In 1950s Panama Diner, Glum Offshore Lawyers Count Cost of Leak
Panama City: Aghast at the biggest offshore scandal in memory, lawyers, businessmen and politicians f lock to one of their favourite haunts, a diner opened in the 1950s nestled between Panama City’s financial and historic quarters, to swap notes. Given the reports from the Panama Papers jolting colleagues at shell company specialist Mossack Fonseca, Thursday’s huddle over orange juice and sandwiches at Cafe Boulevard Balboa was a less pleasant get-together than usual.
While that firm in particular stands in the eye of a storm that has buffeted world leaders from Russia to China, Britain to Iceland, its rivals in the off- shore services industry were also picking up the pieces.
“I was about to sign a contract on Monday with some Italian clients but they postponed it,” said corporate lawyer Pablo Gonzalez, 39, who said he worked for various legal firms, but declined to name them. “They want us to check everything again 10 times, they are afraid and want to be sure it’s all legal.” Mossack Fonseca and others set up companies in Panama that could be used to avoid taxes and commit financial crimes, but lawyers said the vast majority are for legitimate businesses for foreigners and Panamanians themselves. The head of the Chamber of Commerce said although the offshore legal industry represented around 0.5% of gross domestic product, the reputational damage from the leaks could have an impact on the wider Panamanian economy.
A cross-sampling of the Central American country’s legal community of around 22,000 lawyers said in interviews that they are angry and worried that information taken from just one firm has unfairly tarnished Panama’s reputation and will hurt business.
Jima Arauz, 58, who was eating a breakfast sandwich with her lawyer husband, said she had created hundreds of companies for clients over the years, and had heard of one lawyer who has lost two client deals since Sunday. “We’re worried because its giving a bad image to our country... it doesn’t reflect reality,” she said. Gonzalez and most of the more than 20 lawyers interviewed by Reuters protested that the image of Panama cast by the scandal was unfair, and that a new antimoney laundering law passed last year was already very strict on his industry.
Gonzalez said one client had wanted to put some aerobatic planes into an offshore company to sell them to an investor in Ethiopia. He turned it down as the new law would have made it too risky. On Tuesday evening at the National College of Lawyers, the centre of Panamanian legal life, the mood was just as grim.
While there were just a few cases of clients postponing or cancelling business so far, many believe there could be serious consequences for the legal industry. “There is ... collective hysteria among clients,” said lawyer Maria Isabel Saravia, of Legal Engine Solutions. “We expect a gradual impact ... Our clients feel like criminals.”
THINNING CLIENTELE Cafe Boulevard Balboa