DATA LEAK Massive document dump exposes how the wealthy and powerful hide money
A massive leak of documents has blown open a window on the murky world of shell companies, providing an extraordinary look at how the wealthy and powerful conceal their money.
Twelve current and former world leaders maintain offshore shell companies. Close friends of Russian Leader Vladimir Putin have funnelled as much as $2 billion (all figures US) through banks and offshore companies.
Those exposed in the leak include the prime ministers of Iceland and Pakistan, an alleged bagman for Syrian President Bashar Assad, a close friend of Mexican President Enrique Pena Nieto and companies linked to the family of Chinese President Xi Jinping.
Add to those the monarchs of Saudi Arabia and Morocco; Middle Eastern royalty; leaders of FIFA, the international body that controls international soccer; and 29 billionaires included in Forbes Magazine’s list of the world’s 500 richest people. Also mentioned are 61 relatives and associates of current country leaders, and 128 other current or former politicians and public officials.
The leak exposes a trail of dark money flowing through the global financial system, stripping national treasuries of tax revenue.
The data breach occurred at a little-known but powerful Panamanian law firm, Mossack Fonseca & Co., which has an office in Las Vegas, a representative in Miami and presence in more than 35 other places around the world.
The firm is one of the world’s top five creators of shell companies, which can have legitimate business uses, but can also be used to dodge taxes and launder money.
More than 11.5 million emails, financial spreadsheets, client records, passports and corporate registries were obtained in the leak, which was delivered to the Suddeutsche Zeitung newspaper in Munich, Germany. In turn, the newspaper shared the data with the Washington-based International Consortium of Investigative Journalists.
Several McClatchy journalists joined more than 370 journalists from 78 countries in the largest media collaboration ever undertaken after a leak.
As a registered agent, the Mossack Fonseca law firm incorporates companies in tax havens worldwide for a fee. It has avoided close scrutiny from U.S. law enforcement officials.
Mossack Fonseca denied all accusations of illegal activity.
“We have not once in nearly 40 years of operation been charged with criminal wrongdoing,” spokesperson Carlos Sousa said. “We’re proud of the work we do, notwithstanding recent and wilful attempts by some to mischaracterize it.”
The law firm’s co-founder, Ramon Fonseca, in an interview last month on Panamanian television, said blaming Mossack Fonseca for what people do with their companies would be like blaming an automaker “for an accident or if the car was used in a robbery.”
Yet plenty of criminals are named in the documents, such as drug traffickers and convicted fraudsters.
“The offshore world is the parallel universe of the ultrarich and ultrapowerful,” said Jack Blum, a white-collar crime lawyer and an architect of the Foreign Corrupt Practices Act.
The archive, which dates to the late 1970s and extends through December 2015, reveals that 14,000 intermediaries and middlemen bring business to Mossack Fonseca.
No part of the world is untouched, including the United States.
States such as Delaware, Nevada and Wyoming register thousands of corporations annually, often without identifying the true owners. Some of the billions of dollars moving through the domestic economy come from anonymous foreigners who inflate real estate prices in places such as Miami, buying properties outright in cash.
“We know (of ) upwards to $6 to $10 billion a year laundered through the U.S.,” said Patrick Fallon Jr., head of the FBI’s financial crimes section.
The most extraordinary allegations in the archive revolve around Putin’s closest associates, including Sergey Roldugin, a close friend since the late 1970s when Putin was a young KGB agent.
Roldugin is a cellist for the St. Petersburg orchestra, yet his name appears as the owner of offshore companies that have rights to loans worth hundreds of millions of dollars. A Russian news service report in 2010 disclosed that he owned at least three per cent of Bank Rossiya, Russia’s most important bank.
When Mossack Fonseca helped open a bank account in Switzerland on behalf of Roldugin, the application form asked if he had “any relation to PEPs (politically exposed persons) or VIPs.”
The one-word answer was, “No.” Yet, Roldugin is godfather to Putin’s daughter Mariya.
“Roldugin is, by his proximity to a serving head of state, clearly an exposed person,” Mark Pieth, a former head of the Swiss justice ministry’s organized crime division, told the ICIJ team.
A Kremlin spokesperson, Dmitry Peskov, said last week that ICIJ was publishing a “series of fibs” that amounted to a media “attack” on Putin. Peskov suggested that unknown “organizations and services” were behind the media reports.