Mossack Fonesca didn’t want to provide this
information. For a firm that specializes in setting up hard-to-trace
offshore companies for clients around the world, confidentiality is a
must.
The law firm tried to block the subpoena by denying
that its Las Vegas operations, run by a company called M.F. Corporate
Services (Nevada) Limited, were part of the Mossack Fonseca group.
The firm’s Panama-based co-founder, Jürgen Mossack,
testified under oath that “MF Nevada and Mossack Fonseca do not have a
parent-subsidiary relationship nor does Mossack Fonseca control the
internal affairs or daily operations of MF Nevada’s business.”
But secret records obtained by the International
Consortium of Investigative Journalists (ICIJ), the German newspaper
Süddeutsche Zeitung and more than 100 other media partners raise new
doubts over that sworn testimony.
Not only do they show that the Nevada subsidiary was
wholly owned by Mossack Fonseca but that, behind the scenes, the firm
took steps to wipe potentially damaging records from phones and
computers to keep details of their clients from the
United States justice system.
One email from 2014, for instance, instructs that any link between Mossack Fonseca’s central computing system in
Panama
and the Nevada office “has to be obscure to the investigators.” Other
emails report that IT operatives working via remote control from Panama
“tried to clean the logs of the PC’s in the Nevada office” and planned
to run a “remote session to eliminate the traces of direct access to our
CIS” - the firm’s computer information system.
The documents even show that a firm employee
traveled from Panama to Vegas to whisk paper documents out of the
country. “When Andrés came to Nevada he cleaned up everything and
brought all documents to Panama,” a Sept. 24, 2014 email said.
In comments to ICIJ, Mossack Fonseca “categorically”
denied hiding or destroying documents that might be used in an ongoing
investigation or litigation.
The more than 11 million documents obtained by ICIJ -
emails, bank accounts and client records - represent the inner workings
of Mossack Fonseca for nearly forty years, from 1977 to December 2015 .
They reveal the offshore holdings of individuals and companies from
more than 200 countries and territories .
They recount example after example of ethical and
legal wrongdoing by some clients and provide evidence of a firm happy to
act as a gatekeeper to the secrets of its clients, even those who turn
out to be crooks, members of the Mafia, drug dealers, corrupt
politicians and tax evaders.
The files show that business has been good.
Today, Mossack Fonseca is considered one of the
world’s five biggest wholesalers of offshore secrecy. It has more than
more than 500 employees and collaborators in more than 40 offices around
the world, including three in
Switzerland and eight in
China.
Mossack Fonseca responded to questions raised by
ICIJ’s findings saying that “for 40 years Mossack Fonseca has operated
beyond reproach … Our firm has never been accused or charged in
connection with criminal wrongdoing.”
Spokesman
Carlos Sousa said that the firm “merely helps clients incorporate companies.”
That doesn’t amount to “establishing a business link with or directing in any way the companies so formed,” Sousa said.
Firm’s Roots
Mossack Fonseca traces its beginnings to 1986, when
Ramón Fonseca merged his small, one-secretary law firm in Panama with
another local firm headed by Jürgen Mossack, a Panamanian of German
origin.
“Together,” Fonseca later mused to a journalist, “we have created a monster.”
Both men had international pedigrees and backgrounds in the worlds of money, power and secrets.
Fonseca was born in Panama in 1952 and studied law
and political science at the University of Panama and the London School
of Economics. As a young man, he once recalled, he hoped to save the
world, first yearning to be a priest and later working for five years
for the
United Nations in Geneva.
“I didn’t save anything, I didn’t make any change,”
he recalled in a television interview in 2008. “I decided then, as I was
a little more mature, to dedicate myself to my profession, to have a
family, to get married and have a regular life … As one gets older, you
turn more materialistic.”
Mossack was born in
Germany in 1948. He moved to Panama with his family in the early 1960s, according to his law partner.
Mossack’s father had been a member of the Waffen-SS,
the notorious armed wing of the Nazi Party during World War II,
according to U.S. Army intelligence files obtained by ICIJ.
After the war the father offered his services to the
U.S. government as an informant, the files show, claiming “he was about
to join a clandestine organization, either of former Nazis now turned
Communist . . . or of unconverted Nazis cloaking themselves as
Communists.” An Army intelligence officer wrote that the offer to spy
for the U.S. might simply be “a shrewd attempt to get out of an awkward
situation.”
Nevertheless, the old intelligence files indicate
that Mossack’s father later ended up in Panama, where he offered to spy,
this time for the CIA, on Communist activity in nearby
Cuba.
After earning a law degree in Panama in 1973, the
son worked for a time as a lawyer in London before returning to Panama
to start the firm that he would later merge to form Mossack Fonseca
& Co.
Today, both partners move in the highest circles of Panamanian society.
As well as being a lawyer, Fonseca leads an equally high profile second life as an award-winning novelist. Among his books is “
Mister Politicus,
” a political thriller that, his literary website says, “articulates
the tangled processes that unscrupulous officials use to gain power and
achieve their detestable ambitions.”
Fonseca knows the world of politics through his work until recently as a top adviser to the Panamanian President,
Juan Carlos Varela.
Fonseca announced in early March that he was taking a
leave of absence from that position after allegations that the Mossack
Fonseca’s Brazilian office was involved in a still-growing bribery and
money-laundering scandal centered on Brazil’s state-controlled oil
company. He took the action, he said, “to defend my honor and my firm
and my country.”
Denying any involvement in wrong-doing during a
television interview, he used an analogy the company has employed
before, saying that if an offshore firm is put to bad use, the company
is no more culpable than an automobile factory that built a car later
used in a robbery.
Mossack is a member of the prestigious
Club Union,
where his daughter Nicole made her debut in 2008. He also served on the
Conarex, Panama’s council on foreign relations, from 2009 to 2014.
Mossack’s holdings, according to the files obtained
by ICIJ, include a teak plantation and other real estate, an executive
helicopter, a yacht named
Rex Maris and a collection of gold coins.
Path Breaking in the BVI
The merger that created Mossack Fonseca came at a
difficult time in Panama’s history. The country faced political and
economic instability under military dictator
Manuel Noriega, who was getting unwelcome attention because of growing evidence that he was involved in money laundering and drug running.
In 1987, with Panama under a shadow, Mossack Fonseca made its first big move abroad, establishing a branch in the
British Virgin Islands,
which a few years before had passed a law that made it easy to set up
offshore companies without public disclosure of owners and directors.
“Mossack Fonseca was the first to come from Panama to the BVI and others followed,”
Rosemarie Flax, Mossack Fonseca’s longtime managing director there, told a British Virgin Islands news outlet in May 2014.
Today, the British Virgin Islands are home to about
40 percent of the world’s offshore companies. Of the companies that
appear in Mossack Fonseca’s files, one out of every two companies - more
than 113,000 - were incorporated in the British Virgin Islands.
Tales of the South Pacific
Mossack Fonseca made another significant move in 1994.
It helped the tiny nation of
Niue
- a South Pacific coral outcrop with a population of fewer than 2,000 -
craft legislation that provided for incorporation of offshore
companies. The law firm had picked Niue, Mossack later told Agence
France-Presse, because it wanted a location in an Asia-Pacific time zone
and because it would face no competitors: “If we had a jurisdiction
that was small, and we had it from the beginning, we could offer people a
stable environment, a stable price.”
The firm then signed a 20-year-deal with the small
atoll’s government for exclusive rights to register offshore companies
in Niue. Importantly, Niue offered registration in Chinese or Cyrillic
characters, making it attractive to Chinese and Russian customers.
By 2001, Mossack Fonseca was doing so much business
out of Niue that it was paying the equivalent of $1.6 million of the
Niue government’s projected $2 million annual budget.
But the firm’s cozy relations with the island nation also began attracting unwanted scrutiny.
That same year the U.S.
State Department
questioned the “awkward sharing arrangements” between Niue and Mossack
Fonseca and warned that Niue’s offshore industry had been “linked with
the laundering of criminal proceeds from
Russia and
South America. ”
The Financial Action Taskforce, an intergovernmental
organization set up by major nations to combat money laundering, put
Niue on a blacklist of jurisdictions that were failing to take steps to
prevent money laundering, threatening economic sanctions.
Though Mossack denied that Niue was involved in money laundering, in 2001 the Bank of New York and Chase
Manhattan
imposed embargoes on transfers of dollars to Niue. In 2003, Niue
declined to renew four Mossack Fonseca-incorporated companies, signaling
that it would be shutting down the firm’s exclusive franchise .
Shifting Operations
Losing Niue didn’t slow Mossack Fonseca down. It
simply shifted its operations, with the law firm encouraging customers
who had companies in Niue to simply re-incorporate in the nearby nation
of
Samoa.
The switch was part of a pattern that emerges in the
documents. When legal crackdowns have hindered Mossack Fonseca’s
ability to serve its clients, it has quickly adapted and found other
places to work.
When the British Virgin Islands cracked down on
bearer shares in 2005 , Mossack Fonseca moved that particular business
to Panama.
Companies that have bearer shares don’t display an
owner’s name. If they’re in your hands, you own them. They have long
been considered a vehicle for money laundering and other wrongdoing, and
have been gradually disappearing worldwide. In some jurisdictions, they
are still allowed, although subject to more restrictions.
Mossack Fonseca’s ability to move its business
swiftly shows up in a big increase in incorporations in one of those
jurisdictions, the Caribbean island
Anguilla,
which saw the number of companies incorporated there more than double
between 2010 and 2011. Anguilla is now one of Mossack Fonseca’s top four
jurisdictions for incorporations.
Mossack Fonseca has also expanded its operations to
take care of the additional needs of its customers, including
registering private aircraft and yachts.
By 2006, according to the files, Mossack Fonseca
expanded its business further by handling the finances of some clients
or, as the company described it, “discretionary portfolio management.”
According to the documents the firm’s in-house asset manager operations - called
Mossfon Asset Management S.A., or MAMSA - handled more than 4,700 transactions and at least $1.2 billion in client money between mid-2007 and mid-2015.
MAMSA worked with several banks, including at least two that have been the subjects of money laundering investigations:
Banca Privada d’Andorra, accused by the U.S.
Treasury Department in a 2015 report of money laundering for powerful criminal gangs, and
Deutsche Bank Switzerland, whose parent company has been investigated by authorities in the
United Kingdom
and the United States for possible money laundering for Russian
clients. The U.S. treasury withdrew its finding on Banca Privada
d’Andorra on Feb. 19, 2016, saying that it “no longer operates in a
manner that poses a threat to the U.S. financial system.”
Secrecy for Sale
The files show that as well as Deutsche Bank, the
firm works with some of the world’s other biggest financial
institutions, such as
HSBC, Société Générale,
Credit Suisse,
UBS, and
Commerzbank,
in some cases to help the banks’ clients set up complex structures that
make it hard for tax collectors and investigators to track the flow of
money from one place to another.
Mossack Fonseca said that allegation that it
provides structures designed to hide the identity of owners is
“completely unsupported and false.”
Société Générale and Credit Suisse said they emphasize tax compliance and are vigilant against fraud and money laundering.
Credit Suisse said that, since 2013, it has been
putting in place programs that ask private clients to provide evidence
of tax compliance or lose their banking relationship.
“The allegations are historical, in some cases dating back 20 years,
predating our significant, well-publicized reforms implemented over the last few years,” said
Rob Sherman, a spokesman for HSBC in New York.
UBS said it knows the identity of the owners of all
companies that it is asked to work with and has strict
anti-money-laundering rules. Deutsche Bank noted that it reached an
agreement Nov. 24, 2015 with the U.S.
Justice Department
to pay $31 million in exchange for a non-prosecution agreement in a
U.S. investigation of Swiss banks that helped U.S. citizens evade taxes.
Commerzbank said it would have no comment.
The real owners of bank accounts that appear under
the name of anonymous offshore companies registered by Mossack Fonseca
may be hidden behind so-called nominee directors - stand-in directors
supplied by Mossack Fonseca - who provide cover for the real owners.
Depending on how much a client pays, more than one
secrecy jurisdiction and more than one anonymous company can be
involved, adding to the frustration of authorities if they try to trace
the real owners.
In Panama, Mossack Fonseca’s products include
private foundations, which are not subject to taxes in Panama and
operate under a law that does not require the names of the founders or
beneficiaries to be revealed.
Other activities found in the files include Mossack
Fonseca changing and backdating documents when a client is in trouble
and allowing customers to hide their assets by setting up foundations in
Panama that initially list non-profits such as the
World Wildlife Fund as the beneficiary but allow the customer to change the beneficiary at will.
Backdating is a common industry practice, sometimes
reflecting the date of a decision made before it was recorded, Mossack
Fonseca said. The aim “is not to cover up or hide unlawful acts.”
In one case, the firm helped a financial advice
author from New York hide $1 million from the United States Internal
Revenue Service by providing the author with “a natural person nominee” -
a straw man who worked for Mossack Fonseca - who pretended to be the
owner of an investment account with HSBC bank in
Guernsey, an island nation in the English Channel.
“We do not provide beneficiary services to deceive banks,” said Mossack Fonseca in written answers to ICIJ.
Most Wanted
Though Mossack Fonseca publicly says it “conducts
exhaustive due diligence to verify the legitimacy of each our clients”
and says it would never work with political grafters, criminals or other
shady characters, the firm’s internal records paint a different
picture.
An analysis by ICIJ found, for example, that Mossack
Fonseca has worked with at least 33 companies and people blacklisted by
U.S. authorities because of their links to terrorism, narcotics
trafficking or because they aided rogue regimes such as
North Korea or
Iran.
Mossack Fonseca said it “does not foster or promote
unlawful acts” and has “never knowingly allowed the use of our
companies” by individuals working with sanctioned governments. In most
cases, the obligation to vet customers belongs to the banks, law firms
and other intermediaries that are the link between the Panama firm and
the owners of their shell companies, it said.
The files show that Mossack Fonseca sometimes made a
financial calculation to hang onto clients who were big sources of fees
for the company, even after they were revealed by authorities to be
undesirable.
In other cases, Mossack Fonseca’s loose procedures
allowed blacklisted individuals and other questionable clients to slip
by without even the firm itself knowing with whom it was dealing.
In an episode involving
Rafael Caro Quintero, the one-time head of the Guadalajara drug cartel in
Mexico, the firm’s actions were apparently based on a more visceral consideration - fear.
Authorities arrested Caro Quintero in
Costa Rica
in 1985 for the torture and murder of U.S. drug agent Enrique “Kiki”
Camarena. He was extradited to Mexico and sentenced in 1989 to 40 years
in prison. The Mexican government confiscated his wealth - including a
property that belonged to an offshore company set up by Mossack Fonseca -
and handed it over to Costa Rica’s government, which then passed it to
Costa Rica’s
National Olympic Committee.
The files show that in March 2005, Costa Rican
Olympic officials asked Mossack Fonseca to help them obtain clear title
to the property.
Jürgen Mossack objected. The offshore company’s shareholders would have to decide - and who they were was unknown, he said.
However, a Mossack Fonseca lawyer wrote in an
internal email exchange that it “appears the real owner of the estate,
and therefore of the company, was the narcotrafficker Rafael Caro
Quintero.”
Mossack, one of three directors listed for the company, wasn’t interested in getting on Caro Quintero’s bad side.
“Compared to Quintero even
Pablo Escobar
was a baby,” he wrote in an email exchange, the upshot of which was
that Mossack Fonseca would resign from its representation of Caro
Quintero’s offshore. “I don’t want to be among those Quintero visits
after jail.”
In 2013, Caro Quintero was released from prison on a
technicality and immediately disappeared. He remains at large and is
back on Interpol’s Most Wanted list.
Playing defense
Despite the notoriety of some of its clients,
Mossack Fonseca has managed to keep a remarkably low profile. The
Economist called it “the tight-lipped Mossack Fonseca” in a 2012 article
about offshore middlemen.
That same year, in July 2012 according to the files, the firm engaged the services of
Mercatrade S.A., a company that provides “online reputation management.”
The contract promises to launder Mossack Fonseca’s
image by removing negative entries on the Internet related to 12
keywords in English and Spanish: “Lavado de dinero, lavado de activos,
evasión fiscal, fraude fiscal, Delito, Trafico de armas, Money
Laundering, Tax Evasion, Tax Fraud, dirty Money, scandal, escándalo.”
Mossack Fonseca has since retained one of the
world’s most powerful public relations agencies, Burson-Marsteller,
which specializes in representing controversial clients, including
dictators in
Argentina,
Indonesia and
Romania and
Union Carbide after a deadly chemical explosion in Bhopal,
India.
Despite the attempts at public relations, nations have begun to take a harder look at Mossack Fonseca’s practices.
In 2012 and 2013 regulators in the British Virgin
Islands hit the firm with a series of fines for violating the country’s
anti-money-laundering rules, including a $37,500 penalty for failing to
properly screen a “high risk” client -
Alaa Mubarak, the son of Egypt’s ousted former dictator.
In February 2015, German authorities launched a
series of raids on the Commerzbank office and private homes in
Frankfurt. Süddeutsche Zeitung reported at the time that the German
authorities were considering legal actions against Mossack Fonseca
employees for possible contributions to tax evasion involving the bank’s
offices in nearby Luxembourg.
In early 2016 in
Brazil,
Mossack Fonseca became one of the targets of a bribery and money
laundering investigation dubbed “Operation Car Wash,” which is rapidly
growing into one of the biggest corruption scandals in
Latin American history.
Prosecutors allege that Brazilian businesses
cooperated with each other to divide up the bidding for contracts with
state-controlled oil conglomerate
Petrobras, inflating prices and using the extra money to bribe politicians and oil company officials and to enrich themselves.
Brazilian prosecutors claim Mossack Fonseca’s office
in Brazil helped some of the defendants by creating shell companies
that were used to commit crimes. At a news conference in January 2016,
they called Mossack Fonseca “a big money launderer” and announced they
had filed criminal charges against five employees of Mossack Fonseca’s
Brazilian office, involving crimes ranging from money laundering to
destroying and hiding documents.
The firm denies any wrongdoing in the case. It said
in a statement that the Mossack Fonseca office in Brazil is a franchise,
and the Panama law firm, which practices only in Panama, “is being
erroneously implicated in issues for which it has no responsibility.”
The argument was similar to the one used in Vegas.
The recently settled court action in Las Vegas was
begun by a U.S. company, NML Capital, which is controlled by billionaire
investor
Paul Singer - a hedge fund manager perhaps best known for his massive donations to the U.S.
Republican Party.
Mossack Fonseca was not a defendant, but it has been
the subject of court orders seeking to obtain information about Nevada
companies that the hedge fund claimed had been set up through Mossack
Fonseca by Lázaro Báez, a businessman close to former Argentine
presidents Néstor Kirchner and Cristina Fernández.
Internal emails obtained by ICIJ show Mossack
Fonseca employees in Panama scrambled to hide or destroy evidence of the
firm’s control of MF Nevada out of concern that the court case might
lead to a search of the Nevada branch.
Another concern, the emails show, was whether the manager of the MF Nevada branch,
Patricia Amunategui,
could be forced to testify. In one email, a Mossack Fonseca official
said the parent firm wanted her to “behave as if she was a provider” -
acting as if she was leading an independent U.S. company that had a
business relationship with Mossack Fonseca but no ownership connection.
But Mossack Fonseca officials worried that she wasn’t savvy enough to pull it off.
Mossack Fonseca’s IT manager wrote that IT staffers
were concerned Amunategui “does not have the skills to pass a basic
audit without allowing ourselves to be in evidence - Look out!!!. . .
I’m deeply worried about
Mrs. Patricia
forgetting things and getting very nervous. I think that in this
situation it could easily become clear that we are hiding something.”
U.S. Magistrate
Judge Cam Ferenbach rejected the parent firm’s attempt to distance itself from MF Nevada.
He noted that the branch manager’s contract was
signed by the firm’s partners, Mossack and Fonseca, and that she
received “all of her directions” from a Mossack Fonseca employee who
lives and works in Panama. “Mossack Fonseca & Co.’s own website
advertises the services of M.F. Corporate Services as its own,” the
judge wrote.
The judge ruled in March 2015 that Mossack Fonseca and MF Nevada were one in the same.
