Panama papers: who were exposed by them?

A lot of people have heard the term «offshore» - a financial center, which attract foreign capital by the granting of special concessions, especially tax concessions for the foreign companies, which register in the countries of such centers.  But not many people are familiar with the history of the term «offshore». It first occurred in a small American newspaper in the late 1950-s. The article was about a financial organization that managed to avoid government control by an outlandish inventiveness.
14.07.2016
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The company’s executive management decided to move its activity to a territory with a more loyal tax climate, after it fell under a rough financial control.  But as time went by, such inventiveness stopped being so unusual. As the tax pressure on business in big countries has been rising – more and more entrepreneurs have been leaving to offshore jurisdictions. According to experts-economists’ evaluations dated 2013, the total volume of finances in offshores was estimated at over 18 trillion dollars. Naturally, official authorities are interested in getting the money back to their countries Processes of deoffshorization are being extensively conducted all over the world and that is why many companies, who are worried about being exposed are hoping for the lawyers. However, as recent events showed, even the best lawyers cannot always provide proper safety.

Mossack Fonseca & Cо – is a juridical firm with a headquarter in Panama and dozens of offices all over the world. It was founded in 1977 and specializes in trade law, trust services and in financial consulting of private individuals and organizations. The firm is included in the seven of companies, which together give more than a half profit of all other companies registered in Panama. The Mossack Fonseca was founded by two businessmen – Jurgen Mossack and Ramon Fonseca. Jurgen was born in 1948 in a West German city – Furth. His genealogic table is rather fascinating: according to some data, his father was working on Hitler, but managed to remain untouched in a postwar period and in 1960-s he moved to Latin America, where he was cooperating with CIA. His priority was to stand against communists.

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What is Mossack Fonseca?

Jurgen Mossack and Ramon Fonseca
Jurgen Mossack and Ramon Fonseca

The second founder of the firm was born in Panama in 1952. He got a legal education, but in his spare time he was taking a turn at creative writing. In his entire life he had over tens of his books published.  Moreover in 1994 and in 1998 he became a winner of Panamian literary award named after Ricardo Miro.  It is interesting, that the last Fonseca’s book, which was published in 2012, is named Mister Politicos. The book is written in the political thriller genre and it describes how cynical policies use different schemes to obtain and retain power.

Such schemes, but at this time used by real persons, slipped out from the legal firm. On 3d of April 2016, a link of 11 millions secret documents were made public. According to these documents, the company helps its clients all over the world in an illegal transmission of great amounts of money to offshores.

This link is rather mysterious. The documents of Panamian legal firm were sent to editorial office of German newspaper Sueddeutsche Zeitung in 2015 by an anonymous nicknamed John Doe. Such nickname is often used abroad to define people, whose personalities must be concealed or whose names are unknown.

According to German newpaper’s reporter Bastian Obermayer, first time in his whole life, he got such message from an unknown person: «Hello. This is John Doe. Interested in data?». 

The Süddeutsche Zeitung newspaper
The Süddeutsche Zeitung newspaper

Before he could answer he received files with over 11 million secret documents. The newspaper’s representatives claim, that they still do not know, who was their information source and why he contacted them. They also refrained from commenting on whether they are still in touch with him or not. The communication of the anonymous and the journalist was encrypted and was held in different ways. "On some days, I chatted more with the source than with my wife. We had a lot to talk about", - told Obermayer in an inner exchange of emails. It is also surprising, that the source has never asked for any money in return of information.

The German newspaper involved journalists from all over the world in the performance of work. During a year, a group of different media’s representatives, named non-commercial organization the International Consortium of Investigative Journalists (ICIJ), was investigating the secret archive.

Hidden owner scheme of the Mossack Fonseca
Hidden owner scheme of the Mossack Fonseca

 

The ICIJ report cause a stir in Russia – it is mentioned there, that people, who are «close to the President of the country Vladimir Putin» were laundering money amounting to 2 billion dollars through offshore companies. However, besides Russian authorities the investigation has touched a great amount of powerful people from all over the planet.

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Sergey Roldugin, a famous cellist and a close friend of Vladimir Putin, was revealed in the Panama papers. Later Putin said that Roldugin has done nothing wrong and spent the money he earned from business on buying expensive musical instruments to donate to public institutions. At the same time, media reports based on the leaked documents from a Panama-based law firm alleged that Sergey Roldugin had quietly built up a sprawling business empire involved in offshore transactions that might be linked to the Russian leader.

Thus, the report also included data concerning the President of Azerbaijan Ilham Aliyev’s family, which secretly owned offshore companies to own real estate in London and control other active assets abroad.  In 2005 Aliyev himself transferred a right to hard rock gold mining in Azerbaijan to a Brititsh company and to three offshores. But in fact, thanks to such manipulations, the mines came into possession of the Aliyev’s family. According to the Mossack Fonseca data, in 2003 Aliyev and his wife became owners of the Rosamund International Limited company, registered on British Virgin Islands. Five years later Aliyev’s daughters registered their companies in the same place. Arzu, 19, and Layla, 23, own gold mines, at the cost of billions dollars.

The exposed politicians of China and Kazakhstan
The exposed politicians of China and Kazakhstan

Officials from Great Britain are also mentioned in the documents: six members of House of Lords, three former members of Parliament from conservators and a late father of prime-minister David Cameron – Ian Cameron. All of them had fortunes in offshores.  After publication of the data, British authorities sent a request for receiving copies of the documents. On the ground of this information government is planning to take measures against tax evasion in the country. British citizen have already demanded Cameron’s resignation. Cameron himself claimed, that he and his wife owned a stock of shares in his father’s offshore fund, but he had sold it far before becoming a prime minister. 

Another victim of the investigation is a country with the highest level of quality of life – Iceland. According to the Panama papers, current prime minister of the country David Gunnlaugsson Sigmundur, who came into power under a slogan of fighting with offshores, owned an offshore company with his wife.

Protests after the reveleation of the PM of Iceland
Protests after the reveleation of the PM of Iceland

 As early as in the evening of April 4th Reykjavik citizens came out on the streets demanding Sigmundur's resignation. At the same time, users launched a collection of signatures campaign on the Internet for the resignation of the prime minister. More than 23 thousands people signed the petition in one day. The result was not late in arriving – on 5th of April 2016, prime minister of Iceland handed a resignation.

The exposed politicians of Iceland, Azerbaijan and GB
The exposed politicians of Iceland, Azerbaijan and GB

Another country of former USSR – Kazakstan – was also mentioned in the documents. According to the investigation, a president’s grandson and vice prime minister’s son Nurali Aliyev owns two offshore companies, registered on the British Virgin Islands, where the children of Azerbaijani elite have their companies. Aliyev used his company to carry out different bank operations and to buy an expensive yacht.

There are also Chinese surnames in the documents. Lately Chinese authorities have been raising alarm because of rapid currency outflow on a massive scale. For the record, the scale of capitals brought out from the country as of 2015 estimated at hundreds of billions dollars. World economists believe, that if the currency outflow in China continues at the same level, the country will face destabilization of all economic system.

According to the documents, Chinese communistic leaders themselves participated in a currency withdrawal, namely seven leading heads of the ruling party, relatives of the Politburo’s members and Chinese governmental authorities.

The Celestial Empire’s authorities denied answering foreign journalists’ questions concerning the offshore exposure and did not let this information leak into Chinese media.  Chinese search system Baidu, when searching Panama Papers, shows the following message: «Search results may not conform to relevant laws and regulations. It is recommended trying to search other related terms». Chinese authorities went the primitive way – censored all information concerning the investigation.

Pakistan also appeared in Panama papers. The investigation includes information about the three children of country’s prime minister Nawaz Sharif.  Sharif’s family owns four offshore firms next door to Kazaks and Azerbaijanis  - on the British Virgin Islands. They have been using these companies to administer their six houses in London, near the Hyde Park.  Total coast of the real estate exceeds millions pounds sterling.

It is notable that the exposure-data concerning the USA is closely intertwined with Russia. According to the British newspaper The Observer, Russian Sberbank lobbies its interests in the USA. The process is going through Podesta Group company, founded by two brothers Tony and John Podesta. John – is a former head of Presidential Administration of Bill Clinton and adviser of Barack Obama. Today he is a head of the Hillary Clinton’s campaign office. At the same time, his brother Tony raises money in a Hillary Clinton’s presidential campaign’s fund.  Tony is famous in the USA as one of the most authoritative lobbyist in the country.

However, in comparison with other countries, there is not much information about the USA in the investigation.  According to primary data, 211 people with American addresses mentioned in the documents, own offshore companies. But there is still no exact information concerning whether these people are citizens of the USA or not. After the publication the President of the United States Barack Obama was quick to say, that tax evasion is a worldwide problem. He also added, that governments of all countries should unite, to solve this problem.

The exposed politicians of the USA, Ukraine and Brazil
The exposed politicians of the USA, Ukraine and Brazil

Ukraine also was not left aside. President Petr Poroshenko himself was mentioned in the documents.  According to the published data, in 2014 he transferred active assets from Roshen company to an offshore company on the British Virgin Islands. President’s assistants claimed, that Poroshenko did it to raise the company’s appeal in the eyes of potential buyers. At the same time in 2015 Poroshenko did not declare the fact of possession of the active assets of the offshore companies, thus violating Ukrainian legislation. Leader of the Radical party Oleg Lyashko called for Poroshenko’s resignation.

Among other famous people, persons of all kinds of spheres mentioned in the investigation: football player Lionel Messi, member of FIFA Ethics Committee Juan Pedro Damiani and even actor Jackie Chan.

Mossack Fonseca is also connected to the «Petrobras case» - an investigation into largest Brazilian oil company, which was caught out on corruption with the participation of construction corporations and leading policies of the country. Soon after that the President of the country Dilma Rousseff was signed out.

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Rousseff had to close off the loopholes because of the Brazilian economy collapsed. The commodity prices, which occupy the structure of the Brazilian exports up to 60%, fell dramatically. This led to the fact that country faced a deficit trade balance, which exceeded $3.9 billion for the first time since 1998. In 2016, according to IMF forecasts, the result will be the same.

In January 2016 Brazilian prosecution office accused five employees of Mossack firm in corruption. According to the investigation, bureaucrats of the  Petrobras were getting bribes from construction firm Oderbrecht: its main business is situated in Panama. Oderbrecht used partners to build its offshore business, those were many subsidiary companies of Mossack Fonseca.

The reaction of law enforcements from different countries was not long to come. Salvador’s authorities have already searched Panamian legal company’s office and confiscated documents and equipment. The Prosecutor General Duglas Melendes, who personally managed the operation, said, that the government decided to conduct the operation on Friday, after Mossack Fonseca took off its sign from the office’s enter.

Another consequence was that Jurgen Mossack – co-founder of the firm – left the foreign affair advisor council affiliated to the government of Panama. At the same time the administration highlighted, that the council was of an informal character and that Mossack worked there on a voluntary basis. Earlier, co-founder of the company Ramon Fonseca accused the investigation’s authors in frame-up and faulty interpretation of the facts, adding that the firm fell under a hacker attack from abroad

However not all documents have been published thus far. So the world hould be expecting new exposures in the short term.

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