In 1950s Panama Diner, Glum Off­shore Lawyers Count Cost of Leak

The Economic Times - - Around The World - CHRISTINE MUR­RAY & EN­RIQUE PRETEL

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

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