Category Archives: corruption

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…]

Facebooktwittermail

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…]

Facebooktwittermail

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…]

Facebooktwittermail

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…]

Facebooktwittermail

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…]

Facebooktwittermail

Panama Papers reveal London as center of ‘spider’s web’

AFP reports: As-well as shining a spotlight on the secret financial arrangements of the rich and powerful, the so-called Panama Papers have laid bare London’s role as a vital organ of the world’s tax-haven network.

The files leaked from Panama law firm Mossack Fonseca exposed Britain’s link to thousands of firms based in tax havens and how secret money is invested in British assets, particularly London property.

Critics accuse British authorities of turning a blind eye to the inflow of suspect money and of being too close to the financial sector to clamp down on the use of its overseas territories as havens, with the British Virgin Islands alone hosting 110,000 of the Mossack Fonseca’s clients.

“London is the epicentre of so much of the sleaze that happens in the world,” Nicholas Shaxson, author of the book “Treasure Islands”, which examines the role of offshore banks and tax havens, told AFP.

The political analyst said that Britain itself was relatively transparent and clean, but that companies used the country’s territories abroad — relics of the days of empire — to “farm out the seedier stuff”, often under the guise of shell companies with anonymous owners.

“Tax evasion and stuff like that will be done in the external parts of the network. Usually there will be links to the City of London, UK law firms, UK accountancy firms and to UK banks,” he said, calling London the centre of a “spider’s web”. [Continue reading…]

Facebooktwittermail

Vladimir Putin says allegations in Panama Papers are an American plot

The New York Times reports: President Vladimir V. Putin dismissed on Thursday reports based on leaked legal documents that some of his close associates had shoveled around $2 billion through offshore accounts in the Caribbean, calling the allegations an American plot to try to undermine Russian unity.

The Russian president, making his first public remarks on the subject, also defended the cellist Sergei P. Roldugin, an old and close friend who was named in reports about the leaked documents, known as the Panama Papers. The cellist was at the center of a scheme to hide money from Russian state banks offshore, the reports said.

Mr. Putin said that Mr. Roldugin, like many Russians, had tried his hand at business, in his case to support his love of music by getting the money to buy expensive instruments.

“Almost all the money he earned he spent on musical instruments that he bought abroad,” Mr. Putin said at a public forum for regional journalists in St. Petersburg, broadcast live by state-run television. The musician had then donated the instruments to government institutions.

On paper, Mr. Roldugin’s shares in various enterprises linked to friends of Mr. Putin, especially Bank Rossiya, give him a net worth of hundreds of millions of dollars. Mr. Roldugin is the artistic director of the House of Music, which trains classical musicians in St. Petersburg. [Continue reading…]

Facebooktwittermail

Panama Papers tie more of China’s elite to secret accounts

The New York Times reports: At least three of the seven people on the Chinese Communist Party’s most powerful committee, including President Xi Jinping, have relatives who have controlled secretive offshore companies, the organization that has publicized a trove of leaked documents about hidden wealth reported on Wednesday.

The disclosures by the organization, the International Consortium of Investigative Journalists, risked new embarrassment for the Chinese authorities, already unnerved and infuriated by the organization’s leaks of the documents, known as the Panama Papers.

Chinese government censors have moved aggressively since the first release of leaked documents on Sunday to purge any media’s mention of them in China, going so far as to block Internet searches and online discussions that involve the words “Panama Papers.” [Continue reading…]

Facebooktwittermail

Panama Papers firm linked to over 1,000 U.S. companies mostly in Nevada and Wyoming

USA Today reports: The law firm at the hub of a global financial scandal has links to more than 1,000 U.S. companies, formed mostly in Nevada and Wyoming since 2001, but appears to have largely escaped the scrutiny of U.S. financial regulators — at least in public.

The leak this week of more than 11 million records from the Panamanian firm, Mossack Fonseca, has led to a global uproar that prompted Iceland’s prime minister to step aside Tuesday. An international consortium of journalists has reported the documents tie the firm, which specializes in shell companies that can be used to conceal assets, to Russian oligarchs, former heads of state and world soccer’s scandal-plagued governing body.

Yet despite those apparent dealings and its operations in the United States, the firm has appeared in only a scattering of court cases and regulatory filings. Most involve government attempts to track money the authorities believed had been concealed behind overseas shell companies the firm helped establish.

The Justice Department is “reviewing the reports” published by international journalists, the head of its Criminal Division, Leslie Caldwell, said Tuesday, but declined to elaborate.

The firestorm around Mossack Fonseca has been tied mostly to its work for foreign customers. But state incorporation records show the firm helped set up nearly 1,100 business entities in the United States since 2001.

The majority of U.S.-based companies linked to Mossack Fonseca were formed in Nevada by M.F. Corporate Services (Nevada) Limited, a one-employee company based out of a low-slung tile-roofed office building 20 miles from the Las Vegas strip. MF Nevada has served as the registered agent for 1,026 business entities since 2001, according to USA TODAY’s review of Nevada business documents. [Continue reading…]

Facebooktwittermail

Panama Papers law firm, Mossack Fonseca, says data hack was external, files complaint

Reuters reports: The Panamanian lawyer at the centre of a data leak scandal that has embarrassed a clutch of world leaders said on Tuesday his firm was a victim of a hack from outside the company, and has filed a complaint with state prosecutors.

Founding partner Ramon Fonseca said the firm, Mossack Fonseca, which specializes in setting up offshore companies, had broken no laws and that all its operations were legal. Nor had it ever destroyed any documents or helped anyone evade taxes or launder money, he added in an interview with Reuters.

Company emails, extracts of which were published in an investigation by the U.S.-based International Consortium of Investigative Journalists and other media organizations, were “taken out of context” and misinterpreted, he added.

“We rule out an inside job. This is not a leak. This is a hack,” Fonseca, 63, said at the company’s headquarters in Panama City’s business district. “We have a theory and we are following it,” he added, without elaborating. [Continue reading…]

Facebooktwittermail

Unlike the secrets exposed by the Panama Papers, big U.S. tax dodging is done in full public view

Quartz reports: Unlike in emerging markets and in Europe, the main US tax avoidance problem isn’t about individuals. Data on financial assets such as stocks and bonds, instruments in which affluent people tend to park their wealth, show a relatively small share of US money is kept offshore.

No, in the US, tax avoidance has more to do with corporations. And much of that dodging has increasingly been done in the clear, bright light of public view.

In his terrific recent book on what he calls the “scourge of tax havens,” Gabriel Zucman, an economist at the University of California, Berkeley, estimates that the artificial shifting of profits to low-tax locales such as Ireland, Switzerland, and the Bahamas reduces US corporate tax liabilities by $130 billion per year.

But the US Treasury Department is taking steps to address this. On April 4, it imposed new limits on so-called tax inversions, a type of deal in which a US company merges with a smaller firm in a foreign country where taxes are lower, adopts the foreign address, and takes advantage of the discrepancy in tax rates.

Such deals have been one of the most popular type of M&A transaction in recent years. The $160 billion deal between US drug giant Pfizer and Ireland-based Allergan is perhaps the most eye-popping example of this. [Continue reading…]

Facebooktwittermail

Panama Papers reveal a global web of corruption and tax avoidance

panama-papers

Matthew Yglesias writes: Even as the world’s wealthiest and most powerful nations have engaged in increasingly complex and intensive efforts at international cooperation to smooth the wheels of global commerce, they have willfully chosen to allow the wealthiest members of Western society to shield their financial assets from taxation (and in many cases divorce or bankruptcy settlement) by taking advantage of shell companies and tax havens.

If Panama or the Cayman Islands were acting to undermine the integrity of the global pharmaceutical patent system, the United States would stop them. But the political elite of powerful Western nations have not acted to stop relatively puny Caribbean nations from undermining the integrity of the global tax system — largely because Western economic elites don’t want them to. [Continue reading…]

Facebooktwittermail

The Panama Papers: Where are the Americans?

Politico reports: The Panama Papers sent ripples across the globe Monday after revealing that 140 politicians from more than 50 countries, including Russian President Vladimir Putin and Iceland President Sigmundur David Gunnlaugsson, were linked to offshore accounts set up by the Panamanian law firm Mossack Fonseca.

Despite its breadth, the scandal so far has barely touched American individuals and companies. There were no mass protests, as occurred in Iceland where protesters demanded the resignation of Gunnlaugsson; no U.S. leaders were forced to deny accusations of tax evasion as Putin did.

How have Americans so far escaped the biggest leak of financial data of all time? It’s not because wealthy Americans don’t use offshore bank accounts to avoid U.S. taxes: they do — to the tune of $1.2 trillion in 2014, according to one estimate. Some professors have suggested that Americans may have disguised their accounts at Mossack Fonseca behind another party. But there’s also a more structural answer, tax experts say — one that has to do with shifts in global financial policy — and, to an extent, taste.

Tax evasion overall is a far larger problem in developing countries, where norms around paying taxes are weak and rules designed to stop such evasion are ineffective. And when wealthy Americans do want to evade taxes, they turn to Bermuda, or the Cayman Islands, or Singapore. They don’t park their money in Panama. [Continue reading…]

Facebooktwittermail

Why Vladimir Putin will hardly flinch at Panama paper cut

By Anastasia Nesvetailova, City University London

The world remains gripped by the revelations made in the papers leaked from Panamanian law firm Mossack Fonseca. But Moscow has greeted the coverage with what might be characterised as calm indifference.

Aware that president Vladimir Putin would be linked to offshore schemes, the people around him began their PR manoeuvres ahead of time. The week before the papers were released, the Kremlin was forewarning the public about an imminent “information attack aimed at destabilising Russia in light of its success in Syria”.

The reaction of the Russian individuals mentioned in the Panama Papers – at least those who have gone on record so far – has also been calm. Some have denied knowledge of ownership of any offshore accounts. Considering the way offshore structures operate and set up, is not an implausible proposition.

Others queried the authenticity of the documents (which is easy, as not all of the original documents have been presented). Some have admitted an earlier relationship with an offshore business but have said the company in question had been sold or shut down. Again, that’s not an odd claim considering that many offshore shells survive as empty, or fossil corporations after their corporate parents have no further use for them and don’t want to go to the expense of shutting them down.

Continue reading →

Facebooktwittermail

Mossack Fonseca serviced Rami Makhlouf, Assad’s cousin and ‘poster boy for corruption’

The Guardian reports: The firm at the centre of the Panama Papers leak serviced a string of companies for a top financier in Bashar al-Assad’s government in the face of international concern about corruption within the Syrian regime.

Documents show Mossack Fonseca’s links to Rami Makhlouf, a cousin of the Syrian president, who was described in US diplomatic cables as the country’s “poster boy for corruption”.

Washington imposed sanctions on Makhlouf in February 2008, saying he was a regime insider who “improperly benefits from and aids the public corruption of Syrian regime officials”. It blacklisted his brother Hafez Makhlouf in 2007.

The documents show, however, that the Panamanian firm continued to work with the Makhloufs, and in January 2011 it rejected the advice of its own compliance team to cut ties with the family as the crisis in Syria began to unfold.

Documents show a Mossack Fonseca compliance officer wrote: “I believe if an individual is found on a sanction list then this is a serious red flag and we should make every effort to disassociate ourselves from them.” [Continue reading…]

Facebooktwittermail

Iceland PM calls to dissolve parliament after tax scandal

Reuters reports: Iceland’s prime minister asked the president on Tuesday to dissolve parliament in the face of a looming no-confidence vote and protests, after leaked files showed his wife owned an offshore firm with big claims on the country’s collapsed banks.

After a meeting with Prime Minister Sigmundur Gunnlaugsson, President Olafur Ragnar Grimsson said he had asked for talks with the main parties before making a decision. Dissolving parliament would almost certainly lead to a new election.

“I was not ready to agree to that request (for dissolving parliament) until I had a discussions with the leaders of other parties on their stand,” Grimsson told reporters.

“I do not think it is normal that the prime minister alone … should be given the authority to dissolve the parliament without the majority of the parliament being satisfied with that decision.”

Earlier on Tuesday, Gunnlaugsson said on his Facebook page: “I would dissolve parliament and call for new elections as soon as possible” if he lost support among his ruling coalition members.

On Monday, the opposition filed a motion of no-confidence and thousands of Icelanders gathered in front of parliament, hurling eggs and bananas and demanding the departure of the leader of the centre-right coalition government, in power since 2013.

Gunnlaugsson would be the first casualty of the “Panama Papers” a leaked collection of documents revealing the financial arrangements of politicians and public figures from around the world. [Continue reading…]

Facebooktwittermail

Hundreds of Israelis exposed in Panama Papers financial scandal

Haaretz reports: Some 600 Israeli companies and 850 Israeli shareholders are listed in the leaked documents of Panamanian law firm Mossack Fonseca, a leader in creating shell companies that often serve to conceal ownership of assets.

The leaked files, which were obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with Haaretz and other media organizations, provide a glimpse of the economy that until now had been hidden from the Israeli public.

There is a number of prominent names among the shareholders. It is important to note that as long as holdings in the companies and their revenues — if any — are reported as required to Israeli tax authorities, owning the company is not against the law.

Mossack Fonseca’s branch in Israel is headed by attorney Amir Maor. Callers to the branch are informed by a voicemail message that they have reached the offices of “The Company for Establishing Companies.”

Reached by telephone, Maor stated that Mossack Fonseca informed its Israeli branch last week that files had been stolen after its computer systems were breached. “Any information you use [from these files] is like using stolen data,” he said, refusing to give further comment.

The leaked files mention Sapir Holdings, a company registered in 2002 in the Virgin Islands. The owner and its only director was top-ranking lawyer Jacob Weinroth. He was indicted for money laundering in late 2009 and acquitted two years later of all charges against him. During the trial, it emerged that the company had received 30 million shekels ($7.95 million) for services rendered from Uzbek-Israeli entrepreneur Michael Cherney and Russian-Israeli businessman Arcady Gaydamak.

The fraudulent real estate deal of 2002 with the Greek Orthodox Patriarchate was also brought up in the trail. The failed deal, in which expensive lands in Jerusalem were offered to the State of Israel for a 999-year lease, was intended to be carried out by Christian Lands of Israel, a company created by Mossack Fonseca, which Weinroth represented. Company documents, like those requesting power of attorney for Weinroth, are among those found in the leaked files. [Continue reading…]

Facebooktwittermail

Fund run by David Cameron’s father avoided paying tax in Britain

The Guardian reports: David Cameron’s father ran an offshore fund that avoided ever having to pay tax in Britain by hiring a small army of Bahamas residents – including a part-time bishop – to sign its paperwork.

Ian Cameron was a director of Blairmore Holdings Inc, an investment fund run from the Bahamas but named after the family’s ancestral home in Aberdeenshire, which managed tens of millions of pounds on behalf of wealthy families.

Clients included Isidore Kerman, an adviser to Robert Maxwell who once owned the West End restaurants Scott’s and J Sheekey, and Leopold Joseph, a private bank used by the Rolling Stones.

The fund was founded in the early 1980s with help from the prime minister’s late father and still exists today. The Guardian has confirmed that in 30 years Blairmore has never paid a penny of tax in the UK on its profits. [Continue reading…]

BBC News reports: China appears to be censoring social media posts on the Panama Papers document leak which has named several members of China’s elite, including President Xi Jinping’s brother-in-law.

Hundreds of posts on networks such as Sina Weibo and Wechat on the topic have been deleted since Monday morning. [Continue reading…]

Find out more about the Panama Papers.

Facebooktwittermail