Business shrinks for Panama Papers law firm
WASHINGTON — U.S. business for the law firm at the heart of the Panama Papers scandal is shrinking dramatically amid multiple investigations from federal and state regulators.
In Wyoming, the local business partner of Mossack Fonseca cut ties to the U.S. operations of the Panamanian law firm, McClatchy has learned. And this week the Nevada affiliate of Mossack Fonseca abruptly resigned as the registered agent for 1,024 companies it administered in the state.
Both developments came more than a month after a report by McClatchy and its partners that showed how Mossack Fonseca helped Brazilians, Russians and others hide assets from authorities in their home countries.
Nevada, Wyoming and Delaware are leaders in company formations but require little information on the true owners, requiring instead only a contact person.
The embattled Panamanian law firm is under investigation from the United States and Germany to the British Virgin Islands and the tiny Seychelles islands in the Indian Ocean. And each company it administered in Nevada now will have to find someone to serve as a new administrator.
“This scenario is absolutely unusual,” said Trevor Rowley, president of the Nevada Registered Agents Association. “I have never seen anything like this.”
A registered agent handles bill payments, renews incorporation and files annual required reports for companies. It’s not unusual for an agent to resign from a company if the true owners are found to be breaking the law or simply refuse to pay their bills. But resigning from more than 1,000 companies at once is a highly unusual event.
“I really don’t know what they would do,” said Rowley.
More than 350 journalists worldwide, working under the umbrella of the International Consortium of Investigative Journalists, examined 11.5 million leaked documents from Mossack Fonseca. The stories, published starting April 3, showed how politicians, businessmen and criminals hid money and assets behind the anonymity of shell companies.
The reporting led the prime minister of Iceland to step aside, forced the British prime minister to testify before Parliament about undisclosed offshore holdings and showed how close associates of Russian leader Vladimir Putin moved billions in offshore shells.
McClatchy’s report April 5 about foreigners using Wyoming and Nevada to hide questionable assets led Wyoming to immediately penalize Mossack Fonseca and investigate the firm. That same report documented how Nevada shell companies are tied to a corruption probe in Brazil.
When approaching a new registered agent, the owner or its representative would have to disclose that the prior registered agent had resigned, and that could be a warning sign.
The Panama Papers stories prompted the Obama administration to propose closing a loophole that allowed some foreign companies to escape reporting to the U.S. government that they operated U.S. shell companies but earned no money nor held any assets here.