» Money in shadows:
World leaders keep shell companies
A massive leak of documents has blown open a window on the vast, murky world of shell companies, providing an extraordinary look at how the wealthy and powerful conceal their money.
Washington — A massive leak of documents has blown open a window on the vast, 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 funneled as much as $2 billion 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.
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.
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,” spokesman Carlos Sousa said. “We’re proud of the work we do, notwithstanding recent and willful attempts by some to mischaracterize it.”
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 comes from anonymous foreigners who inflate real estate prices in places like Miami, buying properties outright in cash.
“We know (of) upwards to $6 (billion) 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 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 3% of Bank Rossiya, Russia’s most important bank.
The documents show how in 2008 a company controlled by Roldugin had influence over Russia’s largest truck maker Kamaz, joining with other offshore companies to help another Putin insider acquire majority control of the company. They wanted foreign investment, and German carmaker Daimler later that year bought a 10% stake in Kamaz for $250 million.
The offshore company that connects many Putin loyalists is Sandalwood Continental Limited in the British Virgin Islands. Roldugin was a shareholder until 2012, as was Oleg Gordin, a businessman whom incorporation documents describe as linked to “law enforcement agencies.”
The files also mention a company co-owned by Putin friend Yury Kovalchuk, the largest shareholder of Bank Rossiya. Kovalchuk was among those targeted by U.S. sanctions in 2014 in retribution for Russia’s invasion of Crimea. Another friend, Arkady Rotenberg, Putin’s judo partner and a billionaire construction mogul, openly obtained companies through Mossack Fonseca. The Treasury Department, when sanctioning him in 2014, suggested that the oligarch acted on behalf of “a senior official.”
That was widely believed to mean Putin, whose fingerprints were not on any offshore company.
A Kremlin spokesman, Dmitry Peskov, said last week that the consortium was publishing a “series of fibs” that amounted to a media “attack” on Putin.
This report contains information gathered by reporters working under the umbrella of the nonprofit International Consortium of Investigative Journalists.