailing its assets had been copied from the banking company HBOS, with the names changed.

Thus, the fraud fell apart. The Abercias, who had wired the whole fee asked of them, were devastated. “That was a lot of money,” Ralph Sr told a local journalist. “We’re still paying the damgum thing back.”

The whole saga had been scripted by a conman named Lal Bhatia. Sir Richard Benson was an actor. He had never rescued Buckingham Palace from foreclosure. The billions and the knighthood were fictitious. S&N had no assets, beyond a registered presence at a house in London – 29 Harley Street. [Continue reading…]

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Path of $681 million: From Saudi Arabia to Malaysian premier’s personal account

The New York Times reports: How did $681 million end up being deposited in the personal bank account of Malaysia’s prime minister, Najib Razak, last year?

Not in any corrupt way, officials insist.

Saudi Arabia’s foreign minister said on Thursday that an unspecified Saudi source had given a large sum of money as a “genuine donation” with no obligations attached. He joined top Malaysian leaders in waving away any suggestion of scandal.

For those who have never had fortunes deposited into their personal bank accounts with no obligations attached, this may sound suspicious. Indeed, Mr. Najib has been subject to fierce international scrutiny, including a United States Justice Department investigation, as he continues to deny any wrongdoing. [Continue reading…]

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U.S. corporations have $1.4tn hidden in tax havens, claims Oxfam report

The Guardian reports: US corporate giants such as Apple, Walmart and General Electric have stashed $1.4tn (£980bn) in tax havens, despite receiving trillions of dollars in taxpayer support, according to a report by anti-poverty charity Oxfam.

The sum, larger than the economic output of Russia, South Korea and Spain, is held in an “opaque and secretive network” of 1,608 subsidiaries based offshore, said Oxfam.

The charity’s analysis of the financial affairs of the 50 biggest US corporations comes amid intense scrutiny of tax havens following the leak of the Panama Papers.

And the charity said its report, entitled Broken at the Top was a further illustration of “massive systematic abuse” of the global tax system.

Technology giant Apple, the world’s second biggest company, topped Oxfam’s league table, with some $181bn held offshore in three subsidiaries. [Continue reading…]

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Panama raids offices of Mossack Fonseca law firm

Reuters reports: Panama’s attorney general late on Tuesday raided the offices of the Mossack Fonseca law firm to search for any evidence of illegal activities, authorities said in a statement.

The Panama-based law firm is at the center of the “Panama Papers” leaks scandal that has embarrassed several world leaders and shone a spotlight on the shadowy world of offshore companies.

The national police, in an earlier statement, said they were searching for documentation that “would establish the possible use of the firm for illicit activities.” The firm has been accused of tax evasion and fraud. [Continue reading…]

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Panama Papers: How the Seychelles saved Syria

James Denselow writes: Against the backdrop of recent territorial gains, the cessation of hostilities and a peace process in Geneva that is rumbling along, President Bashar al-Assad seems more secure than ever after five years of conflict in Syria.

When people ask how he managed to stay in power despite the country having its economy collapse in half, hundreds of thousands killed, one in two Syrians being forced from their homes and the conflict dragging in four of the five UN P5 members of the Security Council, you wouldn’t necessarily think about the Seychelles.

Yet as the Panama Papers, the biggest leak in global history, has shown, the idyllic archipelago of 115 islands in the Indian Ocean off East Africa has played its part in keeping Assad in the Presidential Palace in Damascus.

What this demonstrates is that what appears from a distance to be an insular, authoritarian regime far more proficient in the tools of medieval warfare than modern capitalism, has actually used the levers of globalisation well to protect its interests.

What the 11.5 million leaked documents reveal is that three Syrian companies close to the government – Maxima Middle East Trading, Morgan Additives Manufacturing and Pangates International – used the already infamous Panama-based law firm Mossack Fonseca to create shadow or shell companies in the Seychelles to avoid the increasing pressure of global sanctions.

Considering how near the regime was to collapse before the Russian intervention, this evasion of sanctions is fairly significant. The Panama Papers suggest it paid for fuel that kept Syria’s Air Force helicopters and airplanes in the air. [Continue reading…]

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It’s amazing what America could do with the money the rich hide overseas

Max Ehrenfreund writes: The documents known as the “Panama Papers” have created a global scandal around the ways the world’s rich conceal their wealth from the authorities. The prime minister of Iceland offered his resignation after the papers reportedly revealed that he and his wife had a fortune on paper hidden away in the British Virgin Islands. British Prime Minister David Cameron is taking criticism as well, and he acknowledged that he profited from a secret family trust.

The Washington Post has not reviewed the Panama Papers or verified their authenticity, but what seems certain is that wealthy people all over the world — and in the United States — pay much less in taxes by moving their income and assets to foreign countries.

In the United States, the Treasury would collect about $124 billion a year in additional taxes — $36 billion from individual taxpayers and $88 billion from multinational corporations — if it weren’t for such schemes, according to estimates by Gabriel Zucman, an economist at the University of California at Berkeley.

That’s a lot of money — and we’re all paying for it, Zucman said.

When the wealthy pay less in taxes, the rest of the population bears the burden. Either the government spends less money, providing fewer public services, or ordinary citizens pay more to make up the cost. [Continue reading…]

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What the Panama Papers don’t reveal may be more important than what they do

Uri Friedman writes: I did nothing wrong. That’s the gist of how many individuals connected with the “Panama Papers” — the millions of leaked documents exposing how a Panamanian law firm, Mossack Fonseca, helped the rich and powerful park their wealth in tax havens and offshore bank accounts or shell companies — are responding to the revelations this week. And in many cases, they may be telling the truth. As The New York Times points out, “Holding money in an offshore company is generally not illegal, although such financial arrangements can be used in illegal ways — for example, to facilitate tax evasion or money laundering.”

Wear a ski mask around town on a warm day, perhaps for a perfectly good reason (you’re a celebrity trying to avoid paparazzi, you ran out of sunscreen), and you’ll probably invite suspicion. Because it looks like you might rob a bank.

The release of the Panama Papers is a bit like the end of The Truman Show, the 1998 film about a man, Truman Burbank, who gradually realizes he’s spent 30 years on the set of a reality TV show in which he’s the star. In the last scene, Truman is sailing a boat when its bow pierces the artificial sky — hinting at a world beyond the show’s set. The leaks, from just one law firm in one country, have similarly pierced the screen that normally conceals a vast network of financial secrecy. But on the other side, there’s a much bigger world that, for most people, remains unexplored.

And this elite world has an impact on the world your Average Truman inhabits. [Continue reading…]

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Mossack Fonseca: Inside the firm that helps the super-rich hide their money

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The Guardian reports: In June 2013, two Swiss lawyers held a private telephone chat. They were annoyed. In London, David Cameron had just given a speech. The prime minister had promised to sweep away decades of offshore “tax secrecy” by introducing a central register. Anybody who owned an offshore company would have to declare it to the authorities.

The G8 summit, to be hosted by Cameron on the shores of Lough Erne, in Northern Ireland, was looming. Top of the agenda: how to stop aggressive tax avoidance.

For much of the 20th century hiding your money was simple. You got a lawyer, filled in a form and set up a Swiss bank account or offshore “shell company”.

Nobody asked questions. For a couple of thousand dollars a year, it was possible to hide away profits where governments could never find them.

But in the UK crown dependencies and overseas territories where financial services were the main source of jobs and income times were changing. In tropical tax havens such as the British Virgin Islands a chill wind – or at least the threat of one – was blowing.

One of the Swiss lawyers was Sandro Hangartner, the Zurich boss of the Panamanian law firm Mossack Fonseca.

The other man, his disgruntled caller, was Sascha Züger. Züger’s company looked after the assets of some very wealthy South Americans.

In an email to his head office in Panama, Hangartner wrote: “Sascha is not very pleased about the development in BVI [British Virgin Islands].”

He was now looking for “alternatives”, Hangartner added – in other words other secret jurisdictions where a client might park their money.

For the network of international lawyers and accountants who serviced the offshore industry, these were troubled times.

Cameron’s speech was merely the latest piece of unwelcome attention. Since 2008, and the global financial crisis, cash-strapped exchequers had been trying to get their hands on billions in potential tax revenue hidden offshore.

How serious these attempts were was a matter for debate.

What wasn’t in doubt were the vast sums involved. According to the US economist Gabriel Zucman, 8% of the world’s wealth – a vast $7.6tn (£5.3tn) – was stashed in tax havens.

Zucman estimates the loss in global tax revenues at $200bn per year. That includes $35bn in the US and $78bn in Europe.

Previous attempts to bring about transparency had flopped. But now the world’s leading economies – the G20, G8 and Organisation for Economic Cooperation and Development – were apparently pursuing the theme with zeal.

If Cameron got his way, British overseas territories such as the BVI and Gibraltar would soon have to draw up a register of beneficial owners – the real owners of a company, even though their name may not appear on the shareholder register. The crown dependencies Jersey, Guernsey and the Isle of Man would fall into line, too. [Continue reading…]

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David Cameron’s trust problem

Therese Raphael writes: U.K. Prime Minister David Cameron didn’t lie. He’s not accused of being a tax cheat. Unlike his Icelandic counterpart, he didn’t have financial holdings that presented an obvious conflict of interest. Even so, he’s in trouble.

Cameron is under attack for revelations that he benefited, albeit legally, from shares in a fund his stock-broker father had set up in Panama. Cameron is unlikely to lose his job, as Iceland’s Sigmundur David Gunnlaugsson did, but his reputation is taking a hammering. That’s no small problem so soon before a critical vote on European Union membership, in which he is asking Britons to trust his judgement and vote to remain inside the bloc.

The ferocity of this reaction may look odd from outside the U.K. Over in Russia, reports that some $2 billion have been stashed in offshore accounts and shell companies by a group of President Vladimir Putin’s closest friends have received a dismissive collective shrug. Russians expect their leaders to enrich themselves. In Britain, the news that a privileged prime minister made 19,000 pounds ($27,000) with all taxes paid has sparked paroxysms of outrage. [Continue reading…]

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The covert roots of the Panama Papers

Steven Cohen writes: It should come as no surprise that the CIA’s finances are a secret. One of the rare glimpses into the agency’s funding came when Edward Snowden leaked a copy of the intelligence “black budget” to The Washington Post in 2013. But if history is any indication, the CIA may well have resources that don’t appear on any congressional document, highly classified or otherwise. Covert operations, by their very nature, often require access to off-the-books funding. The CIA’s first operation was paid for with funds seized from the Nazis, and in the years since, the agency has been notoriously creative about how it obtains its money.

Adnan Khashoggi would know. A “principal foreign agent” of the United States, as one Senate report referred to him, the billionaire playboy made a fortune (more than $100 million between 1970 and 1975 alone) from commissions negotiating arms deals with his native Saudi Arabia. He used these windfalls, in turn, to cultivate political clout—including, allegedly, with President Richard Nixon. In the aftermath of Watergate, when Congress began reining in the CIA, Khashoggi helped establish the supranational intelligence partnership known as the Safari Club. Soon after, he aided the CIA in circumventing another congressional impediment. With money borrowed from the Saudi and U.S. intelligence-linked Bank of Credit and Commerce International, he financed the illegal arms sales that set off the Iran-Contra scandal.

One way Khashoggi structured his shadowy holdings during his heyday was through the specialized services of Mossack Fonseca, the law firm that is in the news for having helped global luminaries like Vladimir Putin hide their money. Thanks to a recent report from the International Consortium of Investigative Journalists, we now know Khashoggi to be among a number of former spies and CIA associates implicated by the 2.6 terabytes of offshore financial documents provided to the German newspaper Süddeutsche Zeitung last summer.

That his name should appear in an international dark money scandal suggests something about the nature of tax havens that much of the media’s coverage has thus far avoided grappling with. The Panama Papers have largely been presented as an unprecedented insight into how global elites hide their fortunes from tax collectors and other regulators. But they also underscore how tax havens are used by covert agencies and other shadowy players to launder dirty money, a practice that has a long history in which Panama, in particular, has played a notable part. [Continue reading…]

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How global tax evasion keeps poor countries poor

Max Bearak writes: Releases of secret documents, like the whopping 11.5 million Panama Papers, are designed to result in a cascade of scandals. Since Sunday’s revelations, Iceland’s prime minister has stepped down, and Britain’s prime minister, David Cameron, admitted on Thursday that he had profited from his father’s offshore account. Leaders in Russia, China and other parts of the world have come forward to either claim the leak is a conspiracy, censor online speculation, or simply deny any illicit dealings or tax impropriety.

As journalists take a fine comb through the 2.6 terabytes of data obtained from the servers of Mossack Fonseca, the world’s fourth biggest “offshore law” firm, they are sure to uncover more and more of the web of dealings that tie politicians, businesspeople, celebrities and their kin to that tax haven and others.

But what’s so scandalous about the Panama Papers isn’t just that there’s a nexus of rich people, some elected, who make profits by evading taxes. It’s that so much of the money moved through tax havens would otherwise be taxed by some of the world’s poorest, most revenue-hungry governments.

That tax evasion disproportionately affects the poor shouldn’t come as a surprise, and it certainly isn’t a secret. Angel Gurría, the secretary general of the Organization for Economic Cooperation and Development, or OECD, an economic organization consisting of the world’s richest nations, once estimated that developing countries lose three times as much to tax evasion as they receive in foreign aid. The Tax Justice Network, pointing out that data on tax evasion is murky at best, says the real figure may be closer to 10 times. [Continue reading…]

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The Panama Papers prove it: America can afford a universal basic income

Colin Holtz writes: We should all be able to agree: no one should be poor in a nation as wealthy as the US. Yet nearly 15% of Americans live below the poverty line. Perhaps one of the best solutions is also one of the oldest and simplest ideas: everyone should be guaranteed a small income, free from conditions.

Called a universal basic income by supporters, the idea has has attracted support throughout American history, from Thomas Paine to Martin Luther King Jr. But it has also faced unending criticism for one particular reason: the advocates of “austerity” say we simply can’t afford it – or any other dramatic spending on social security.

That argument dissolved this week with the release of the Panama Papers, which reveal the elaborate methods used by the wealthy to avoid paying back the societies that helped them to gain their wealth in the first place.

Roads and transportation infrastructure. Educated workforces. Courts and legal systems. Innovations sparked by government funding, such as the internet. No one – no matter how smart or hard working – joins the American or global elite without making use of these shared resources.

But while working and middle-class families pay their taxes or face consequences, the Panama Papers remind us that the worst of the 1% have, for years, essentially been stealing access to Americans’ common birthright, and to the benefits of our shared endeavors. [Continue reading…]

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The super rich live in a parallel world; here’s how we bring them back to reality

Suzanne McGee writes: “Only the little people pay taxes,” Leona Helmsley, New York’s “Queen of mean” once famously opined. The statement, delivered in court by one of her “little people” helped send the late billionaire real estate mogul to jail for 19 months for failing to pay her dues.

It’s hard not to think of the late Leona amid the revelations still pouring out from the Panama Papers. The massive treasure trove of 11.5m documents from the Panamanian law firm of Mossack Fonseca leaked to the media has disclosed a staggering amount of detail about how the rich and powerful have used shell companies to hide their wealth from the taxman and others around the world.

Done right – the way that the lawyers at Mossack Fonseca promised their super-wealthy clients they would be done – shell companies are almost untraceable. And that enabled those clients to use them to stash money made from illegal weapons, human trafficking or drugs, or shelter cash from the tax man or other kinds of regulatory scrutiny.

It’s just another way that the rich can take advantage of breaks that would elude us even if we wanted them. Sure, you or I could set up a shell company of sorts, by establishing a limited liability company. But our names, and our social security numbers, are attached to it. And it’s domiciled here in the US. While there are ways to use US shell companies fraudulently, most of us would have a hard time doing it without paying big bucks for the assistance of high-priced attorneys. [Continue reading…]

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David Cameron left dangerously exposed by Panama Papers fallout

The Guardian reports: David Cameron was left dangerously exposed on Tuesday after repeatedly failing to provide a clear and full account about links to an offshore fund set up by his late father, as the storm over the Panama Papers gathered strength in both the UK and elsewhere around the world.

The prime minister and his office have now offered three partial answers about the fund set up by his father Ian, which avoided ever paying tax in Britain. The key unanswered question is whether the prime minister’s family stands to gain in the future from his father’s company, Blairmore, an investment fund run from the Bahamas.

After Downing Street said on Monday that the fund was a “private matter”, a journalist asked Cameron about it during a visit to Birmingham on Tuesday.

Cameron replied: “I own no shares, no offshore trusts, no offshore funds, nothing like that. And, so that, I think, is a very clear description.”

He dodged the key part of the question about whether he or his family stood to benefit. [Continue reading…]

The Guardian reports: David Cameron intervened personally to prevent offshore trusts from being dragged into an EU-wide crackdown on tax avoidance, it has emerged.

In a 2013 letter to the then president of the European council, Herman Van Rompuy, the prime minister said that trusts should not automatically be subject to the same transparency requirements as companies.

The EU planned to shine a light on the dealings of offshore bodies by publishing a central register of their ultimate owners but, in a letter unearthed by the Financial Times that remains publicly available on the government’s website, Cameron said: “It is clearly important we recognise the important differences between companies and trusts … This means that the solution for addressing the potential misuse of companies – such as central public registries – may well not be appropriate generally.” [Continue reading…]

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