Xi Jinping
Xi Jinping
Head of China’s Communist Party (2012-present); President of China (2013-present)
Relatives in the data: Deng Jiagui
Deng Jiagui, Brother in lawDeng Jiagui
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Deng Jiagui, who has made a fortune in real estate development, became “Red Nobility” in 1996 when he married Qi Qiaoqiao, the daughter of Xi Zhongxun, one of China's revolutionary heroes and a former top official. Qi Qiaoqiao’s younger brother is Xi Jinping, who is president of China and head of China’s Communist Party. An investigative report by Bloomberg News in 2012 revealed that Deng and his wife had hundreds of millions of dollars in real estate, share holdings and other assets.
Inside the Mossack Fonseca data Offshore companies acquired as brother-in-law was rising in politics
In 2004, Deng Jiagui, the brother-in-law of China’s current President Xi Jinping, acquired a company in the British Virgin Islands called Supreme Victory Enterprises Ltd and was the sole director and shareholder. The company was struck off the BVI registry in 2007. In September 2009, Deng became the sole director and shareholder of two additional British Virgin Islands-based “shelf companies” in Mossack Fonseca's inventory. The companies were called “Best Effect Enterprises Ltd” and “Wealth Ming International Limited.” Mossack Fonseca helped Deng obtain a “chop” – a carved metal or stone seal often used by Chinese businesses to validate documents in lieu of signatures – for Best Effect Enterprises. It is unclear what the two companies were used for. At the time, Xi Jinping was one of nine men on the all-powerful Politburo Standing Committee, the body that rules China. By the time Xi was named general secretary of the Chinese Communist Party in 2012 and the country’s president in 2013, Deng’s two BVI companies were dormant.
Sunday 10 April 2016
PETRO POROSHENKO
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Petro Poroshenko
Petro Poroshenko
President of Ukraine (2014-present); Economic Development and Trade Minister (2012)
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Petro Poroshenko, Ukraine’s billionaire “chocolate king,” whose corporate empire includes automotive plants, a shipyard, a TV channel and the country’s largest candy company, won the presidential election of 2014 by a landslide, a result widely attributed to his political acumen. Poroshenko has adroitly shifted his political affiliations over the years and avoided being tainted by Ukraine’s long line of corrupt leaders and oligarchs. Although he vowed to oppose the oligarchs and “prevent the inappropriate influence of private interests on the state,” critics are still waiting for him to deliver. A supporter of the 2004 pro-Europe, pro-democracy Orange Revolution, he also has positioned himself as a nationalist who could pursue peaceful relations with Russia.
Inside the Mossack Fonseca data Offshore firm holds assets including a European candy manufacturer
In August 2014, as Russian troops rolled into Eastern Ukraine, Poroshenko became the sole shareholder of Prime Asset Partners Limited, which Mossack Fonseca set up in the British Virgin Islands. A Cyprus law firm representing the newly acquired company described it as a “holding company of Cyprus and Ukrainian companies of the Roshen Group, one of the largest European manufacturers of confectionery products.” The firm wrote that, though Prime Assets Partners was for “a person involved in politics,” it had “nothing to do with his political activities." During his 2015 presidential campaign, Poroshenko had pledged to sell most of his assets, all of which were transferred to Prime Assets Capital, according to a news account. In October 2014, a Ukrainian bank in which Poroshenko owns a majority stake, International Invest Bank, wrote a reference letter to Mossack Fonseca saying that his accounts there “have
Petro Poroshenko
Petro Poroshenko
President of Ukraine (2014-present); Economic Development and Trade Minister (2012)
Read the storyExplore the data
Petro Poroshenko, Ukraine’s billionaire “chocolate king,” whose corporate empire includes automotive plants, a shipyard, a TV channel and the country’s largest candy company, won the presidential election of 2014 by a landslide, a result widely attributed to his political acumen. Poroshenko has adroitly shifted his political affiliations over the years and avoided being tainted by Ukraine’s long line of corrupt leaders and oligarchs. Although he vowed to oppose the oligarchs and “prevent the inappropriate influence of private interests on the state,” critics are still waiting for him to deliver. A supporter of the 2004 pro-Europe, pro-democracy Orange Revolution, he also has positioned himself as a nationalist who could pursue peaceful relations with Russia.
Inside the Mossack Fonseca data Offshore firm holds assets including a European candy manufacturer
In August 2014, as Russian troops rolled into Eastern Ukraine, Poroshenko became the sole shareholder of Prime Asset Partners Limited, which Mossack Fonseca set up in the British Virgin Islands. A Cyprus law firm representing the newly acquired company described it as a “holding company of Cyprus and Ukrainian companies of the Roshen Group, one of the largest European manufacturers of confectionery products.” The firm wrote that, though Prime Assets Partners was for “a person involved in politics,” it had “nothing to do with his political activities." During his 2015 presidential campaign, Poroshenko had pledged to sell most of his assets, all of which were transferred to Prime Assets Capital, according to a news account. In October 2014, a Ukrainian bank in which Poroshenko owns a majority stake, International Invest Bank, wrote a reference letter to Mossack Fonseca saying that his accounts there “have
PANAMA LEAKS
King Salman bin Abdulaziz bin Abdulrahman Al Saud
King Salman bin Abdulaziz bin Abdulrahman Al Saud
King of Saudi Arabia (2015-present); Crown Prince (2012-2015)
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Salman bin Abdulaziz bin Abdulrahman Al Saud became King of Saudi Arabia in January 2015, assuming the throne after the death of his brother King Abdullah. He previously served as defense minister and deputy prime minister and was the governor of Riyadh, the country’s capital, from 1955 to 1960 and again from 1963 to 2011. He was named as heir to the throne in 2012.
Inside the Mossack Fonseca data British Virgin Island company used for mortgages on luxury homes in London and to hold yacht
King Salman held an unspecific role in Luxembourg company Safason Corporation SPF S.A., which was the shareholder of Verse Development Corporation, incorporated in the British Virgin Islands in 1999, and Inrow Corporation, incorporated in 2002. Inrow took out a mortgage in 2009 worth up to $26 million and Verse took out a second mortgage worth more than $8 million both of which were for luxury homes in central London. While King Salman's precise role is not specified, both mortgages are mentioned "in relation to" him and his assets. King Salman was also described as "the principal user" of a motor yacht, Erga, named after the King’s palace in Riyadh, Saudi Arabia, and registered in London by the BVI company Crassus Limited, incorporated in 2004. The records of another BVI company, Park Property Limited, incorporated in 2005 and of which Safason Corporation was the sole shareholder, were kept at Erga Palace.
King Salman bin Abdulaziz bin Abdulrahman Al Saud
King of Saudi Arabia (2015-present); Crown Prince (2012-2015)
Read the storyExplore the data
Salman bin Abdulaziz bin Abdulrahman Al Saud became King of Saudi Arabia in January 2015, assuming the throne after the death of his brother King Abdullah. He previously served as defense minister and deputy prime minister and was the governor of Riyadh, the country’s capital, from 1955 to 1960 and again from 1963 to 2011. He was named as heir to the throne in 2012.
Inside the Mossack Fonseca data British Virgin Island company used for mortgages on luxury homes in London and to hold yacht
King Salman held an unspecific role in Luxembourg company Safason Corporation SPF S.A., which was the shareholder of Verse Development Corporation, incorporated in the British Virgin Islands in 1999, and Inrow Corporation, incorporated in 2002. Inrow took out a mortgage in 2009 worth up to $26 million and Verse took out a second mortgage worth more than $8 million both of which were for luxury homes in central London. While King Salman's precise role is not specified, both mortgages are mentioned "in relation to" him and his assets. King Salman was also described as "the principal user" of a motor yacht, Erga, named after the King’s palace in Riyadh, Saudi Arabia, and registered in London by the BVI company Crassus Limited, incorporated in 2004. The records of another BVI company, Park Property Limited, incorporated in 2005 and of which Safason Corporation was the sole shareholder, were kept at Erga Palace.
Saturday 9 April 2016
DOZENS OF BLACKLISTED FIRMS FOUND OUT
33 companies and people blacklisted by the U.S. government appear in Mossack Fonseca’s files
Alleged terrorism and nuclear weapons financiers from the Middle East and North Korea, arms traders and backers of Syria’s barrel bombings found in files
Mossack Fonseca employees repeatedly acknowledged failing to properly check blacklisted customers
One morning in mid-2014, before the summer sun had reached its peak, two elderly men in Aleppo, Syria, sat on plastic chairs, chatting quietly and drinking black coffee. From his perch outside his food stall, Sabri Wahid Asfur and his friend Abu Yassin watched their neighbors go about their day.
Suddenly, bombs hit the ground, scattering bricks and debris. Seconds later, they exploded, sending thousands of pieces of shrapnel — nails, rebar — in all directions. The crudely made barrel bombs had been designed for maximum human damage.
As the smoke lifted, Asfur reached for Abu Yassin.
“I looked at my friend when I recovered my vision and saw his body in shreds,” Asfur remembers. “He was exhaling his last breath.”
The attack was one of hundreds of aerial bombings that Syrian President Bashar al-Assad’s regime has carried out during the country’s six-year civil war, killing thousands of its own people. The deadly air campaign would not have been possible, U.S. authorities have charged, without a network of companies that dodged international embargoes by supplying the oil and gas that kept the military aircraft in sky.
Three of the companies that the U.S. alleges helped supply the fuel were customers of a global law firm, Mossack Fonseca & Co., which helped the companies incorporate and maintain offshore branches in Seychelles, a tax haven in the Indian Ocean.
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Syrian President Bachar al-Assad. Photo: Valentina Petrov / Shutterstock.com
The law firm continued doing work for at least one of these closely-linked companies after the three of them were blacklisted by the American government for supporting Syria’s war machine – joining dozens of other Mossack Fonseca customers sanctioned by the U.S. Treasury Department’s Office of Foreign Assets Control.
Mossack Fonseca, which is based in Panama but has offices around the world, has worked with at least 33 individuals or companies that have landed on the Treasury Department’s OFAC list, according to an analysis of the firm’s internal files by the International Consortium of Investigative Journalists, the German newspaper Süddeutsche Zeitung and other media partners.
In some cases, individuals and companies had ceased to work with Mossack Fonseca before being sanctioned. In other cases, the entities were active customers when the sanctions were put in place.
The reporting partners reviewed more than 11 million documents — emails, client accounts and financial records — that show the inner workings of Mossack Fonseca from 1977 to December 2015.
For years, the records show, Mossack Fonseca has earned money creating shell companies that have been used by suspected financiers of terrorists and war criminals in the Middle East; drug kings and queens from Mexico, Guatemala and Eastern Europe; nuclear weapons proliferators in Iran and North Korea, and arms dealers in southern Africa.
“It sounds almost like a corporate death wish taking on that many horrible people,” said Jason Sharman, a political scientist at Australia’s Griffith University and co-author of a groundbreaking study of anonymous companies. “You’d think that, even if they were cynical, they’d be reluctant dealing with U.S. sanctioned entities and taking on the United States.”
Mossack Fonseca denies wrongdoing.
A spokesman told ICIJ that the firm relies on intermediaries such as banks and other law firms to review the backgrounds of the customers that they refer to Mossack Fonseca. These middlemen are supposed to notify the firm “as soon as they have knowledge of a client of theirs having been either convicted or listed by a sanctioning body,” the spokesman said. “Likewise, we have our own procedures in place to identify such individuals, to the extent it is reasonably possible.”
The time it takes to resign varies by jurisdiction, the spokesman said, and some authorities require the agent to remain in place to prevent interference with an investigation.
The spokesman added that Mossack Fonseca has “never knowingly allowed the use of our companies by individuals having any relationship with North Korea, Zimbabwe, Syria and other countries” that have been listed as sanctioned. If it did discover it had unknowingly represented a company that was being used for unlawful purposes, he said, the law firm would take “any measures that are reasonably available to us” to deal with the issue.
Fuel for war
OFAC, the U.S. Treasury Department’s blacklist enforcement unit, announced a series of sanctions in 2014 barring U.S. citizens from dealing with individuals and companies suspected of supporting the Syrian regime.
One of the companies was Pangates International Corporation Limited, a petroleum products specialist headquartered in the United Arab Emirates that had been a Mossack Fonseca customer for more than a decade.
OFAC put Pangates on its blacklist in July 2014, charging that Pangates had supplied the Syrian government with 1,000 metric tons of “avgas” — aviation fuel necessary to operate military aircraft.
“Certainly any armed Syrian Air Force aircraft will be using avgas,” said Jane’s Defence Weekly Europe Editor Nick de Larrinaga.
Pangates is part of the Abdulkarim Group, a sizeable Syrian company with offices in Damascus. OFAC also sanctioned two other Mossack Fonseca clients with alleged ties to the Abdulkarim Group or its directors — Maxima Middle East Trading Co. and Morgan Additives Manufacturing Co.
In addition, it sanctioned two Syrian citizens linked to the companies.
OFAC identified Ahmad Barqawi as general manager of Maxima Middle East Trading Co. and Wael Abdulkarim as Pangates’ managing director. It said Wael Abdulkarim had “worked to arrange numerous shipments of base oils and aviation gasoline to Syria.”
In June 2014, Pangates, Maxima and the Abdulkarim Group worked with a Russian oil and gas firm to obtain oil destined for Syrian government-controlled refineries, according to OFAC.
A representative of Morgan Additives told ICIJ that the basis of its blacklisting by OFAC was “in error.”
Barqawi resigned as the company’s manager before the OFAC listing and Wael Abdulkarim resigned when the sanctions were announced, the representative said. Morgan Additives is not currently owned or controlled by Wael Abdulkarim, the representative added.
None of the other companies or individuals sanctioned in connection with the Syrian air war responded to repeated requests for comments via email, registered mail and telephone.
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Barrel bomb in Syria. Photo: Screenshot of BBC video
In a previous comment to media, Pangates acknowledged delivering oil to Syria but claimed not to know about its ultimate destination or purpose.
“We are selling to non-Syrian firms who are not on the EU and US sanctions list,” the company told Reuters. “We do not know exactly who is finally using the fuel but according to our information the product is used for civil humanitarian purposes.”
The secret files show Pangates’ relationship with Mossack Fonseca began in 1999, when the law firm incorporated Pangates in Niue, the Pacific island nation where Mossack Fonseca once had exclusive rights to incorporate offshore companies.
When authorities in Niue shut down the island’s offshore registration industry in the wake of complaints about money laundering, Pangates moved to Samoa and, in 2012, to Seychelles. At one point, the company valued itself at $7.5 million.
Nine months after the U.S. first sanctioned Pangates, Mossack Fonseca was still handling the company’s paperwork, certifying that it was a Seychelles company in good standing. Later still, Mossack Fonseca helped Pangates close its Seychelles business and sent it a bill for $1,100 to cover its fee for that service. It asked Pangates to pay online or through Mossack Fonseca’s bank account in New York.
It was not until August 2015 — more than a year after sanctions against Pangates had been announced — that Mossack Fonseca acknowledged the blacklisting and scrambled to find ownership details, utility bills or any other identifying information from the Dubai administrators of Pangates and Maxima Middle East. Mossack Fonseca finally reported that the companies were on international sanctions lists to Seychelles regulators in August 2015.
Assad’s cousin
The files show that Mossack Fonseca also worked with Rami Makhlouf, a cousin of Syria’s dictator, Assad. As early as 2008, U.S. Treasury officials had flagged Makhlouf as a “regime insider” who “improperly benefits from and aids the public corruption of Syrian regime officials.” Treasury froze Makhlouf’s U.S. assets and banned U.S. companies or people working with him. Later that year, in a widely reported announcement, the U.S. Treasury Department blacklisted some of his companies.
Although he had long been a customer of Mossack Fonseca, the firm’s emails at the time record no mention of the sanctions. That changed in 2010, when British Virgin Island authorities demanded information on Drex Technologies S.A., a company owned by Makhlouf that Mossack Fonseca had incorporated ten years earlier. Mossack Fonseca employees looked for — and quickly found — information that had circulated widely for years, including details of Makhlouf’s political ties and alleged smuggling.
At this point, the files reveal, Mossack Fonseca’s head of compliance wanted to drop Makhlouf immediately. But one of Mossack Fonseca’s partners resisted, hoping the firm would not lose the business.
That partner, Chris Zollinger, wrote colleagues that “there are allegations (rumors), but not any facts or pending investigations or indictments.” He noted a colleague’s earlier notes from a conversation between Mossack Fonseca and HSBC, the UK-headquartered bank that served as Makhlouf’s financial manager, in which the bank assured the law firm that HSBC’s Geneva and London offices “know about Mr. Makhlouf and that they are comfortable with him.”
If HSBC didn’t have an issue with him, Zollinger said, “then I think we can also accept him.”
However, he ultimately agreed with dropping the firm after further urging from his colleagues and mounting official investigations into Makhlouf’s business empire.
Zollinger recently told Süddeutsche Zeitung: “In retrospect my comment in the e-mail was wrong, which I regret.” He added that, as registered agent, Mossack Fonseca had “no influence on the transactions or the business of the company” linked to Makhlouf.
Makhlouf did not respond to requests for comment.
‘This is dangerous!’
Mossack Fonseca took a more aggressive attitude toward Petropars Limited, a company controlled by the Iranian government that was sanctioned by the U.S. Treasury in June 2010.
The relationship between Petropars and Mossack Fonseca began in 1998, nearly 20 years after the Iranian revolution, when Mossack Fonseca incorporated Petropars in the British Virgin Islands.
Petropars was known to watchers of Iranian politics as an intermediary between foreign companies and Iran’s oil ministry. With offices in Dubai and London, it was also a player in the development of Iran’s multibillion-dollar South Pars natural gas field.
Three years before Mossack Fonseca began work for Petropars, President Bill Clinton, citing Iranian support for terrorism and its quest for weapons of mass destruction, banned U.S. involvement with Iranian oil. Not bound by the U.S. prohibition, Mossack Fonseca helped Petropars to issue shares in a Tehran-based oil investment company in 1998.
Petropars’ links to the Iranian government were highlighted as early as 2001 when Iranian authorities investigated and then charged board members of the company in connection with “irregularities” in lucrative gas contracts. By 2002, the news had made headlines in The Economist and The New York Times.
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Iranian workers dig the ground in a natural gas refinery in the South Pars gas field in Asalouyeh, Iran. Photo: AP Photo / Ebrahim Noroozi
The 2001 corruption allegations “put Petropars on the map,” says Georgetown University political scientist Paasha Mahdavi. “Even before any of the allegations emerged, it wouldn’t have required too much digging to know this is a company whose majority, at the very least, is controlled by government officials.”
Petropars remained a customer of Mossack Fonseca until 2010, when Jürgen Mossack, one of the firm’s founders, learned that his company’s British Virgin Islands post office box had been listed as Petropars’ address in OFAC’s blacklist entry for the company.
After an internet search, a company employee in the BVI office, Marcia DaCosta, recommended that the firm cut Petropars loose.
“It is a decision that may be 12 years too late,” added another employee, Daphne Durand, “but one that must be taken in light of the circumstances.”
The firm’s founders — Mossack and Ramón Fonseca — agreed.
“This is dangerous!” Mossack emailed. “Everybody knows that there are United Nations sanctions against Iran, and we certainly want no business with regimes and individuals from such places! Not because of OFAC, but out of principle. Anybody having had to do anything with this company, at absolutely all levels, should have realized immediately that the names associated with it were Iranian names. A red flag should have been raised immediately.”
The firm resigned as registered agent of Petropars in October 2010. Mossack blamed the London office, which had processed Petropars’ paperwork and should have conducted what the financial industry calls “due diligence” — checking on customers’ identity and making sure they’re not involved in questionable activities.
“It would appear Mossack Fonseca UK are not doing their Due Diligence thoroughly (or maybe none at all),” Mossack said.
Early this year, as a result of the deal that lifted economic sanctions against Iran in exchange for that country’s disabling key parts of its nuclear program, the United States removed Petropars and other Iranian-controlled oil companies from the OFAC blacklist.
The companies they keep
The files show that despite repeatedly admitting internally that its existing checks and balances had failed, Mossack Fonseca did not introduce a comprehensive policy to comply with OFAC sanctions rules until July 2015.
“Global companies that don’t have the appropriate compliance systems in place allow actors like terrorist organizations, drug cartels and human traffickers to continue operating and to engage in illicit and damaging behavior,” said Eric Lorber, senior associate at the Financial Integrity Network who advises financial institutions on complying with OFAC. “Between 2005 and 2007 is when any global company, especially one with interests in the U.S., should have really been paying attention. That’s really when OFAC put the world on notice.”
“It’s like the accountant of Al Capone - a firm that clearly has chosen to service rogue regimes,” said Emanuele Ottolenghi, senior fellow with the Foundation for the Defense of Democracies in Washington, D.C., commenting not on Mossack Fonseca, which was not named at the time of the conversation, but on a description of its practices.
An OFAC spokeswoman declined to comment for this story, saying it is OFAC’s policy to not talk about current or future investigations.
In 2012 — years after Mossack Fonseca’s first brushes with sanctioned companies — the firm audited its London office. The final report concluded the U.K. office had “no procedure in place” for handling high-risk politicians, family and associates and “searches using search engines are not being conducted” to screen potential clients.
Audits of Mossack Fonseca offices in Singapore, Thailand, Brazil and Dubai faulted them on poor record keeping, background checks and procedures for handling politicians, family and friends. Each office scored poorly across every measure of performance, receiving ratings of “unsatisfactory” or “room for improvement,” which indicated either “serious failings” or “some weaknesses.”
The Dubai office, which represented Pangates and other companies sanctioned for aiding Syria’s air war, was rated “unsatisfactory” on every measure. Basic internet searches to check out customers’ backgrounds were not conducted, the audit said.
In 2009, for example, the firm admitted in internal communications that it had incomplete records on a company later sanctioned for “managing millions of dollars of transactions in support of the North Korean regime’s destabilizing activities.”
Also in 2009, Mossack Fonseca ended its relationship with Zimbabwean businessman John Bredenkamp.
Bredenkamp, on the firm’s books since 1997, had been described in 2002 by a United Nations expert panel as “experienced in setting up clandestine companies and sanctions-busting operations.” In 2008, months before Mossack Fonseca cut ties, Bredenkamp was sanctioned by OFAC for allegedly being a “crony” of Zimbabwe dictator Robert Mugabe and a “well-known Mugabe insider.”
Bredenkamp did not respond to requests for comment, but he has consistently denied allegations concerning him and his companies and has denied having supported President Mugabe. In 2012, Bredenkamp successfully overturned European Union sanctions against him and his companies.
One company, Tremalt Limited, purchased equipment for armies in the Democratic Republic of Congo, the United Nations alleged. It took seven years before a Mossack Fonseca employee reported internally that an Internet search implicated a separate company the law firm said was owned by Bredenkamp “in a series of allegations concerning arms deals.”
The files also show that in April 2011, Mossack Fonseca learned that OFAC had accused financiers of Hezbollah — a Middle East terrorist group that has used child soldiers and fired rockets into populated towns — of using a Mossack Fonseca shell company.
The company was reportedly part of a “network linked to terrorism,” the law firm’s compliance chief, Sandra de Cornejo, wrote. It had taken Mossack Fonseca months to notice OFAC’s listing. It cut ties with the company, Ovlas Trading S.A., in May 2011.
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Hezbollah supporters raise up their hands as they shout pro-Hezbollah slogans during a rally in September 2008. Photo: AP Photo / Hussein Malla
“What I do not understand is why the initial Due Diligence did not reveal these issues to begin with!” Jürgen Mossack berated colleagues in an email. “Surely the Due Diligence process is flawed somewhere.”
Lawyers representing Ovlas Trading said the BVI company was formed for tax-saving reasons as part of a food import and export business. The company has been “mostly dormant,” the lawyers said.
“At no time was Ovlas BVI involved in any money laundering, terrorist financing, narcotics, or other illicit activity,” the company’s lawyers said.
A major international accounting firm conducted a forensic investigation into Ovlas’ business, the lawyers said, and found “no evidence” of any activity described by the U.S. Treasury Department. The company’s owner has “publicly stated that he has not been and is not a supporter of Hezbollah,“ and efforts to have the sanctions lifted are ongoing.
Mossack Fonseca did have guidelines for sanctions before 2015, including a risk matrix that included pariah states and countries under embargo as well as a “Mossfon Black List” of countries that required special attention.
But the files reveal Mossack Fonseca’s management did not follow up on recommendations that the firm introduce more stringent policies on OFAC screenings. In 2010, in response to the Petropars debacle, Marcia DaCosta, a compliance specialist, had suggested “a comprehensive Compliance Policy is needed in relation to our approach to sanctioned countries and individuals.”
In a 2015 memo, citing “recent changes in our organization” and “regulatory matters,” Mossack Fonseca announced it would drop 35 potentially risky companies “as soon as possible.” They included businesses purportedly dealing in oil in Belarus and Russia, mobile phones, juice, tomato paste and cheese in the Middle East, investment companies in Uganda and Guinea, shipping in West Africa and real estate in Lebanon and Zimbabwe.
Mossack Fonseca would not act as the agent for any companies with activities in countries on the OFAC list, such as Sudan and South Sudan, and would be more cautious in other countries subject to limited sanctions, the memo said.
Several offshore experts said that sanctions enforcers in the U.S. and elsewhere haven’t paid enough attention to offshore middlemen like Mossack Fonseca, despite their key role in creating the companies that enable wrongdoing.
This is partly because of limited resources available to pursue cases, according to Daniel Reeves, former lead investigator for the Internal Revenue Service’s offshore compliance initiatives.
But things can change, Reeves said.
“There was a time when people wouldn’t go after banks, they wanted to go after their customers,” he noted. Since then, investigations targeting banks such as HSBC and UBS produced historic fines punishing them for their work on behalf of criminals, sanctions-busters and tax evaders. “So maybe the next step is corporate service providers,” he said.
Contributor to this story: Frederik Obermaier
Alleged terrorism and nuclear weapons financiers from the Middle East and North Korea, arms traders and backers of Syria’s barrel bombings found in files
Mossack Fonseca employees repeatedly acknowledged failing to properly check blacklisted customers
One morning in mid-2014, before the summer sun had reached its peak, two elderly men in Aleppo, Syria, sat on plastic chairs, chatting quietly and drinking black coffee. From his perch outside his food stall, Sabri Wahid Asfur and his friend Abu Yassin watched their neighbors go about their day.
Suddenly, bombs hit the ground, scattering bricks and debris. Seconds later, they exploded, sending thousands of pieces of shrapnel — nails, rebar — in all directions. The crudely made barrel bombs had been designed for maximum human damage.
As the smoke lifted, Asfur reached for Abu Yassin.
“I looked at my friend when I recovered my vision and saw his body in shreds,” Asfur remembers. “He was exhaling his last breath.”
The attack was one of hundreds of aerial bombings that Syrian President Bashar al-Assad’s regime has carried out during the country’s six-year civil war, killing thousands of its own people. The deadly air campaign would not have been possible, U.S. authorities have charged, without a network of companies that dodged international embargoes by supplying the oil and gas that kept the military aircraft in sky.
Three of the companies that the U.S. alleges helped supply the fuel were customers of a global law firm, Mossack Fonseca & Co., which helped the companies incorporate and maintain offshore branches in Seychelles, a tax haven in the Indian Ocean.
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Syrian President Bachar al-Assad. Photo: Valentina Petrov / Shutterstock.com
The law firm continued doing work for at least one of these closely-linked companies after the three of them were blacklisted by the American government for supporting Syria’s war machine – joining dozens of other Mossack Fonseca customers sanctioned by the U.S. Treasury Department’s Office of Foreign Assets Control.
Mossack Fonseca, which is based in Panama but has offices around the world, has worked with at least 33 individuals or companies that have landed on the Treasury Department’s OFAC list, according to an analysis of the firm’s internal files by the International Consortium of Investigative Journalists, the German newspaper Süddeutsche Zeitung and other media partners.
In some cases, individuals and companies had ceased to work with Mossack Fonseca before being sanctioned. In other cases, the entities were active customers when the sanctions were put in place.
The reporting partners reviewed more than 11 million documents — emails, client accounts and financial records — that show the inner workings of Mossack Fonseca from 1977 to December 2015.
For years, the records show, Mossack Fonseca has earned money creating shell companies that have been used by suspected financiers of terrorists and war criminals in the Middle East; drug kings and queens from Mexico, Guatemala and Eastern Europe; nuclear weapons proliferators in Iran and North Korea, and arms dealers in southern Africa.
“It sounds almost like a corporate death wish taking on that many horrible people,” said Jason Sharman, a political scientist at Australia’s Griffith University and co-author of a groundbreaking study of anonymous companies. “You’d think that, even if they were cynical, they’d be reluctant dealing with U.S. sanctioned entities and taking on the United States.”
Mossack Fonseca denies wrongdoing.
A spokesman told ICIJ that the firm relies on intermediaries such as banks and other law firms to review the backgrounds of the customers that they refer to Mossack Fonseca. These middlemen are supposed to notify the firm “as soon as they have knowledge of a client of theirs having been either convicted or listed by a sanctioning body,” the spokesman said. “Likewise, we have our own procedures in place to identify such individuals, to the extent it is reasonably possible.”
The time it takes to resign varies by jurisdiction, the spokesman said, and some authorities require the agent to remain in place to prevent interference with an investigation.
The spokesman added that Mossack Fonseca has “never knowingly allowed the use of our companies by individuals having any relationship with North Korea, Zimbabwe, Syria and other countries” that have been listed as sanctioned. If it did discover it had unknowingly represented a company that was being used for unlawful purposes, he said, the law firm would take “any measures that are reasonably available to us” to deal with the issue.
Fuel for war
OFAC, the U.S. Treasury Department’s blacklist enforcement unit, announced a series of sanctions in 2014 barring U.S. citizens from dealing with individuals and companies suspected of supporting the Syrian regime.
One of the companies was Pangates International Corporation Limited, a petroleum products specialist headquartered in the United Arab Emirates that had been a Mossack Fonseca customer for more than a decade.
OFAC put Pangates on its blacklist in July 2014, charging that Pangates had supplied the Syrian government with 1,000 metric tons of “avgas” — aviation fuel necessary to operate military aircraft.
“Certainly any armed Syrian Air Force aircraft will be using avgas,” said Jane’s Defence Weekly Europe Editor Nick de Larrinaga.
Pangates is part of the Abdulkarim Group, a sizeable Syrian company with offices in Damascus. OFAC also sanctioned two other Mossack Fonseca clients with alleged ties to the Abdulkarim Group or its directors — Maxima Middle East Trading Co. and Morgan Additives Manufacturing Co.
In addition, it sanctioned two Syrian citizens linked to the companies.
OFAC identified Ahmad Barqawi as general manager of Maxima Middle East Trading Co. and Wael Abdulkarim as Pangates’ managing director. It said Wael Abdulkarim had “worked to arrange numerous shipments of base oils and aviation gasoline to Syria.”
In June 2014, Pangates, Maxima and the Abdulkarim Group worked with a Russian oil and gas firm to obtain oil destined for Syrian government-controlled refineries, according to OFAC.
A representative of Morgan Additives told ICIJ that the basis of its blacklisting by OFAC was “in error.”
Barqawi resigned as the company’s manager before the OFAC listing and Wael Abdulkarim resigned when the sanctions were announced, the representative said. Morgan Additives is not currently owned or controlled by Wael Abdulkarim, the representative added.
None of the other companies or individuals sanctioned in connection with the Syrian air war responded to repeated requests for comments via email, registered mail and telephone.
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Barrel bomb in Syria. Photo: Screenshot of BBC video
In a previous comment to media, Pangates acknowledged delivering oil to Syria but claimed not to know about its ultimate destination or purpose.
“We are selling to non-Syrian firms who are not on the EU and US sanctions list,” the company told Reuters. “We do not know exactly who is finally using the fuel but according to our information the product is used for civil humanitarian purposes.”
The secret files show Pangates’ relationship with Mossack Fonseca began in 1999, when the law firm incorporated Pangates in Niue, the Pacific island nation where Mossack Fonseca once had exclusive rights to incorporate offshore companies.
When authorities in Niue shut down the island’s offshore registration industry in the wake of complaints about money laundering, Pangates moved to Samoa and, in 2012, to Seychelles. At one point, the company valued itself at $7.5 million.
Nine months after the U.S. first sanctioned Pangates, Mossack Fonseca was still handling the company’s paperwork, certifying that it was a Seychelles company in good standing. Later still, Mossack Fonseca helped Pangates close its Seychelles business and sent it a bill for $1,100 to cover its fee for that service. It asked Pangates to pay online or through Mossack Fonseca’s bank account in New York.
It was not until August 2015 — more than a year after sanctions against Pangates had been announced — that Mossack Fonseca acknowledged the blacklisting and scrambled to find ownership details, utility bills or any other identifying information from the Dubai administrators of Pangates and Maxima Middle East. Mossack Fonseca finally reported that the companies were on international sanctions lists to Seychelles regulators in August 2015.
Assad’s cousin
The files show that Mossack Fonseca also worked with Rami Makhlouf, a cousin of Syria’s dictator, Assad. As early as 2008, U.S. Treasury officials had flagged Makhlouf as a “regime insider” who “improperly benefits from and aids the public corruption of Syrian regime officials.” Treasury froze Makhlouf’s U.S. assets and banned U.S. companies or people working with him. Later that year, in a widely reported announcement, the U.S. Treasury Department blacklisted some of his companies.
Although he had long been a customer of Mossack Fonseca, the firm’s emails at the time record no mention of the sanctions. That changed in 2010, when British Virgin Island authorities demanded information on Drex Technologies S.A., a company owned by Makhlouf that Mossack Fonseca had incorporated ten years earlier. Mossack Fonseca employees looked for — and quickly found — information that had circulated widely for years, including details of Makhlouf’s political ties and alleged smuggling.
At this point, the files reveal, Mossack Fonseca’s head of compliance wanted to drop Makhlouf immediately. But one of Mossack Fonseca’s partners resisted, hoping the firm would not lose the business.
That partner, Chris Zollinger, wrote colleagues that “there are allegations (rumors), but not any facts or pending investigations or indictments.” He noted a colleague’s earlier notes from a conversation between Mossack Fonseca and HSBC, the UK-headquartered bank that served as Makhlouf’s financial manager, in which the bank assured the law firm that HSBC’s Geneva and London offices “know about Mr. Makhlouf and that they are comfortable with him.”
If HSBC didn’t have an issue with him, Zollinger said, “then I think we can also accept him.”
However, he ultimately agreed with dropping the firm after further urging from his colleagues and mounting official investigations into Makhlouf’s business empire.
Zollinger recently told Süddeutsche Zeitung: “In retrospect my comment in the e-mail was wrong, which I regret.” He added that, as registered agent, Mossack Fonseca had “no influence on the transactions or the business of the company” linked to Makhlouf.
Makhlouf did not respond to requests for comment.
‘This is dangerous!’
Mossack Fonseca took a more aggressive attitude toward Petropars Limited, a company controlled by the Iranian government that was sanctioned by the U.S. Treasury in June 2010.
The relationship between Petropars and Mossack Fonseca began in 1998, nearly 20 years after the Iranian revolution, when Mossack Fonseca incorporated Petropars in the British Virgin Islands.
Petropars was known to watchers of Iranian politics as an intermediary between foreign companies and Iran’s oil ministry. With offices in Dubai and London, it was also a player in the development of Iran’s multibillion-dollar South Pars natural gas field.
Three years before Mossack Fonseca began work for Petropars, President Bill Clinton, citing Iranian support for terrorism and its quest for weapons of mass destruction, banned U.S. involvement with Iranian oil. Not bound by the U.S. prohibition, Mossack Fonseca helped Petropars to issue shares in a Tehran-based oil investment company in 1998.
Petropars’ links to the Iranian government were highlighted as early as 2001 when Iranian authorities investigated and then charged board members of the company in connection with “irregularities” in lucrative gas contracts. By 2002, the news had made headlines in The Economist and The New York Times.
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Iranian workers dig the ground in a natural gas refinery in the South Pars gas field in Asalouyeh, Iran. Photo: AP Photo / Ebrahim Noroozi
The 2001 corruption allegations “put Petropars on the map,” says Georgetown University political scientist Paasha Mahdavi. “Even before any of the allegations emerged, it wouldn’t have required too much digging to know this is a company whose majority, at the very least, is controlled by government officials.”
Petropars remained a customer of Mossack Fonseca until 2010, when Jürgen Mossack, one of the firm’s founders, learned that his company’s British Virgin Islands post office box had been listed as Petropars’ address in OFAC’s blacklist entry for the company.
After an internet search, a company employee in the BVI office, Marcia DaCosta, recommended that the firm cut Petropars loose.
“It is a decision that may be 12 years too late,” added another employee, Daphne Durand, “but one that must be taken in light of the circumstances.”
The firm’s founders — Mossack and Ramón Fonseca — agreed.
“This is dangerous!” Mossack emailed. “Everybody knows that there are United Nations sanctions against Iran, and we certainly want no business with regimes and individuals from such places! Not because of OFAC, but out of principle. Anybody having had to do anything with this company, at absolutely all levels, should have realized immediately that the names associated with it were Iranian names. A red flag should have been raised immediately.”
The firm resigned as registered agent of Petropars in October 2010. Mossack blamed the London office, which had processed Petropars’ paperwork and should have conducted what the financial industry calls “due diligence” — checking on customers’ identity and making sure they’re not involved in questionable activities.
“It would appear Mossack Fonseca UK are not doing their Due Diligence thoroughly (or maybe none at all),” Mossack said.
Early this year, as a result of the deal that lifted economic sanctions against Iran in exchange for that country’s disabling key parts of its nuclear program, the United States removed Petropars and other Iranian-controlled oil companies from the OFAC blacklist.
The companies they keep
The files show that despite repeatedly admitting internally that its existing checks and balances had failed, Mossack Fonseca did not introduce a comprehensive policy to comply with OFAC sanctions rules until July 2015.
“Global companies that don’t have the appropriate compliance systems in place allow actors like terrorist organizations, drug cartels and human traffickers to continue operating and to engage in illicit and damaging behavior,” said Eric Lorber, senior associate at the Financial Integrity Network who advises financial institutions on complying with OFAC. “Between 2005 and 2007 is when any global company, especially one with interests in the U.S., should have really been paying attention. That’s really when OFAC put the world on notice.”
“It’s like the accountant of Al Capone - a firm that clearly has chosen to service rogue regimes,” said Emanuele Ottolenghi, senior fellow with the Foundation for the Defense of Democracies in Washington, D.C., commenting not on Mossack Fonseca, which was not named at the time of the conversation, but on a description of its practices.
An OFAC spokeswoman declined to comment for this story, saying it is OFAC’s policy to not talk about current or future investigations.
In 2012 — years after Mossack Fonseca’s first brushes with sanctioned companies — the firm audited its London office. The final report concluded the U.K. office had “no procedure in place” for handling high-risk politicians, family and associates and “searches using search engines are not being conducted” to screen potential clients.
Audits of Mossack Fonseca offices in Singapore, Thailand, Brazil and Dubai faulted them on poor record keeping, background checks and procedures for handling politicians, family and friends. Each office scored poorly across every measure of performance, receiving ratings of “unsatisfactory” or “room for improvement,” which indicated either “serious failings” or “some weaknesses.”
The Dubai office, which represented Pangates and other companies sanctioned for aiding Syria’s air war, was rated “unsatisfactory” on every measure. Basic internet searches to check out customers’ backgrounds were not conducted, the audit said.
In 2009, for example, the firm admitted in internal communications that it had incomplete records on a company later sanctioned for “managing millions of dollars of transactions in support of the North Korean regime’s destabilizing activities.”
Also in 2009, Mossack Fonseca ended its relationship with Zimbabwean businessman John Bredenkamp.
Bredenkamp, on the firm’s books since 1997, had been described in 2002 by a United Nations expert panel as “experienced in setting up clandestine companies and sanctions-busting operations.” In 2008, months before Mossack Fonseca cut ties, Bredenkamp was sanctioned by OFAC for allegedly being a “crony” of Zimbabwe dictator Robert Mugabe and a “well-known Mugabe insider.”
Bredenkamp did not respond to requests for comment, but he has consistently denied allegations concerning him and his companies and has denied having supported President Mugabe. In 2012, Bredenkamp successfully overturned European Union sanctions against him and his companies.
One company, Tremalt Limited, purchased equipment for armies in the Democratic Republic of Congo, the United Nations alleged. It took seven years before a Mossack Fonseca employee reported internally that an Internet search implicated a separate company the law firm said was owned by Bredenkamp “in a series of allegations concerning arms deals.”
The files also show that in April 2011, Mossack Fonseca learned that OFAC had accused financiers of Hezbollah — a Middle East terrorist group that has used child soldiers and fired rockets into populated towns — of using a Mossack Fonseca shell company.
The company was reportedly part of a “network linked to terrorism,” the law firm’s compliance chief, Sandra de Cornejo, wrote. It had taken Mossack Fonseca months to notice OFAC’s listing. It cut ties with the company, Ovlas Trading S.A., in May 2011.
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Hezbollah supporters raise up their hands as they shout pro-Hezbollah slogans during a rally in September 2008. Photo: AP Photo / Hussein Malla
“What I do not understand is why the initial Due Diligence did not reveal these issues to begin with!” Jürgen Mossack berated colleagues in an email. “Surely the Due Diligence process is flawed somewhere.”
Lawyers representing Ovlas Trading said the BVI company was formed for tax-saving reasons as part of a food import and export business. The company has been “mostly dormant,” the lawyers said.
“At no time was Ovlas BVI involved in any money laundering, terrorist financing, narcotics, or other illicit activity,” the company’s lawyers said.
A major international accounting firm conducted a forensic investigation into Ovlas’ business, the lawyers said, and found “no evidence” of any activity described by the U.S. Treasury Department. The company’s owner has “publicly stated that he has not been and is not a supporter of Hezbollah,“ and efforts to have the sanctions lifted are ongoing.
Mossack Fonseca did have guidelines for sanctions before 2015, including a risk matrix that included pariah states and countries under embargo as well as a “Mossfon Black List” of countries that required special attention.
But the files reveal Mossack Fonseca’s management did not follow up on recommendations that the firm introduce more stringent policies on OFAC screenings. In 2010, in response to the Petropars debacle, Marcia DaCosta, a compliance specialist, had suggested “a comprehensive Compliance Policy is needed in relation to our approach to sanctioned countries and individuals.”
In a 2015 memo, citing “recent changes in our organization” and “regulatory matters,” Mossack Fonseca announced it would drop 35 potentially risky companies “as soon as possible.” They included businesses purportedly dealing in oil in Belarus and Russia, mobile phones, juice, tomato paste and cheese in the Middle East, investment companies in Uganda and Guinea, shipping in West Africa and real estate in Lebanon and Zimbabwe.
Mossack Fonseca would not act as the agent for any companies with activities in countries on the OFAC list, such as Sudan and South Sudan, and would be more cautious in other countries subject to limited sanctions, the memo said.
Several offshore experts said that sanctions enforcers in the U.S. and elsewhere haven’t paid enough attention to offshore middlemen like Mossack Fonseca, despite their key role in creating the companies that enable wrongdoing.
This is partly because of limited resources available to pursue cases, according to Daniel Reeves, former lead investigator for the Internal Revenue Service’s offshore compliance initiatives.
But things can change, Reeves said.
“There was a time when people wouldn’t go after banks, they wanted to go after their customers,” he noted. Since then, investigations targeting banks such as HSBC and UBS produced historic fines punishing them for their work on behalf of criminals, sanctions-busters and tax evaders. “So maybe the next step is corporate service providers,” he said.
Contributor to this story: Frederik Obermaier
Friday 8 April 2016
TIES TO FIFA SCANDAL
Leak Ties Ethics Guru to Three Men Charged in FIFA scandal.
Four of the 16 FIFA officials indicted in the United States used offshore companies created by Mossack Fonseca
Files show offshore companies used by some soccer players to hold money from image rights deals
Offshore revelations extend beyond soccer to other sports including hockey and golf
Leaked documents reveal that the law firm of a FIFA ethics watchdog had business relationships with three men who have been indicted in the world soccer association’s corruption scandal.
The confidential files disclose previously unknown dealings between the three men and Juan Pedro Damiani, a member of FIFA’s Independent Ethics Committee, which has handed down a series of bans against high-level executives at the organization.
The records show that Damiani and his law firm did work for at least seven offshore companies linked to Eugenio Figueredo, a former FIFA vice president who has been charged by U.S. authorities with wire fraud and money laundering for his role in the alleged bribery conspiracy.
The records also show that Damiani’s law firm served as an intermediary for a Nevada-based company linked to Hugo and Mariano Jinkis, a father-son team of businessmen who have been accused of paying tens of millions of dollars in bribes to gain broadcast rights to FIFA events in Latin America.
The records do not show illegal conduct by Damiani or his law firm. But they do raise new questions for Damiani and FIFA at a time when the nexus between offshore secrecy and corruption has been a growing concern in the world’s most popular sport.
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Juan Pedro Damiani (left) in 2007. Photo: Vince Alongi
Damiani, the president of Uruguay’s Club Atlético Peñarol, one of the more important soccer clubs in Latin America, said his law firm does not maintain “any professional relationship” with anyone indicted in the U.S.’s FIFA investigation. He did not answer a question about previous working relationships with people indicted in the case.
A spokesman for the ethics panel confirmed, however, that Damiani informed the committee on March 18 that he has had business ties to Figueredo. That was one day after the International Consortium of Investigative Journalists and other reporting partners sent detailed questions to Damiani about his law firm’s work for companies linked to the former FIFA vice-president.
The ethics panel says it has now launched a preliminary investigation into Damiani’s relationship with Figueredo.
The links between the ethics watchdog and figures indicted in the FIFA scandal are among the new revelations about the hidden side of soccer contained in the leaked documents.
The secret files show that what is often called the called “the beautiful game” could also be dubbed the game of dummy corporations and tax havens. The documents expose offshore entities used by an array of players, team owners, league officials, sports agents and soccer clubs to move money offshore.
These findings are the result a yearlong investigation by ICIJ, the German newspaper Süddeutsche Zeitung and other media partners. The reporting partners sifted through more than 11 million records from the internal files of Mossack Fonseca, a Panama-based law firm that specializes in helping the wealthy and powerful set up offshore companies.
The Mossack Fonseca documents include the names of nearly 20 high-profile soccer players, past and present, representing some of the globe’s best-known professional football clubs, including Barcelona, Manchester United and Real Madrid.
Among the names: Lionel Messi.
The Barcelona star, a five-time world player of the year, is already under indictment in Spain on charges that he and his father, Jorge Horacio Messi, used offshore companies in Belize and Uruguay to stiff the government out of millions of dollars in taxes.
The leaked documents show that Messi and his father owned yet another offshore company in Panama: Mega Star Enterprises.
The first reference to the company in Mossack Fonseca’s files came on June 13, 2013 — one day after Spanish prosecutors first filed tax fraud charges against Messi and his father. An email indicated that responsibility for handling the company’s paperwork was being transferred to Mossack Fonseca from another offshore corporate agent.
The first reference in the files to the Messis owning Mega Star came less than two weeks later, on June 23, 2013.
Through his father, Messi declined to comment for this story.
The files also include the offshore holdings of current or former owners of at least 20 major soccer clubs, including Internazionale Milano and Boca Juniors.
While soccer players and executives are by far the most common sports-related names in the leaked documents, the files also include the names of current and former athletes from other sports.
“Over the years, we’ve seen an increasing penetration of offshore finance into sports, which we believe is detrimental to the game,” said George Turner of the Tax Justice Network, a fair-tax advocacy group based in London. “If we’re shifting competition away from the athleticism, the skill, the talent of the players and into the skill and talent of the accountants, lawyers, bankers, and boardroom executives, the sport quickly becomes a pointless thing to go and watch.”
Mossack Fonseca’s internal files reveal, for example, that at least 11 retired National Hockey League players used the law firm to help administer offshore structures. The records show that Nick Faldo, one of the top professional golfers of all time, owned an offshore company in the British Virgin Islands from 2006 until 2008. Faldo is one of at least five golfers whose names appear in the documents.
A spokesperson for Faldo declined comment.
Soccer ethics
The FIFA scandal broke into the open in 2015 when the U.S. Justice Department charged that entrepreneurs had used bribes and kickbacks to win favorable terms on the broadcast rights to games sponsored by the world soccer body.
Four of the 16 FIFA officials indicted in the United States used offshore companies created by Mossack Fonseca, as did four businessmen linked to the soccer corruption case, the leaked records show.
The records show that two of the businessmen charged with fraud and money laundering in the scandal — Hugo and Mariano Jinkis — have been linked to a company called Cross Trading SA that was originally incorporated on the tiny Pacific island of Niue in 1998, then moved to Nevada in 2006 as Cross Trading LLC.
Both Hugo and Mariano Jinkis are mentioned in correspondence regarding Cross Trading between Mossack Fonseca and the law of firm of Damiani, the FIFA ethics panel member. The leaked records listed Hugo Jinkis as a “beneficiary” of the company after it moved to Nevada.
The records show that Damiani’s law firm did work for Cross Trading while it was in Niue as well as in Nevada — handling correspondence for Cross Trading and advising on the question of whether it would have to pay taxes in Nevada. At one point after the company’s move to Nevada, the records listed Damiani as Cross Trading’s “principal beneficiary,” but it’s unclear what that meant. It’s possible that was a temporary designation while the new structure for the company was being arranged.
Damiani’s ties to Cross Trading weren’t unusual. According to the leaked documents, Damiani and his law firm, J.P. Damiani & Asociados, have acted as a go-between for hundreds of companies registered with Mossack Fonseca.
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Figueredo leaves the courthouse after he was extradited from Switzerland to face fraud and money laundering charges in Uruguay. Photo: AP Photo / Matilde Campodonico
Among them are five offshore companies owned by Figueredo, the former FIFA vice president arrested in Zurich in May 2015 . Damiani’s firm also acted as an intermediary for a company over which Figueredo held power of attorney and another company for which Figueredo and members of his family served as officers and directors.
Figueredo has been charged with taking part in a bribery scheme in which media and marketing executives were to pay more than $100 million in exchange for the rights to Copa Libertadores, the annual Latin American soccer championship, and other major events.
In a separate case, Figueredo has already pleaded guilty to fraud and money laundering in his native Uruguay.
Damiani said through a spokesperson that he wasn’t authorized to make statements while officials in Uruguay are investigating allegations of corruption related to FIFA. He added, however, that he taken a lead in reporting corrupt practices within FIFA to Uruguayan authorities and to the soccer organization’s ethics committee.
More FIFA figures
One of the biggest soccer figures named in the documents is Michel Platini, a former French soccer great and a key figure in the 2015 FIFA scandal. Platini relied on Mossack Fonseca to help him administer an offshore company created in Panama in 2007, the same year he was named president of UEFA, the European soccer association. Platini was given an unlimited power of attorney for Balney Enterprises Corp., which was still an active business as of March 2016, according to Panama’s commercial register.
Platini, a longtime member of FIFA’s executive committee, has already been banned from the sport for six years because of a questionable $2 million payment he received from FIFA in 2011.
An attorney for Platini said his client is a Swiss citizen and noted that all his “bank accounts, investments or assets are known by the Swiss Authorities.”
Jérôme Valcke, the secretary general of FIFA from 2007 until he was banned on corruption charges in September 2015, also appears in the leaked documents. Valcke is listed as the owner of a British Virgin Islands company called Umbelina SA, created in July 2013. The company appears to have been used to purchase a yacht registered in the Cayman Islands.
“Publish what you want,” Valcke wrote in an email responding to questions for this story. “The company no longer exists and never had its own funds, never held a bank account and never had any commercial activity.”
The Mossack Fonseca files also provide details of broadcast agreements that officials with CONMEBOL, the South American soccer association, signed with companies that U.S. authorities claim paid bribes and kickbacks. The men who signed these deals for the association — CONMEBOL’s former president, Nicolás Leoz , and its former secretary general, Eduardo Deluca — were both indicted by the U.S. in November.
One deal, with a company run by an entrepreneur named as an unindicted “co-conspirator,” provided that CONMEBOL would be paid $97 million for the rights to broadcast Copa Libertadores championships from 2008 to 2018. According to the 2015 indictments, the entrepreneur secured media and marketing rights for his companies by paying annual six-figure bribes to Leoz, Deluca and other CONMEBOL officials over a period of several years.
Cast of players
The soccer players whose names appear in the Mossack Fonseca files hail from Brazil, Uruguay, the United Kingdom, Turkey, Serbia, The Netherlands and Sweden, among other countries. Most seemed to have used the law firm’s services to create offshore companies to hold the money they earned selling their image rights to athletic shoe companies and other advertisers.
Lionel Messi and his father, who served as his son’s agent, are slated to stand trial on tax fraud charges starting May 31. Accused of shortchanging the government out of nearly $6.5 million in taxes by shielding his image rights in an offshore network, Messi has paid the back taxes the government said he owed for the years 2007-2009.
Messi denies that he deliberately tried to deceive anyone.
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Messi during the 2014 World Cup Final game between Argentina and Germany. Photo: AGIF / Shutterstock.com
Mega Star Enterprises , the offshore company owned by Messi and his father at least as far back as 2013 , is not mentioned in the Spanish government’s 2014 and 2015 indictments against the pair. The leaked records show Messi signed at least one document reflecting his ownership of Mega Star, but that his father, Jorge Messi, took over sole ownership of the company in December 2015. The company remains active in Panama’s company register.
Messi isn’t alone when it comes to using offshore havens.
Among the others named in the secret files:
Leonardo Ulloa, a top scorer for Leicester City, the surprise team of the season for fans of the Premier League.
In early 2008, when he was playing for San Lorenzo de Almagro in Argentina, Leo Ulloa signed over his economic and image rights to Jump Drive Sport Rights LLC, a company registered in New York.
On paper, Jump Drive’s director and shareholder weren’t people but instead two companies based in the South Pacific nation of Samoa. Jump Drive’s power of attorney was held by José Manuel García Osuna, a businessman and soccer administrator who is now facing fraud charges in Spain, including an allegation that he pocketed a large percentage of the money that Ulloa was supposed to receive for his image rights as well as for his signing contracts to move from one team to another.
Ulloa declined to discuss his image rights agreement or his dealings with Osuna. “I don’t have a good relationship with him now, but I don’t want to talk about it,” Ulloa said in a brief telephone interview.
Osuna told ICIJ that he didn’t incorporate Jump Drive and he didn’t sign Ulloa’s image rights contract. He said he negotiated Ulloa’s signing with the Spanish club CD Castellón but he “did not bill a single cent to the club in exchange for my services.”
Iván Zamorano, a retired footballer from Chile who was named to the FIFA 100 list of the world’s best living players.
His image rights were held by Fut Bam International Ltd. when he was a star player for Real Madrid in the 1990s. Fut Bam is based in the British Virgin Islands, which has an effective tax rate of zero, and lists Zamorano as its owner.
Fut Bam granted temporary custody of those image rights to Real Madrid in exchange for a total payment of $195 million pesetas —roughly $1.3 million dollars. The club was to pay Fut Bam $45 million pesetas in 1993 and then another $50 million pesetas ($330,000) a year between 1994 and 1996.
Gabriel Iván Heinze, who is from Argentina and played with Manchester United and Real Madrid, among other teams.
In 2005, while he was with Manchester United, Heinze created the Galena Mills Corp., also in the British Virgin Islands. That same year he signed a contract with Puma AG that guaranteed him payments of at least $1 million over five years. The payments from Puma were channeled through the offshore company. The records show that Heinze’s mother was listed as the company’s owner.
The Puma deal ended in 2008, a few months after Heinze joined Real Madrid. The Mossack Fonseca files also show that the former footballer also held a Swiss bank account with UBS.
A spokesman for Heinze said that “the set up of Galena Mills was a part of a succession (inheritance) strategy, just in case something bad could happen to Heinze.” The spokesman said Galena Mills “paid all the necessary taxes” in the countries where it was supposed to pay taxes.
Team effort
The secret documents also expose how one club, Real Sociedad in Spain, paid its players in a way that appears to have allowed both the club and its players to slash their tax payments.
The documents show that the club shelled out millions of dollars each year to the foreign players in its employ, even as the players reported a fraction of those payments to the Spanish government. Real Sociedad paid seven of its foreign players that way between 2000 and 2008, the records show, via companies and banks in Niue, Panama, the British Virgin Islands, the Netherlands, Switzerland and Jersey in the Channel Islands.
Spanish authorities were told that Darko Kovacevic, a well-known Serbian footballer, was earning about $2,000 a month from the team during the 2006-2007 season, according to an online news site, ExtraConfidential.com, which in December published parts of an investigative report by a Spanish prosecutor . Mossack Fonseca’s files show that that the team paid Kovacevic roughly $1.4 million that season through IMFC Licensing in The Netherlands.
Real Sociedad’s general manager, Iñaki Otegi, declined to answer questions about the club’s payment practices. But the club’s press officer said that Otegi “asked me to phone you and tell you that this sort of practice of using companies abroad to remunerate the foreign players was and is a common practice in all Spanish soccer clubs.”
Contributor to this story: Bastian Obermayer
DID YOU FIND THIS INTERESTING?W
Four of the 16 FIFA officials indicted in the United States used offshore companies created by Mossack Fonseca
Files show offshore companies used by some soccer players to hold money from image rights deals
Offshore revelations extend beyond soccer to other sports including hockey and golf
Leaked documents reveal that the law firm of a FIFA ethics watchdog had business relationships with three men who have been indicted in the world soccer association’s corruption scandal.
The confidential files disclose previously unknown dealings between the three men and Juan Pedro Damiani, a member of FIFA’s Independent Ethics Committee, which has handed down a series of bans against high-level executives at the organization.
The records show that Damiani and his law firm did work for at least seven offshore companies linked to Eugenio Figueredo, a former FIFA vice president who has been charged by U.S. authorities with wire fraud and money laundering for his role in the alleged bribery conspiracy.
The records also show that Damiani’s law firm served as an intermediary for a Nevada-based company linked to Hugo and Mariano Jinkis, a father-son team of businessmen who have been accused of paying tens of millions of dollars in bribes to gain broadcast rights to FIFA events in Latin America.
The records do not show illegal conduct by Damiani or his law firm. But they do raise new questions for Damiani and FIFA at a time when the nexus between offshore secrecy and corruption has been a growing concern in the world’s most popular sport.
articles/00Sports/160403-sports-06.jpg
Juan Pedro Damiani (left) in 2007. Photo: Vince Alongi
Damiani, the president of Uruguay’s Club Atlético Peñarol, one of the more important soccer clubs in Latin America, said his law firm does not maintain “any professional relationship” with anyone indicted in the U.S.’s FIFA investigation. He did not answer a question about previous working relationships with people indicted in the case.
A spokesman for the ethics panel confirmed, however, that Damiani informed the committee on March 18 that he has had business ties to Figueredo. That was one day after the International Consortium of Investigative Journalists and other reporting partners sent detailed questions to Damiani about his law firm’s work for companies linked to the former FIFA vice-president.
The ethics panel says it has now launched a preliminary investigation into Damiani’s relationship with Figueredo.
The links between the ethics watchdog and figures indicted in the FIFA scandal are among the new revelations about the hidden side of soccer contained in the leaked documents.
The secret files show that what is often called the called “the beautiful game” could also be dubbed the game of dummy corporations and tax havens. The documents expose offshore entities used by an array of players, team owners, league officials, sports agents and soccer clubs to move money offshore.
These findings are the result a yearlong investigation by ICIJ, the German newspaper Süddeutsche Zeitung and other media partners. The reporting partners sifted through more than 11 million records from the internal files of Mossack Fonseca, a Panama-based law firm that specializes in helping the wealthy and powerful set up offshore companies.
The Mossack Fonseca documents include the names of nearly 20 high-profile soccer players, past and present, representing some of the globe’s best-known professional football clubs, including Barcelona, Manchester United and Real Madrid.
Among the names: Lionel Messi.
The Barcelona star, a five-time world player of the year, is already under indictment in Spain on charges that he and his father, Jorge Horacio Messi, used offshore companies in Belize and Uruguay to stiff the government out of millions of dollars in taxes.
The leaked documents show that Messi and his father owned yet another offshore company in Panama: Mega Star Enterprises.
The first reference to the company in Mossack Fonseca’s files came on June 13, 2013 — one day after Spanish prosecutors first filed tax fraud charges against Messi and his father. An email indicated that responsibility for handling the company’s paperwork was being transferred to Mossack Fonseca from another offshore corporate agent.
The first reference in the files to the Messis owning Mega Star came less than two weeks later, on June 23, 2013.
Through his father, Messi declined to comment for this story.
The files also include the offshore holdings of current or former owners of at least 20 major soccer clubs, including Internazionale Milano and Boca Juniors.
While soccer players and executives are by far the most common sports-related names in the leaked documents, the files also include the names of current and former athletes from other sports.
“Over the years, we’ve seen an increasing penetration of offshore finance into sports, which we believe is detrimental to the game,” said George Turner of the Tax Justice Network, a fair-tax advocacy group based in London. “If we’re shifting competition away from the athleticism, the skill, the talent of the players and into the skill and talent of the accountants, lawyers, bankers, and boardroom executives, the sport quickly becomes a pointless thing to go and watch.”
Mossack Fonseca’s internal files reveal, for example, that at least 11 retired National Hockey League players used the law firm to help administer offshore structures. The records show that Nick Faldo, one of the top professional golfers of all time, owned an offshore company in the British Virgin Islands from 2006 until 2008. Faldo is one of at least five golfers whose names appear in the documents.
A spokesperson for Faldo declined comment.
Soccer ethics
The FIFA scandal broke into the open in 2015 when the U.S. Justice Department charged that entrepreneurs had used bribes and kickbacks to win favorable terms on the broadcast rights to games sponsored by the world soccer body.
Four of the 16 FIFA officials indicted in the United States used offshore companies created by Mossack Fonseca, as did four businessmen linked to the soccer corruption case, the leaked records show.
The records show that two of the businessmen charged with fraud and money laundering in the scandal — Hugo and Mariano Jinkis — have been linked to a company called Cross Trading SA that was originally incorporated on the tiny Pacific island of Niue in 1998, then moved to Nevada in 2006 as Cross Trading LLC.
Both Hugo and Mariano Jinkis are mentioned in correspondence regarding Cross Trading between Mossack Fonseca and the law of firm of Damiani, the FIFA ethics panel member. The leaked records listed Hugo Jinkis as a “beneficiary” of the company after it moved to Nevada.
The records show that Damiani’s law firm did work for Cross Trading while it was in Niue as well as in Nevada — handling correspondence for Cross Trading and advising on the question of whether it would have to pay taxes in Nevada. At one point after the company’s move to Nevada, the records listed Damiani as Cross Trading’s “principal beneficiary,” but it’s unclear what that meant. It’s possible that was a temporary designation while the new structure for the company was being arranged.
Damiani’s ties to Cross Trading weren’t unusual. According to the leaked documents, Damiani and his law firm, J.P. Damiani & Asociados, have acted as a go-between for hundreds of companies registered with Mossack Fonseca.
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Figueredo leaves the courthouse after he was extradited from Switzerland to face fraud and money laundering charges in Uruguay. Photo: AP Photo / Matilde Campodonico
Among them are five offshore companies owned by Figueredo, the former FIFA vice president arrested in Zurich in May 2015 . Damiani’s firm also acted as an intermediary for a company over which Figueredo held power of attorney and another company for which Figueredo and members of his family served as officers and directors.
Figueredo has been charged with taking part in a bribery scheme in which media and marketing executives were to pay more than $100 million in exchange for the rights to Copa Libertadores, the annual Latin American soccer championship, and other major events.
In a separate case, Figueredo has already pleaded guilty to fraud and money laundering in his native Uruguay.
Damiani said through a spokesperson that he wasn’t authorized to make statements while officials in Uruguay are investigating allegations of corruption related to FIFA. He added, however, that he taken a lead in reporting corrupt practices within FIFA to Uruguayan authorities and to the soccer organization’s ethics committee.
More FIFA figures
One of the biggest soccer figures named in the documents is Michel Platini, a former French soccer great and a key figure in the 2015 FIFA scandal. Platini relied on Mossack Fonseca to help him administer an offshore company created in Panama in 2007, the same year he was named president of UEFA, the European soccer association. Platini was given an unlimited power of attorney for Balney Enterprises Corp., which was still an active business as of March 2016, according to Panama’s commercial register.
Platini, a longtime member of FIFA’s executive committee, has already been banned from the sport for six years because of a questionable $2 million payment he received from FIFA in 2011.
An attorney for Platini said his client is a Swiss citizen and noted that all his “bank accounts, investments or assets are known by the Swiss Authorities.”
Jérôme Valcke, the secretary general of FIFA from 2007 until he was banned on corruption charges in September 2015, also appears in the leaked documents. Valcke is listed as the owner of a British Virgin Islands company called Umbelina SA, created in July 2013. The company appears to have been used to purchase a yacht registered in the Cayman Islands.
“Publish what you want,” Valcke wrote in an email responding to questions for this story. “The company no longer exists and never had its own funds, never held a bank account and never had any commercial activity.”
The Mossack Fonseca files also provide details of broadcast agreements that officials with CONMEBOL, the South American soccer association, signed with companies that U.S. authorities claim paid bribes and kickbacks. The men who signed these deals for the association — CONMEBOL’s former president, Nicolás Leoz , and its former secretary general, Eduardo Deluca — were both indicted by the U.S. in November.
One deal, with a company run by an entrepreneur named as an unindicted “co-conspirator,” provided that CONMEBOL would be paid $97 million for the rights to broadcast Copa Libertadores championships from 2008 to 2018. According to the 2015 indictments, the entrepreneur secured media and marketing rights for his companies by paying annual six-figure bribes to Leoz, Deluca and other CONMEBOL officials over a period of several years.
Cast of players
The soccer players whose names appear in the Mossack Fonseca files hail from Brazil, Uruguay, the United Kingdom, Turkey, Serbia, The Netherlands and Sweden, among other countries. Most seemed to have used the law firm’s services to create offshore companies to hold the money they earned selling their image rights to athletic shoe companies and other advertisers.
Lionel Messi and his father, who served as his son’s agent, are slated to stand trial on tax fraud charges starting May 31. Accused of shortchanging the government out of nearly $6.5 million in taxes by shielding his image rights in an offshore network, Messi has paid the back taxes the government said he owed for the years 2007-2009.
Messi denies that he deliberately tried to deceive anyone.
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Messi during the 2014 World Cup Final game between Argentina and Germany. Photo: AGIF / Shutterstock.com
Mega Star Enterprises , the offshore company owned by Messi and his father at least as far back as 2013 , is not mentioned in the Spanish government’s 2014 and 2015 indictments against the pair. The leaked records show Messi signed at least one document reflecting his ownership of Mega Star, but that his father, Jorge Messi, took over sole ownership of the company in December 2015. The company remains active in Panama’s company register.
Messi isn’t alone when it comes to using offshore havens.
Among the others named in the secret files:
Leonardo Ulloa, a top scorer for Leicester City, the surprise team of the season for fans of the Premier League.
In early 2008, when he was playing for San Lorenzo de Almagro in Argentina, Leo Ulloa signed over his economic and image rights to Jump Drive Sport Rights LLC, a company registered in New York.
On paper, Jump Drive’s director and shareholder weren’t people but instead two companies based in the South Pacific nation of Samoa. Jump Drive’s power of attorney was held by José Manuel García Osuna, a businessman and soccer administrator who is now facing fraud charges in Spain, including an allegation that he pocketed a large percentage of the money that Ulloa was supposed to receive for his image rights as well as for his signing contracts to move from one team to another.
Ulloa declined to discuss his image rights agreement or his dealings with Osuna. “I don’t have a good relationship with him now, but I don’t want to talk about it,” Ulloa said in a brief telephone interview.
Osuna told ICIJ that he didn’t incorporate Jump Drive and he didn’t sign Ulloa’s image rights contract. He said he negotiated Ulloa’s signing with the Spanish club CD Castellón but he “did not bill a single cent to the club in exchange for my services.”
Iván Zamorano, a retired footballer from Chile who was named to the FIFA 100 list of the world’s best living players.
His image rights were held by Fut Bam International Ltd. when he was a star player for Real Madrid in the 1990s. Fut Bam is based in the British Virgin Islands, which has an effective tax rate of zero, and lists Zamorano as its owner.
Fut Bam granted temporary custody of those image rights to Real Madrid in exchange for a total payment of $195 million pesetas —roughly $1.3 million dollars. The club was to pay Fut Bam $45 million pesetas in 1993 and then another $50 million pesetas ($330,000) a year between 1994 and 1996.
Gabriel Iván Heinze, who is from Argentina and played with Manchester United and Real Madrid, among other teams.
In 2005, while he was with Manchester United, Heinze created the Galena Mills Corp., also in the British Virgin Islands. That same year he signed a contract with Puma AG that guaranteed him payments of at least $1 million over five years. The payments from Puma were channeled through the offshore company. The records show that Heinze’s mother was listed as the company’s owner.
The Puma deal ended in 2008, a few months after Heinze joined Real Madrid. The Mossack Fonseca files also show that the former footballer also held a Swiss bank account with UBS.
A spokesman for Heinze said that “the set up of Galena Mills was a part of a succession (inheritance) strategy, just in case something bad could happen to Heinze.” The spokesman said Galena Mills “paid all the necessary taxes” in the countries where it was supposed to pay taxes.
Team effort
The secret documents also expose how one club, Real Sociedad in Spain, paid its players in a way that appears to have allowed both the club and its players to slash their tax payments.
The documents show that the club shelled out millions of dollars each year to the foreign players in its employ, even as the players reported a fraction of those payments to the Spanish government. Real Sociedad paid seven of its foreign players that way between 2000 and 2008, the records show, via companies and banks in Niue, Panama, the British Virgin Islands, the Netherlands, Switzerland and Jersey in the Channel Islands.
Spanish authorities were told that Darko Kovacevic, a well-known Serbian footballer, was earning about $2,000 a month from the team during the 2006-2007 season, according to an online news site, ExtraConfidential.com, which in December published parts of an investigative report by a Spanish prosecutor . Mossack Fonseca’s files show that that the team paid Kovacevic roughly $1.4 million that season through IMFC Licensing in The Netherlands.
Real Sociedad’s general manager, Iñaki Otegi, declined to answer questions about the club’s payment practices. But the club’s press officer said that Otegi “asked me to phone you and tell you that this sort of practice of using companies abroad to remunerate the foreign players was and is a common practice in all Spanish soccer clubs.”
Contributor to this story: Bastian Obermayer
DID YOU FIND THIS INTERESTING?W
HOW CRIMINAL?
Files reveal the offshore holdings of 140 politicians and public officials from around the world
Current and former world leaders in the data include prime ministers of Iceland and Pakistan, the president of Ukraine, and the king of Saudi Arabia
More than 214,000 offshore entities appear in the leak, connected to people in more than 200 countries and territories
Major banks have driven the creation of hard-to-trace companies in offshore havens
A massive leak of documents exposes the offshore holdings of 12 current and former world leaders and reveals how associates of Russian President Vladimir Putin secretly shuffled as much as $2 billion through banks and shadow companies.
The leak also provides details of the hidden financial dealings of 128 more politicians and public officials around the world.
The cache of 11.5 million records shows how a global industry of law firms and big banks sells financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities and sports stars.
These are among the findings of a yearlong investigation by the International Consortium of Investigative Journalists, German newspaper Süddeutsche Zeitung and more than 100 other news organizations.
The files expose offshore companies controlled by the prime ministers of Iceland and Pakistan, the king of Saudi Arabia and the children of the president of Azerbaijan.
They also include at least 33 people and companies blacklisted by the U.S. government because of evidence that they’d been involved in wrongdoing, such as doing business with Mexican drug lords, terrorist organizations like Hezbollah or rogue nations like North Korea and Iran.
One of those companies supplied fuel for the aircraft that the Syrian government used to bomb and kill thousands of its own citizens, U.S. authorities have charged.
“These findings show how deeply ingrained harmful practices and criminality are in the offshore world,” said Gabriel Zucman, an economist at the University of California, Berkeley and author of “The Hidden Wealth of Nations: The Scourge of Tax Havens.” Zucman, who was briefed on the media partners’ investigation, said the release of the leaked documents should prompt governments to seek “concrete sanctions” against jurisdictions and institutions that peddle offshore secrecy.
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Chinese President Xi Jinping and British Prime Minister David Cameron. Photo: UK Government / Georgina Coupe
World leaders who have embraced anti-corruption platforms feature in the leaked documents. The files reveal offshore companies linked to the family of China’s top leader, Xi Jinping, who has vowed to fight “armies of corruption,” as well as Ukrainian President Petro Poroshenko, who has positioned himself as a reformer in a country shaken by corruption scandals. The files also contain new details of offshore dealings by the late father of British Prime Minister David Cameron, a leader in the push for tax-haven reform.
The leaked data covers nearly 40 years, from 1977 through the end of 2015. It allows a never-before-seen view inside the offshore world — providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues.
Most of the services the offshore industry provides are legal if used by the law abiding. But the documents show that banks, law firms and other offshore players have often failed to follow legal requirements that they make sure their clients are not involved in criminal enterprises, tax dodging or political corruption. In some instances, the files show, offshore middlemen have protected themselves and their clients by concealing suspect transactions or manipulating official records.
The documents make it clear that major banks are big drivers behind the creation of hard-to-trace companies in the British Virgin Islands, Panama and other offshore havens. The files list nearly 15,600 paper companies that banks set up for clients who want keep their finances under wraps, including thousands created by international giants UBS and HSBC.
The records reveal a pattern of covert maneuvers by banks, companies and people tied to Russian leader Putin. The records show offshore companies linked to this network moving money in transactions as large as $200 million at a time. Putin associates disguised payments, backdated documents and gained hidden influence within the country’s media and automotive industries, the leaked files show.
A Kremlin spokesman did not answer questions for this story, but instead went public March 28 with charges that ICIJ and its media partners were preparing a misleading “information attack” on Putin and people close to him.
The leaked records — which were reviewed by a team of more than 370 journalists from 76 countries — come from a little-known but powerful law firm based in Panama, Mossack Fonseca, that has branches in Hong Kong, Miami, Zurich and more than 35 other places around the globe.
The firm is one of the world’s top creators of shell companies, corporate structures that can be used to hide ownership of assets. The law firm’s leaked internal files contain information on 214,488 offshore entities connected to people in more than 200 countries and territories. ICIJ will release the full list of companies and people linked to them in early May.
The data includes emails, financial spreadsheets, passports and corporate records revealing the secret owners of bank accounts and companies in 21 offshore jurisdictions, from Nevada to Singapore to the British Virgin Islands.
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Files show a number of luxury yachts bought and sold through offshore companies. Photo: Twiga269 / Flickr
Mossack Fonseca’s fingers are in Africa’s diamond trade, the international art market and other businesses that thrive on secrecy. The firm has serviced enough Middle East royalty to fill a palace. It’s helped two kings, Mohammed VI of Morocco and King Salman of Saudi Arabia, take to the sea on luxury yachts.
In Iceland, the leaked files show how Prime Minister Sigmundur David Gunnlaugsson and his wife secretly owned an offshore firm that held millions of dollars in Icelandic bank bonds during that country’s financial crisis.
The files include a convicted money launderer who claimed he’d arranged a $50,000 illegal campaign contribution used to pay the Watergate burglars, 29 billionaires featured in Forbes Magazine’s list of the world’s 500 richest people and movie star Jackie Chan, who has at least six companies managed through the law firm.
As with many of Mossack Fonseca’s clients, there is no evidence that Chan used his companies for improper purposes. Having an offshore company isn’t illegal. For some international business transactions, it’s a logical choice.
The Mossack Fonseca documents indicate, however, that the firm’s customers have included Ponzi schemers, drug kingpins, tax evaders and at least one jailed sex offender. A U.S. businessman convicted of traveling to Russia to have sex with underage orphans signed papers for an offshore company while he was serving his prison sentence in New Jersey, the records show.
The files contain new details about major scandals ranging from England’s most infamous gold heist to the bribery allegations convulsing FIFA, the body that rules international soccer.
The leaked documents reveal that the law firm of Juan Pedro Damiani, a member of FIFA’s ethics committee, had business relationships with three men who have been indicted in the FIFA scandal — former FIFA vice president Eugenio Figueredo and Hugo and Mariano Jinkis, the father-son team accused of paying bribes to win broadcast rights to Latin American soccer events. The records show that Damiani’s law firm in Uruguay represented an offshore company linked to the Jinkises and seven companies linked to Figueredo.
In response to the reporting by ICIJ and its media partners, FIFA’s ethics panel has launched a preliminary investigation into Damiani’s relationship to Figueredo. A spokesman for the committee said Damiani first informed the panel about his business ties to Figueredo on March 18. That was one day after the reporting team sent questions to Damiani about his law firm’s work for companies tied to the former FIFA vice president.
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Argentine soccer player Lionel Messi. Photo: Shutterstock / CP DC Press
The world’s best soccer player, Lionel Messi, is also found in the documents. The records show Messi and his father were owners of a Panama company: Mega Star Enterprises Inc. This adds a new name to the list of shell companies known to be linked to Messi. His offshore dealings are currently the target of a tax evasion case in Spain.
Whether they’re famous or unknown, Mossack Fonseca works aggressively to protect its clients’ secrets. In Nevada, the records show, the law firm tried to shield itself and its clients from the fallout from a legal action in U.S. District Court by removing paper records from its Las Vegas branch and having its tech gurus wipe electronic records from phones and computers.
The leaked files show the firm regularly offered to backdate documents to help its clients gain advantage in their financial affairs. It was so common that in 2007 an email exchange shows firm employees talking about establishing a price structure — clients would pay $8.75 for each month farther back in time that a corporate document would be backdated.
In a written response to questions from ICIJ and its media partners, the firm said it “does not foster or promote illegal acts. Your allegations that we provide shareholders with structures supposedly designed to hide the identity of the real owners are completely unsupported and false.”
The firm added that the backdating of documents “is a well-founded and accepted practice” that is “common in our industry and its aim is not to cover up or hide unlawful acts.”
The firm said it couldn’t answer questions about specific customers because of its obligation to maintain client confidentiality.
The law firm’s co-founder, Ramón Fonseca, said in a recent interview on Panamanian television that the firm has no responsibility for what clients do with the offshore companies that the firm sells. He compared the firm to a “car factory” whose liability ends once the car is produced. Blaming Mossack Fonseca for what people do with their companies would be like blaming a carmaker “if the car was used in a robbery,” he said.
Under scrutiny
Until recently, Mossack Fonseca has largely operated in the shadows. But it has come under growing scrutiny as governments have obtained partial leaks of the firm’s files and authorities in Germany and Brazil began probing its practices.
In February 2015, Süddeutsche Zeitung reported that German law-enforcement agencies had launched a series of raids targeting one of the country’s biggest banks, Commerzbank, in a tax-fraud investigation that authorities said could lead to criminal charges against Mossack Fonseca employees.
In Brazil, the law firm has become a target in a bribery and money laundering investigation dubbed “Operation Car Wash” (“Lava Jato,” in Portuguese), which has led to criminal charges against leading politicians and an investigation of popular former president Luiz Inacio Lula da Silva. The scandal threatens to unseat current President Dilma Rousseff.
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Employees of Mossack Fonseca were among those arrested by Brazilian police as part of Operation Car Wash. Image: RedeTV
In January, Brazilian prosecutors labeled Mossack Fonseca as a “big money launderer” and announced they had filed criminal charges against five employees of the firm’s Brazilian office for their role in the scandal.
Mossack Fonseca denies any wrongdoing in Brazil.
The disclosures found inside the law firm’s leaked files dramatically expand on previous leaks of offshore records that ICIJ and its reporting partners have revealed in the past four years.
In the largest media collaboration ever undertaken, journalists working in more than 25 languages dug into Mossack Fonseca’s inner workings and traced the secret dealings of the law firm’s customers around the world. They shared information and hunted down leads generated by the leaked files using corporate filings, property records, financial disclosures, court documents and interviews with money laundering experts and law-enforcement officials.
Reporters at Süddeutsche Zeitung obtained millions of records from a confidential source and shared them with ICIJ and other media partners. The news outlets involved in the collaboration did not pay for the documents.
Before Süddeutsche Zeitung obtained the leak, German tax authorities bought a smaller set of Mossack Fonseca documents from a whistleblower, a move that triggered the raids in Germany in early 2015. This smaller set of files has since been offered to tax authorities in the United Kingdom, the United States and other countries, according to sources with knowledge of the matter.
The larger set of files obtained by the news organizations offers more than a snapshot of one law firm’s business methods or a catalog of its more unsavory customers. It allows a far-reaching view into an industry that has worked to keep its practices hidden — and offers clues as to why efforts to reform the system have faltered.
The story of Mossack Fonseca is, in many ways, the story of the offshore system itself.
Crime of the century
Before dawn on Nov. 26, 1983, six robbers slipped into the Brink’s-Mat warehouse at London’s Heathrow Airport. The thugs tied up the security guards, doused them in gasoline, lit a match and threatened to set them afire unless they opened the warehouse’s vault. Inside, the thieves found nearly 7,000 gold bars, diamonds and cash.
“Thanks ever so much for your help. Have a nice Christmas,” one of the crooks said as they departed.
British media dubbed the heist the “Crime of the Century.” Much of the loot — including the cash reaped by melting the gold and selling it — was never recovered. Where the missing money went is a mystery that continues to fascinate students of England’s underworld.
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Mossack Fonseca co-founder Jürgen Mossack.
Now documents within Mossack Fonseca’s files reveal that the law firm and its co-founder, Jürgen Mossack, may have helped the conspirators keep the spoils out of the hands of authorities by protecting a company tied to Gordon Parry, a London wheeler-dealer who laundered money for the Brink’s-Mat plotters.
Sixteen months after the robbery, the records show, Mossack Fonseca set up a Panama shell company called Feberion Inc. Jürgen Mossack was one the company’s three “nominee” directors, a term used in the business for stand-ins who control a company on paper but exercise no real authority over its activities.
An internal memo written by Mossack shows he was aware in 1986 that the company was “apparently involved in the management of money from the famous theft from Brink’s-Mat in London. The company itself has not been used illegally, but it could be that the company invested money through bank accounts and properties that was illegitimately sourced.”
Mossack Fonseca records from 1987 make it clear that Parry was behind Feberion. Rather than help authorities gain access to Feberion’s assets, the law firm took steps that prevented U.K. police from gaining control of the company, the records show.
After police obtained the two certificates that controlled the company’s ownership, Mossack Fonseca arranged for Feberion to issue 98 new shares, a move that appears to have effectively wrested control away from investigators, the leaked records show.
It was not until 1995 — three years after Parry was sent to prison for his role in the gold caper — that Mossack Fonseca ended its business relationship with Feberion.
A spokesman for the law firm said any allegations the firm helped shield the proceeds of the Brink’s-Mat robbery “are entirely false.” The spokesman said Jürgen Mossack “never had any dealings” with Parry and was never contacted by police about the case.
Mossack Fonseca’s defense of the dodgy company illustrates how far many offshore operatives will go to serve their customers’ interests.
The offshore system relies on a sprawling global industry of bankers, lawyers, accountants and these go-betweens who work together to protect their clients’ secrets. These secrecy experts use anonymous companies, trusts and other paper entities to create complex structures that can be used to disguise the origins of dirty money.
“They are the gasoline that runs the engine,” says Robert Mazur, a former U.S. drug agent and author of The Infiltrator: My Secret Life Inside the Dirty Banks Behind Pablo Escobar’s Medellín Cartel. “They’re an extraordinarily important piece of the formula of success for criminal organizations.”
Mossack Fonseca told ICIJ that it follows “both the letter and spirit of the law. Because we do, we have not once in nearly 40 years of operation been charged with criminal wrongdoing.”
The men who founded the firm decades ago — and continue today as its main partners — are well-known figures in Panamanian society and politics.
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Mossack Fonseca co-founder Ramón Fonseca.
Jürgen Mossack is a German immigrant whose father sought a new life in Panama for his family after serving in Hitler’s Waffen-SS during World War II. Ramón Fonseca is an award-winning novelist who has worked in recent years as an adviser to Panama’s president. He took a leave of absence as presidential adviser in March after his firm was implicated in the Brazil scandal and ICIJ and its partners began to ask questions about the law firm’s practices.
From its base in Panama, one of the world’s top financial secrecy zones, Mossack Fonseca seeds anonymous companies in Panama, the British Virgin Islands and other financial havens.
The law firm has worked closely with big banks and big law firms in places like The Netherlands, Mexico, the United States and Switzerland, helping clients move money or slash their tax bills, the secret records show.
An ICIJ analysis of the leaked files found that more than 500 banks, their subsidiaries and branches have worked with Mossack Fonseca since the 1970s to help clients manage offshore companies. UBS set up more than 1,100 offshore companies through Mossack Fonseca. HSBC and its affiliates created more than 2,300.
In all, the files indicate Mossack Fonseca worked with more than 14,000 banks, law firms, company incorporators and other middlemen to set up companies, foundations and trusts for customers, the records show.
Mossack Fonseca says these middlemen are its true clients, not the eventual customers who use offshore companies. The firm says these middlemen provide additional layers of oversight for reviewing new customers. As for its own procedures, Mossack Fonseca says they often exceed “the existing rules and standards to which we and others are bound.”
In its efforts to protect Feberion Inc., the shell company linked to the Brink’s-Mat gold heist, Mossack Fonseca used the services of a Panama-based firm, Chartered Management Company, run by Gilbert R.J. Straub, an American expatriate who played a cameo role in the Watergate scandal.
In 1987, as U.K. police were investigating the shell company, Jürgen Mossack and Feberion’s other paper directors resigned, with the understanding they’d be replaced by new directors appointed by Straub’s Chartered Management, the secret files show.
Straub was eventually caught in a U.S. Drug Enforcement Administration sting that was unrelated to the Brink’s-Mat case, according to Mazur, the former undercover agent. During one of his deep-cover stints, Mazur built the case that led Straub to plead guilty to money laundering in 1995. Believing Mazur was a well-connected money launderer, Straub tried to establish his own criminal bona fides, Mazur says, by describing how he’d illegally channeled cash to President Nixon’s 1972 re-election campaign.
Secrets and victims
Nick Kgopa’s father died when Nick was 14. His father’s workmates at a gold mine in northern South Africa said Nick’s dad had been killed by chemical exposure.
Nick and his mother and his younger brother, who is deaf, survived thanks to monthly checks from a fund for widows and orphans of mineworkers.
One day the payments stopped.
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Gold miners in South Africa. Photo: AP Photo / Themba Hadebe
His family was one of many that lost out because of a $60 million investment fraud pulled off by South African businessmen. Prosecutors alleged that a group of individuals connected to an asset management company, Fidentia, had schemed to loot millions from investment funds — including the mineworkers’ death benefits pool that was supporting some 46,000 widows and orphans.
Mossack Fonseca’s leaked documents show that at least two of the men involved in the fraud used the Panama-based law firm to create offshore companies — and that Mossack Fonseca was willing to help one of the fraudsters protect his money even after authorities publicly linked him to the scandal.
Ponzi schemers and other fraudsters who bilk large numbers of victims often use offshore structures to pull of their schemes or hide the proceeds. The Fidentia case isn’t the only big-ticket fraud that appears in the files of Mossack Fonseca’s clients.
In Indonesia, for example, small investors claim a company incorporated by Mossack Fonseca in the British Virgin Islands was used to scam 3,500 people out of at least $150 million.
“We really need that money for our son’s education fee this April,” one Indonesian investor emailed Mossack Fonseca in April 2007 after payouts had stopped.
“You can give us any suggestion something we can do,” the investor asked in broken English after seeing Mossack Fonseca’s name on the investment fund’s advertising leaflet.
In the Fidentia case, Mossack Fonseca’s records show that one of the men later jailed in South Africa for his role in the fraud, Graham Maddock, paid Mossack Fonseca $59,000 in 2005 and 2006 to create two sets of offshore companies, including one called Fidentia North America. The law firm’s records say it gave him “the VIP service.”
Mossack Fonseca also created offshore structures for Steven Goodwin, a man that prosecutors later claimed had played an “instrumental role” within the Fidentia swindle. As the scandal broke in 2007, Goodwin flew to Australia, then to the U.S., where a Mossack Fonseca lawyer met with him at a luxury hotel in Manhattan to discuss his offshore holdings, the firm’s internal records show.
The firm official later wrote that he and Goodwin “spoke deeply” about the Fidentia scandal and that he had “convinced Goodwin to better protect” his offshore company’s assets by passing them to a third party.
In his memo, the firm official told colleagues that Goodwin wasn’t involved in the scandal “in any way whatsoever” — he was just “a victim of the circumstances.”
In April 2008, the FBI arrested Goodwin in Los Angeles and sent him back to South Africa, where he pleaded guilty to fraud and money laundering. He was sentenced to 10 years in prison.
A month after Goodwin’s sentencing, an employee at Mossack Fonseca suggested a plan for frustrating South African prosecutors who were expected to start digging into assets linked to Goodwin’s offshore company, Hamlyn Property LLP, which had been set up to buy real estate in South Africa.
The employee proposed having an accountant “prepare” audits for 2006 and 2007 “to try to prevent the prosecutor from taking actions against the entities behind Hamlyn.” He set off “prepare” in quote marks in his email.
It’s unclear whether the proposal was adopted.
Mossack Fonseca did not answer questions from ICIJ about its relationship with Goodwin. A representative for Goodwin told ICIJ that Goodwin “had nothing whatsoever” to do Fidentia’s collapse “or anything directly or indirectly to do with the 46,000 widows and orphans.”
Politically exposed
On Feb. 10, 2011, an anonymous company in the British Virgin Islands named Sandalwood Continental Ltd. loaned $200 million to an equally shadowy firm based in Cyprus called Horwich Trading Ltd.
The following day, Sandalwood assigned the rights to collect payments on the loan — including interest — to Ove Financial Corp., a mysterious company in the British Virgin Islands.
For those rights, Ove paid $1.
But the money trail didn’t end there.
The same day, Ove reassigned its rights to collect on the loan to a Panama company called International Media Overseas.
It too paid $1.
In the space of 24 hours the loan had, on paper, traversed three countries, two banks and four companies, making the money all but untraceable in the process.
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Close allies of Russian President Vladimir Putin make extensive use of offshore holdings to shuffle large sums of money. Photo: AP Photo / Krill Kudryavtsev
There were plenty of reasons why the men behind the transaction might want it disguised, not least of all because the money trail came uncomfortably close to Russian leader Vladimir Putin.
St. Petersburg-based Bank Rossiya, an institution whose majority owner and chairman has been called one of Putin’s “cashiers,” established Sandalwood Continental and directed the money flow.
International Media Overseas, where rights to the interest payments from the $200 million appear to have landed, was controlled, on paper, by one of Putin’s oldest friends, Sergey Roldugin, a classical cellist who is godfather to Putin’s eldest daughter.
The $200 million loan was one of dozens of transactions totaling at least $2 billion found in the Mossack Fonseca files involving people or companies linked to Putin. They formed part of a Bank Rossiya enterprise that gained indirect influence over a major shareholder in Russia’s biggest truck maker and amassed secret stakes in a key Russian media property.
Suspicious payments made by Putin’s cronies may have in some cases been designed as payoffs, possibly in exchange for Russian government aid or contracts. The secret documents suggest that much of the loan money originally came from a bank in Cyprus that at the time was majority owned by the Russian state-controlled VTB Bank.
In a media conference call last week, Putin spokesman Dmitry Peskov said the government wouldn’t reply to “honey-worded queries” from ICIJ or its reporting partners, because they contain questions that “have been asked hundreds of times and answered hundreds of times.”
Peskov added that Russia has “available the full arsenal of legal means in the national and international arena to protect the honor and dignity of our president.”
Under national laws and international agreements, firms like Mossack Fonseca that help create companies and bank accounts are supposed to be on the lookout for clients who may be involved in money laundering, tax evasion or other wrongdoing. They are required to pay special attention to “politically exposed persons” — government officials or their family members or associates. If someone is a “PEP,” the middlemen creating their companies are expected to review their activities carefully to make sure they are not engaging in corruption.
Mossack Fonseca told ICIJ that it has “duly established policies and procedures to identify and handle those cases where individuals” qualify as PEPs.
Often, Mossack Fonseca appeared not to realize who its customers were. A 2015 internal audit found that the law firm knew the identities of the real owners of just 204 of 14,086 companies it had incorporated in Seychelles, a tax haven in the Indian Ocean.
British Virgin Islands authorities fined Mossack Fonseca $37,500 for violating anti-money-laundering rules because the firm incorporated a company for the son of former Egyptian President Hosni Mubarak but failed to identify the connection, even after the father and son were charged with corruption in Egypt. An internal review by the law firm concluded, “our risk assessment formula is seriously flawed.”
In all, an ICIJ analysis of the Mossack Fonseca files identified 61 family members and associates of prime ministers, presidents or kings.
The records show, for example, that the family of Azerbaijan President Ilham Aliyev used foundations and companies in Panama to hold secret stakes in gold mines and London real estate. The children of Pakistani Prime Minister Nawaz Sharif also owned London real estate through companies created by Mossack Fonseca, the law firm’s records show.
Family members of at least eight current or former members of China’s Politburo Standing Committee, the country’s main ruling body, have offshore companies arranged though Mossack Fonseca. They include President Xi’s brother-in-law, who set up two British Virgin Islands companies in 2009.
Representatives for the Azeri, Pakistani and Chinese leaders did not respond to requests for comment.
The list of world leaders who used Mossack Fonseca to set up offshore entities includes the current president of Argentina, Mauricio Macri, who was director and vice president of a Bahamas company managed by Mossack Fonseca when he was a businessman and the mayor of Argentina’s capital, Buenos Aires. A spokesman for Macri said the president never personally owned shares in the firm, which was part of his family’s business.
During the bloodiest days of Russia’s 2014 invasion of the Ukraine’s Donbas region, the documents show, representatives of Ukrainian leader Petro Poroshenko scrambled to find a copy of a home utility bill for him to complete the paperwork to create a holding company in the British Virgin Islands.
A spokesperson for Poroshenko said the creation of the company had nothing to do with “any political and military events in Ukraine.” Poroshenko’s financial advisers said the president didn’t include the BVI firm in his 2014 financial disclosures because neither the holding company nor two related companies in Cyprus and the Netherlands have any assets. They said that the companies were part of a corporate restructuring to help sell Poroshenko’s confectionery business.
When Sigmundur David Gunnlaugsson became Iceland’s prime minister in 2013 he concealed a secret that could have damaged his political career. He and his wife shared ownership in an offshore company in the British Virgin Islands when he entered parliament in 2009. He sold his stake in the company months later to his wife for $1.
The company held bonds originally worth millions of dollars in three giant Icelandic banks that failed during the 2008 global financial crash, making it a creditor in their bankruptcies. Gunnlaugsson’s government negotiated a deal with creditors last year without disclosing his family’s financial stake in the outcome.
Gunnlaugsson has denied in recent days that his family’s financial interests influenced his stances. The leaked records do not make it clear whether Gunnlaugsson’s political positions benefited or hurt the value of the bonds held through the offshore company.
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Iceland Prime Minister Sigmundur David Gunnlaugsson and his wife Anna Sigurlaug Pálsdóttir.
In an interview with an ICIJ media partners, Reykjavik Media and SVT, Gunnlaugsson denied hiding assets. When he was confronted with the name of the offshore company linked to him — Wintris Inc. — the prime minister said “I’m starting to feel a bit strange about these questions because it’s like you are accusing me of something.”
Soon after, he ended the interview.
Four days later, his wife took the matter public, posting a note on Facebook asserting that the company was hers, not his, and that she had paid all taxes on it.
Since then, members of Iceland’s parliament have questioned why Gunnlaugsson never disclosed the offshore company, with one lawmaker calling for the prime minister and his government to resign.
The prime minister has fought back, putting out an eight-page statement arguing he wasn’t required to publicly report his connection to Wintris because it was really owned by his wife and because it was “merely a holding company, not a company engaged in commercial activities.”
Offshore cover-ups
In 2005, a tour boat called the Ethan Allen sank in New York’s Lake George, drowning 20 elderly tourists. After the survivors and families of the dead sued, they learned the tour company had no insurance because fraudsters had sold it a fake policy.
Malchus Irvin Boncamper, an accountant on the Caribbean island of St. Kitts, pleaded guilty in a U.S. court in 2011 to helping the con artists launder proceeds of their frauds.
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The Ethan Allen tour boat brought to the surface after sinking in Lake George, New York. Photo: AP Photo / Mary Altaffer
This created a problem for Mossack Fonseca, because Boncamper had served as the front man — a “nominee” director — for 30 companies created by the law firm.
Once it learned of Boncamper’s criminal conviction, Mossack Fonseca took quick action. It told its offices to replace Boncamper as director of the companies — and to backdate the records in a way that made it appear the changes had taken place, in some cases, a decade earlier.
The Boncamper case is one of the examples in the leaked files showing the law firm using questionable tactics to hide its own methods or its customers’ activities from legal authorities.
In the “Operation Car Wash” case in Brazil, prosecutors allege that Mossack Fonseca employees destroyed and hid documents to mask the law firm’s involvement in money laundering. A police document says that, in one instance, an employee of the firm’s Brazil branch sent an email instructing co-workers to hide records involving a client who may have been the target of a police investigation: “Do not leave anything. I will save them in my car or at my house.”
In Nevada, the leaked files show, Mossack Fonseca employees worked in late 2014 to obscure the links between the law firm’s Las Vegas branch and its headquarters in Panama in anticipation of a U.S. court order requiring it to turn over information on 123 companies incorporated by the law firm. Argentine prosecutors had linked those Nevada-based companies to a corruption scandal involving an associate of former presidents Néstor Kirchner and Cristina Fernández de Kirchner.
In an effort to free itself from the American court’s jurisdiction, Mossack Fonseca claimed that its Las Vegas office, MF Nevada, wasn’t in fact a branch office at all. It said it had no control over the office.
The firm’s internal records show the opposite. They indicate that the firm controlled MF Nevada’s bank account and the firm’s co-founders and another Mossack Fonseca official owned 100 percent of MF Nevada.
To erase evidence of the connection, the law firm arranged to remove paper documents from the branch and worked to delete computer traces of the link between the Nevada and the Panama operations, internal emails show. One big worry, an internal email said, was that the branch’s manager might be too “nervous” to carry out the effort, making it easy for investigators to discover “that we are hiding something.”
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A sign for MF Corporate Services outside a buisness complex in Las Vegas, Nevada. Photo: McClatchy / Ronda Churchill
Mossack Fonseca declined to answer questions about the Brazil and Nevada affairs, but denied generally that it had obstructed investigations or covered up improper activities.
“It is not our policy to hide or destroy documentation that may be of use in any ongoing investigation or proceeding,” the firm said.
Reforming the secret world
In 2013, U.K. leader David Cameron urged his country’s overseas territories — including the British Virgin Islands — to work with him to “get our own houses in order” and join the fight against tax evasion and offshore secrecy.
He could have looked no further than his late father to see how challenging that would be.
Ian Cameron, a stockbroker and multimillionaire, was a Mossack Fonseca client who used the law firm to shield his investment fund, Blairmore Holdings, Inc., from U.K. taxes.
The fund’s name came from Blairmore House, his family’s ancestral country estate. Mossack Fonseca registered the investment fund in Panama even though many of its key investors were British. Ian Cameron controlled the fund from its birth in 1982 until his death in 2010.
A prospectus for investors said the fund “should be managed and conducted so that it does not become resident in the United Kingdom for United Kingdom taxation purposes.”
The fund did this by using untraceable certificates of ownership known as “bearer shares” and by employing “nominee” company officers based in the Bahamas, the law firm’s leaked records show.
Ian Cameron’s tax-haven history is an example of how deeply offshore secrecy is woven into the lives of political and financial elites around the world. It’s also an important economic engine for many countries. The weight of that self-interest has made reform difficult.
In the U.S., for example, states like Delaware and Nevada, which have allowed company owners to remain anonymous, continue to fight against efforts to require greater corporate transparency.
Mossack Fonseca’s home country, Panama, has refused to embrace a plan for worldwide exchange of information about bank accounts — out of concern that its offshore industry could be left at a competitive disadvantage. Panama officials say they will exchange information, but on a more modest scale.
The challenge that reformers and law enforcers face is how to find and stop criminal behavior when it’s buried beneath layers of secrecy. The most effective tool for breaking through this secrecy has been leaks of offshore documents that have dragged hidden dealings into the open.
Document leaks uncovered by ICIJ and its media partners have prompted legislation and official investigations in dozens of countries — and fanned fears among offshore customers who worry their secrets will be revealed.
In April 2013, after ICIJ released its “Offshore Leaks” stories based on confidential documents from the British Virgin Islands and Singapore, some Mossack Fonseca customers emailed the firm looking for reassurance that their offshore holdings were safe from scrutiny.
Mossack Fonseca told customers not to worry. It said its commitment to its clients’ privacy “has always been paramount, and in this regard your confidential information is stored in our state-of-the-art data center, and any communication within our global network is handled through an encryption algorithm that complies with the highest world-class standards.”
This story was reported and written by Bastian Obermayer , Gerard Ryle, Marina Walker Guevara, Michael Hudson, Jake Bernstein, Will Fitzgibbon, Mar Cabra, Martha M. Hamilton, Frederik Obermaier, Ryan Chittum, Emilia Diaz-Struck, Rigoberto Carvajal, Cécile Schilis-Gallego, Marcos Garcia Rey, Delphine Reuter, Matthew Caruana Galizia, Hamish Boland-Rudder, Miguel Fiandor and Mago Torres
Current and former world leaders in the data include prime ministers of Iceland and Pakistan, the president of Ukraine, and the king of Saudi Arabia
More than 214,000 offshore entities appear in the leak, connected to people in more than 200 countries and territories
Major banks have driven the creation of hard-to-trace companies in offshore havens
A massive leak of documents exposes the offshore holdings of 12 current and former world leaders and reveals how associates of Russian President Vladimir Putin secretly shuffled as much as $2 billion through banks and shadow companies.
The leak also provides details of the hidden financial dealings of 128 more politicians and public officials around the world.
The cache of 11.5 million records shows how a global industry of law firms and big banks sells financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities and sports stars.
These are among the findings of a yearlong investigation by the International Consortium of Investigative Journalists, German newspaper Süddeutsche Zeitung and more than 100 other news organizations.
The files expose offshore companies controlled by the prime ministers of Iceland and Pakistan, the king of Saudi Arabia and the children of the president of Azerbaijan.
They also include at least 33 people and companies blacklisted by the U.S. government because of evidence that they’d been involved in wrongdoing, such as doing business with Mexican drug lords, terrorist organizations like Hezbollah or rogue nations like North Korea and Iran.
One of those companies supplied fuel for the aircraft that the Syrian government used to bomb and kill thousands of its own citizens, U.S. authorities have charged.
“These findings show how deeply ingrained harmful practices and criminality are in the offshore world,” said Gabriel Zucman, an economist at the University of California, Berkeley and author of “The Hidden Wealth of Nations: The Scourge of Tax Havens.” Zucman, who was briefed on the media partners’ investigation, said the release of the leaked documents should prompt governments to seek “concrete sanctions” against jurisdictions and institutions that peddle offshore secrecy.
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Chinese President Xi Jinping and British Prime Minister David Cameron. Photo: UK Government / Georgina Coupe
World leaders who have embraced anti-corruption platforms feature in the leaked documents. The files reveal offshore companies linked to the family of China’s top leader, Xi Jinping, who has vowed to fight “armies of corruption,” as well as Ukrainian President Petro Poroshenko, who has positioned himself as a reformer in a country shaken by corruption scandals. The files also contain new details of offshore dealings by the late father of British Prime Minister David Cameron, a leader in the push for tax-haven reform.
The leaked data covers nearly 40 years, from 1977 through the end of 2015. It allows a never-before-seen view inside the offshore world — providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues.
Most of the services the offshore industry provides are legal if used by the law abiding. But the documents show that banks, law firms and other offshore players have often failed to follow legal requirements that they make sure their clients are not involved in criminal enterprises, tax dodging or political corruption. In some instances, the files show, offshore middlemen have protected themselves and their clients by concealing suspect transactions or manipulating official records.
The documents make it clear that major banks are big drivers behind the creation of hard-to-trace companies in the British Virgin Islands, Panama and other offshore havens. The files list nearly 15,600 paper companies that banks set up for clients who want keep their finances under wraps, including thousands created by international giants UBS and HSBC.
The records reveal a pattern of covert maneuvers by banks, companies and people tied to Russian leader Putin. The records show offshore companies linked to this network moving money in transactions as large as $200 million at a time. Putin associates disguised payments, backdated documents and gained hidden influence within the country’s media and automotive industries, the leaked files show.
A Kremlin spokesman did not answer questions for this story, but instead went public March 28 with charges that ICIJ and its media partners were preparing a misleading “information attack” on Putin and people close to him.
The leaked records — which were reviewed by a team of more than 370 journalists from 76 countries — come from a little-known but powerful law firm based in Panama, Mossack Fonseca, that has branches in Hong Kong, Miami, Zurich and more than 35 other places around the globe.
The firm is one of the world’s top creators of shell companies, corporate structures that can be used to hide ownership of assets. The law firm’s leaked internal files contain information on 214,488 offshore entities connected to people in more than 200 countries and territories. ICIJ will release the full list of companies and people linked to them in early May.
The data includes emails, financial spreadsheets, passports and corporate records revealing the secret owners of bank accounts and companies in 21 offshore jurisdictions, from Nevada to Singapore to the British Virgin Islands.
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Files show a number of luxury yachts bought and sold through offshore companies. Photo: Twiga269 / Flickr
Mossack Fonseca’s fingers are in Africa’s diamond trade, the international art market and other businesses that thrive on secrecy. The firm has serviced enough Middle East royalty to fill a palace. It’s helped two kings, Mohammed VI of Morocco and King Salman of Saudi Arabia, take to the sea on luxury yachts.
In Iceland, the leaked files show how Prime Minister Sigmundur David Gunnlaugsson and his wife secretly owned an offshore firm that held millions of dollars in Icelandic bank bonds during that country’s financial crisis.
The files include a convicted money launderer who claimed he’d arranged a $50,000 illegal campaign contribution used to pay the Watergate burglars, 29 billionaires featured in Forbes Magazine’s list of the world’s 500 richest people and movie star Jackie Chan, who has at least six companies managed through the law firm.
As with many of Mossack Fonseca’s clients, there is no evidence that Chan used his companies for improper purposes. Having an offshore company isn’t illegal. For some international business transactions, it’s a logical choice.
The Mossack Fonseca documents indicate, however, that the firm’s customers have included Ponzi schemers, drug kingpins, tax evaders and at least one jailed sex offender. A U.S. businessman convicted of traveling to Russia to have sex with underage orphans signed papers for an offshore company while he was serving his prison sentence in New Jersey, the records show.
The files contain new details about major scandals ranging from England’s most infamous gold heist to the bribery allegations convulsing FIFA, the body that rules international soccer.
The leaked documents reveal that the law firm of Juan Pedro Damiani, a member of FIFA’s ethics committee, had business relationships with three men who have been indicted in the FIFA scandal — former FIFA vice president Eugenio Figueredo and Hugo and Mariano Jinkis, the father-son team accused of paying bribes to win broadcast rights to Latin American soccer events. The records show that Damiani’s law firm in Uruguay represented an offshore company linked to the Jinkises and seven companies linked to Figueredo.
In response to the reporting by ICIJ and its media partners, FIFA’s ethics panel has launched a preliminary investigation into Damiani’s relationship to Figueredo. A spokesman for the committee said Damiani first informed the panel about his business ties to Figueredo on March 18. That was one day after the reporting team sent questions to Damiani about his law firm’s work for companies tied to the former FIFA vice president.
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Argentine soccer player Lionel Messi. Photo: Shutterstock / CP DC Press
The world’s best soccer player, Lionel Messi, is also found in the documents. The records show Messi and his father were owners of a Panama company: Mega Star Enterprises Inc. This adds a new name to the list of shell companies known to be linked to Messi. His offshore dealings are currently the target of a tax evasion case in Spain.
Whether they’re famous or unknown, Mossack Fonseca works aggressively to protect its clients’ secrets. In Nevada, the records show, the law firm tried to shield itself and its clients from the fallout from a legal action in U.S. District Court by removing paper records from its Las Vegas branch and having its tech gurus wipe electronic records from phones and computers.
The leaked files show the firm regularly offered to backdate documents to help its clients gain advantage in their financial affairs. It was so common that in 2007 an email exchange shows firm employees talking about establishing a price structure — clients would pay $8.75 for each month farther back in time that a corporate document would be backdated.
In a written response to questions from ICIJ and its media partners, the firm said it “does not foster or promote illegal acts. Your allegations that we provide shareholders with structures supposedly designed to hide the identity of the real owners are completely unsupported and false.”
The firm added that the backdating of documents “is a well-founded and accepted practice” that is “common in our industry and its aim is not to cover up or hide unlawful acts.”
The firm said it couldn’t answer questions about specific customers because of its obligation to maintain client confidentiality.
The law firm’s co-founder, Ramón Fonseca, said in a recent interview on Panamanian television that the firm has no responsibility for what clients do with the offshore companies that the firm sells. He compared the firm to a “car factory” whose liability ends once the car is produced. Blaming Mossack Fonseca for what people do with their companies would be like blaming a carmaker “if the car was used in a robbery,” he said.
Under scrutiny
Until recently, Mossack Fonseca has largely operated in the shadows. But it has come under growing scrutiny as governments have obtained partial leaks of the firm’s files and authorities in Germany and Brazil began probing its practices.
In February 2015, Süddeutsche Zeitung reported that German law-enforcement agencies had launched a series of raids targeting one of the country’s biggest banks, Commerzbank, in a tax-fraud investigation that authorities said could lead to criminal charges against Mossack Fonseca employees.
In Brazil, the law firm has become a target in a bribery and money laundering investigation dubbed “Operation Car Wash” (“Lava Jato,” in Portuguese), which has led to criminal charges against leading politicians and an investigation of popular former president Luiz Inacio Lula da Silva. The scandal threatens to unseat current President Dilma Rousseff.
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Employees of Mossack Fonseca were among those arrested by Brazilian police as part of Operation Car Wash. Image: RedeTV
In January, Brazilian prosecutors labeled Mossack Fonseca as a “big money launderer” and announced they had filed criminal charges against five employees of the firm’s Brazilian office for their role in the scandal.
Mossack Fonseca denies any wrongdoing in Brazil.
The disclosures found inside the law firm’s leaked files dramatically expand on previous leaks of offshore records that ICIJ and its reporting partners have revealed in the past four years.
In the largest media collaboration ever undertaken, journalists working in more than 25 languages dug into Mossack Fonseca’s inner workings and traced the secret dealings of the law firm’s customers around the world. They shared information and hunted down leads generated by the leaked files using corporate filings, property records, financial disclosures, court documents and interviews with money laundering experts and law-enforcement officials.
Reporters at Süddeutsche Zeitung obtained millions of records from a confidential source and shared them with ICIJ and other media partners. The news outlets involved in the collaboration did not pay for the documents.
Before Süddeutsche Zeitung obtained the leak, German tax authorities bought a smaller set of Mossack Fonseca documents from a whistleblower, a move that triggered the raids in Germany in early 2015. This smaller set of files has since been offered to tax authorities in the United Kingdom, the United States and other countries, according to sources with knowledge of the matter.
The larger set of files obtained by the news organizations offers more than a snapshot of one law firm’s business methods or a catalog of its more unsavory customers. It allows a far-reaching view into an industry that has worked to keep its practices hidden — and offers clues as to why efforts to reform the system have faltered.
The story of Mossack Fonseca is, in many ways, the story of the offshore system itself.
Crime of the century
Before dawn on Nov. 26, 1983, six robbers slipped into the Brink’s-Mat warehouse at London’s Heathrow Airport. The thugs tied up the security guards, doused them in gasoline, lit a match and threatened to set them afire unless they opened the warehouse’s vault. Inside, the thieves found nearly 7,000 gold bars, diamonds and cash.
“Thanks ever so much for your help. Have a nice Christmas,” one of the crooks said as they departed.
British media dubbed the heist the “Crime of the Century.” Much of the loot — including the cash reaped by melting the gold and selling it — was never recovered. Where the missing money went is a mystery that continues to fascinate students of England’s underworld.
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Mossack Fonseca co-founder Jürgen Mossack.
Now documents within Mossack Fonseca’s files reveal that the law firm and its co-founder, Jürgen Mossack, may have helped the conspirators keep the spoils out of the hands of authorities by protecting a company tied to Gordon Parry, a London wheeler-dealer who laundered money for the Brink’s-Mat plotters.
Sixteen months after the robbery, the records show, Mossack Fonseca set up a Panama shell company called Feberion Inc. Jürgen Mossack was one the company’s three “nominee” directors, a term used in the business for stand-ins who control a company on paper but exercise no real authority over its activities.
An internal memo written by Mossack shows he was aware in 1986 that the company was “apparently involved in the management of money from the famous theft from Brink’s-Mat in London. The company itself has not been used illegally, but it could be that the company invested money through bank accounts and properties that was illegitimately sourced.”
Mossack Fonseca records from 1987 make it clear that Parry was behind Feberion. Rather than help authorities gain access to Feberion’s assets, the law firm took steps that prevented U.K. police from gaining control of the company, the records show.
After police obtained the two certificates that controlled the company’s ownership, Mossack Fonseca arranged for Feberion to issue 98 new shares, a move that appears to have effectively wrested control away from investigators, the leaked records show.
It was not until 1995 — three years after Parry was sent to prison for his role in the gold caper — that Mossack Fonseca ended its business relationship with Feberion.
A spokesman for the law firm said any allegations the firm helped shield the proceeds of the Brink’s-Mat robbery “are entirely false.” The spokesman said Jürgen Mossack “never had any dealings” with Parry and was never contacted by police about the case.
Mossack Fonseca’s defense of the dodgy company illustrates how far many offshore operatives will go to serve their customers’ interests.
The offshore system relies on a sprawling global industry of bankers, lawyers, accountants and these go-betweens who work together to protect their clients’ secrets. These secrecy experts use anonymous companies, trusts and other paper entities to create complex structures that can be used to disguise the origins of dirty money.
“They are the gasoline that runs the engine,” says Robert Mazur, a former U.S. drug agent and author of The Infiltrator: My Secret Life Inside the Dirty Banks Behind Pablo Escobar’s Medellín Cartel. “They’re an extraordinarily important piece of the formula of success for criminal organizations.”
Mossack Fonseca told ICIJ that it follows “both the letter and spirit of the law. Because we do, we have not once in nearly 40 years of operation been charged with criminal wrongdoing.”
The men who founded the firm decades ago — and continue today as its main partners — are well-known figures in Panamanian society and politics.
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Mossack Fonseca co-founder Ramón Fonseca.
Jürgen Mossack is a German immigrant whose father sought a new life in Panama for his family after serving in Hitler’s Waffen-SS during World War II. Ramón Fonseca is an award-winning novelist who has worked in recent years as an adviser to Panama’s president. He took a leave of absence as presidential adviser in March after his firm was implicated in the Brazil scandal and ICIJ and its partners began to ask questions about the law firm’s practices.
From its base in Panama, one of the world’s top financial secrecy zones, Mossack Fonseca seeds anonymous companies in Panama, the British Virgin Islands and other financial havens.
The law firm has worked closely with big banks and big law firms in places like The Netherlands, Mexico, the United States and Switzerland, helping clients move money or slash their tax bills, the secret records show.
An ICIJ analysis of the leaked files found that more than 500 banks, their subsidiaries and branches have worked with Mossack Fonseca since the 1970s to help clients manage offshore companies. UBS set up more than 1,100 offshore companies through Mossack Fonseca. HSBC and its affiliates created more than 2,300.
In all, the files indicate Mossack Fonseca worked with more than 14,000 banks, law firms, company incorporators and other middlemen to set up companies, foundations and trusts for customers, the records show.
Mossack Fonseca says these middlemen are its true clients, not the eventual customers who use offshore companies. The firm says these middlemen provide additional layers of oversight for reviewing new customers. As for its own procedures, Mossack Fonseca says they often exceed “the existing rules and standards to which we and others are bound.”
In its efforts to protect Feberion Inc., the shell company linked to the Brink’s-Mat gold heist, Mossack Fonseca used the services of a Panama-based firm, Chartered Management Company, run by Gilbert R.J. Straub, an American expatriate who played a cameo role in the Watergate scandal.
In 1987, as U.K. police were investigating the shell company, Jürgen Mossack and Feberion’s other paper directors resigned, with the understanding they’d be replaced by new directors appointed by Straub’s Chartered Management, the secret files show.
Straub was eventually caught in a U.S. Drug Enforcement Administration sting that was unrelated to the Brink’s-Mat case, according to Mazur, the former undercover agent. During one of his deep-cover stints, Mazur built the case that led Straub to plead guilty to money laundering in 1995. Believing Mazur was a well-connected money launderer, Straub tried to establish his own criminal bona fides, Mazur says, by describing how he’d illegally channeled cash to President Nixon’s 1972 re-election campaign.
Secrets and victims
Nick Kgopa’s father died when Nick was 14. His father’s workmates at a gold mine in northern South Africa said Nick’s dad had been killed by chemical exposure.
Nick and his mother and his younger brother, who is deaf, survived thanks to monthly checks from a fund for widows and orphans of mineworkers.
One day the payments stopped.
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Gold miners in South Africa. Photo: AP Photo / Themba Hadebe
His family was one of many that lost out because of a $60 million investment fraud pulled off by South African businessmen. Prosecutors alleged that a group of individuals connected to an asset management company, Fidentia, had schemed to loot millions from investment funds — including the mineworkers’ death benefits pool that was supporting some 46,000 widows and orphans.
Mossack Fonseca’s leaked documents show that at least two of the men involved in the fraud used the Panama-based law firm to create offshore companies — and that Mossack Fonseca was willing to help one of the fraudsters protect his money even after authorities publicly linked him to the scandal.
Ponzi schemers and other fraudsters who bilk large numbers of victims often use offshore structures to pull of their schemes or hide the proceeds. The Fidentia case isn’t the only big-ticket fraud that appears in the files of Mossack Fonseca’s clients.
In Indonesia, for example, small investors claim a company incorporated by Mossack Fonseca in the British Virgin Islands was used to scam 3,500 people out of at least $150 million.
“We really need that money for our son’s education fee this April,” one Indonesian investor emailed Mossack Fonseca in April 2007 after payouts had stopped.
“You can give us any suggestion something we can do,” the investor asked in broken English after seeing Mossack Fonseca’s name on the investment fund’s advertising leaflet.
In the Fidentia case, Mossack Fonseca’s records show that one of the men later jailed in South Africa for his role in the fraud, Graham Maddock, paid Mossack Fonseca $59,000 in 2005 and 2006 to create two sets of offshore companies, including one called Fidentia North America. The law firm’s records say it gave him “the VIP service.”
Mossack Fonseca also created offshore structures for Steven Goodwin, a man that prosecutors later claimed had played an “instrumental role” within the Fidentia swindle. As the scandal broke in 2007, Goodwin flew to Australia, then to the U.S., where a Mossack Fonseca lawyer met with him at a luxury hotel in Manhattan to discuss his offshore holdings, the firm’s internal records show.
The firm official later wrote that he and Goodwin “spoke deeply” about the Fidentia scandal and that he had “convinced Goodwin to better protect” his offshore company’s assets by passing them to a third party.
In his memo, the firm official told colleagues that Goodwin wasn’t involved in the scandal “in any way whatsoever” — he was just “a victim of the circumstances.”
In April 2008, the FBI arrested Goodwin in Los Angeles and sent him back to South Africa, where he pleaded guilty to fraud and money laundering. He was sentenced to 10 years in prison.
A month after Goodwin’s sentencing, an employee at Mossack Fonseca suggested a plan for frustrating South African prosecutors who were expected to start digging into assets linked to Goodwin’s offshore company, Hamlyn Property LLP, which had been set up to buy real estate in South Africa.
The employee proposed having an accountant “prepare” audits for 2006 and 2007 “to try to prevent the prosecutor from taking actions against the entities behind Hamlyn.” He set off “prepare” in quote marks in his email.
It’s unclear whether the proposal was adopted.
Mossack Fonseca did not answer questions from ICIJ about its relationship with Goodwin. A representative for Goodwin told ICIJ that Goodwin “had nothing whatsoever” to do Fidentia’s collapse “or anything directly or indirectly to do with the 46,000 widows and orphans.”
Politically exposed
On Feb. 10, 2011, an anonymous company in the British Virgin Islands named Sandalwood Continental Ltd. loaned $200 million to an equally shadowy firm based in Cyprus called Horwich Trading Ltd.
The following day, Sandalwood assigned the rights to collect payments on the loan — including interest — to Ove Financial Corp., a mysterious company in the British Virgin Islands.
For those rights, Ove paid $1.
But the money trail didn’t end there.
The same day, Ove reassigned its rights to collect on the loan to a Panama company called International Media Overseas.
It too paid $1.
In the space of 24 hours the loan had, on paper, traversed three countries, two banks and four companies, making the money all but untraceable in the process.
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Close allies of Russian President Vladimir Putin make extensive use of offshore holdings to shuffle large sums of money. Photo: AP Photo / Krill Kudryavtsev
There were plenty of reasons why the men behind the transaction might want it disguised, not least of all because the money trail came uncomfortably close to Russian leader Vladimir Putin.
St. Petersburg-based Bank Rossiya, an institution whose majority owner and chairman has been called one of Putin’s “cashiers,” established Sandalwood Continental and directed the money flow.
International Media Overseas, where rights to the interest payments from the $200 million appear to have landed, was controlled, on paper, by one of Putin’s oldest friends, Sergey Roldugin, a classical cellist who is godfather to Putin’s eldest daughter.
The $200 million loan was one of dozens of transactions totaling at least $2 billion found in the Mossack Fonseca files involving people or companies linked to Putin. They formed part of a Bank Rossiya enterprise that gained indirect influence over a major shareholder in Russia’s biggest truck maker and amassed secret stakes in a key Russian media property.
Suspicious payments made by Putin’s cronies may have in some cases been designed as payoffs, possibly in exchange for Russian government aid or contracts. The secret documents suggest that much of the loan money originally came from a bank in Cyprus that at the time was majority owned by the Russian state-controlled VTB Bank.
In a media conference call last week, Putin spokesman Dmitry Peskov said the government wouldn’t reply to “honey-worded queries” from ICIJ or its reporting partners, because they contain questions that “have been asked hundreds of times and answered hundreds of times.”
Peskov added that Russia has “available the full arsenal of legal means in the national and international arena to protect the honor and dignity of our president.”
Under national laws and international agreements, firms like Mossack Fonseca that help create companies and bank accounts are supposed to be on the lookout for clients who may be involved in money laundering, tax evasion or other wrongdoing. They are required to pay special attention to “politically exposed persons” — government officials or their family members or associates. If someone is a “PEP,” the middlemen creating their companies are expected to review their activities carefully to make sure they are not engaging in corruption.
Mossack Fonseca told ICIJ that it has “duly established policies and procedures to identify and handle those cases where individuals” qualify as PEPs.
Often, Mossack Fonseca appeared not to realize who its customers were. A 2015 internal audit found that the law firm knew the identities of the real owners of just 204 of 14,086 companies it had incorporated in Seychelles, a tax haven in the Indian Ocean.
British Virgin Islands authorities fined Mossack Fonseca $37,500 for violating anti-money-laundering rules because the firm incorporated a company for the son of former Egyptian President Hosni Mubarak but failed to identify the connection, even after the father and son were charged with corruption in Egypt. An internal review by the law firm concluded, “our risk assessment formula is seriously flawed.”
In all, an ICIJ analysis of the Mossack Fonseca files identified 61 family members and associates of prime ministers, presidents or kings.
The records show, for example, that the family of Azerbaijan President Ilham Aliyev used foundations and companies in Panama to hold secret stakes in gold mines and London real estate. The children of Pakistani Prime Minister Nawaz Sharif also owned London real estate through companies created by Mossack Fonseca, the law firm’s records show.
Family members of at least eight current or former members of China’s Politburo Standing Committee, the country’s main ruling body, have offshore companies arranged though Mossack Fonseca. They include President Xi’s brother-in-law, who set up two British Virgin Islands companies in 2009.
Representatives for the Azeri, Pakistani and Chinese leaders did not respond to requests for comment.
The list of world leaders who used Mossack Fonseca to set up offshore entities includes the current president of Argentina, Mauricio Macri, who was director and vice president of a Bahamas company managed by Mossack Fonseca when he was a businessman and the mayor of Argentina’s capital, Buenos Aires. A spokesman for Macri said the president never personally owned shares in the firm, which was part of his family’s business.
During the bloodiest days of Russia’s 2014 invasion of the Ukraine’s Donbas region, the documents show, representatives of Ukrainian leader Petro Poroshenko scrambled to find a copy of a home utility bill for him to complete the paperwork to create a holding company in the British Virgin Islands.
A spokesperson for Poroshenko said the creation of the company had nothing to do with “any political and military events in Ukraine.” Poroshenko’s financial advisers said the president didn’t include the BVI firm in his 2014 financial disclosures because neither the holding company nor two related companies in Cyprus and the Netherlands have any assets. They said that the companies were part of a corporate restructuring to help sell Poroshenko’s confectionery business.
When Sigmundur David Gunnlaugsson became Iceland’s prime minister in 2013 he concealed a secret that could have damaged his political career. He and his wife shared ownership in an offshore company in the British Virgin Islands when he entered parliament in 2009. He sold his stake in the company months later to his wife for $1.
The company held bonds originally worth millions of dollars in three giant Icelandic banks that failed during the 2008 global financial crash, making it a creditor in their bankruptcies. Gunnlaugsson’s government negotiated a deal with creditors last year without disclosing his family’s financial stake in the outcome.
Gunnlaugsson has denied in recent days that his family’s financial interests influenced his stances. The leaked records do not make it clear whether Gunnlaugsson’s political positions benefited or hurt the value of the bonds held through the offshore company.
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Iceland Prime Minister Sigmundur David Gunnlaugsson and his wife Anna Sigurlaug Pálsdóttir.
In an interview with an ICIJ media partners, Reykjavik Media and SVT, Gunnlaugsson denied hiding assets. When he was confronted with the name of the offshore company linked to him — Wintris Inc. — the prime minister said “I’m starting to feel a bit strange about these questions because it’s like you are accusing me of something.”
Soon after, he ended the interview.
Four days later, his wife took the matter public, posting a note on Facebook asserting that the company was hers, not his, and that she had paid all taxes on it.
Since then, members of Iceland’s parliament have questioned why Gunnlaugsson never disclosed the offshore company, with one lawmaker calling for the prime minister and his government to resign.
The prime minister has fought back, putting out an eight-page statement arguing he wasn’t required to publicly report his connection to Wintris because it was really owned by his wife and because it was “merely a holding company, not a company engaged in commercial activities.”
Offshore cover-ups
In 2005, a tour boat called the Ethan Allen sank in New York’s Lake George, drowning 20 elderly tourists. After the survivors and families of the dead sued, they learned the tour company had no insurance because fraudsters had sold it a fake policy.
Malchus Irvin Boncamper, an accountant on the Caribbean island of St. Kitts, pleaded guilty in a U.S. court in 2011 to helping the con artists launder proceeds of their frauds.
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The Ethan Allen tour boat brought to the surface after sinking in Lake George, New York. Photo: AP Photo / Mary Altaffer
This created a problem for Mossack Fonseca, because Boncamper had served as the front man — a “nominee” director — for 30 companies created by the law firm.
Once it learned of Boncamper’s criminal conviction, Mossack Fonseca took quick action. It told its offices to replace Boncamper as director of the companies — and to backdate the records in a way that made it appear the changes had taken place, in some cases, a decade earlier.
The Boncamper case is one of the examples in the leaked files showing the law firm using questionable tactics to hide its own methods or its customers’ activities from legal authorities.
In the “Operation Car Wash” case in Brazil, prosecutors allege that Mossack Fonseca employees destroyed and hid documents to mask the law firm’s involvement in money laundering. A police document says that, in one instance, an employee of the firm’s Brazil branch sent an email instructing co-workers to hide records involving a client who may have been the target of a police investigation: “Do not leave anything. I will save them in my car or at my house.”
In Nevada, the leaked files show, Mossack Fonseca employees worked in late 2014 to obscure the links between the law firm’s Las Vegas branch and its headquarters in Panama in anticipation of a U.S. court order requiring it to turn over information on 123 companies incorporated by the law firm. Argentine prosecutors had linked those Nevada-based companies to a corruption scandal involving an associate of former presidents Néstor Kirchner and Cristina Fernández de Kirchner.
In an effort to free itself from the American court’s jurisdiction, Mossack Fonseca claimed that its Las Vegas office, MF Nevada, wasn’t in fact a branch office at all. It said it had no control over the office.
The firm’s internal records show the opposite. They indicate that the firm controlled MF Nevada’s bank account and the firm’s co-founders and another Mossack Fonseca official owned 100 percent of MF Nevada.
To erase evidence of the connection, the law firm arranged to remove paper documents from the branch and worked to delete computer traces of the link between the Nevada and the Panama operations, internal emails show. One big worry, an internal email said, was that the branch’s manager might be too “nervous” to carry out the effort, making it easy for investigators to discover “that we are hiding something.”
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A sign for MF Corporate Services outside a buisness complex in Las Vegas, Nevada. Photo: McClatchy / Ronda Churchill
Mossack Fonseca declined to answer questions about the Brazil and Nevada affairs, but denied generally that it had obstructed investigations or covered up improper activities.
“It is not our policy to hide or destroy documentation that may be of use in any ongoing investigation or proceeding,” the firm said.
Reforming the secret world
In 2013, U.K. leader David Cameron urged his country’s overseas territories — including the British Virgin Islands — to work with him to “get our own houses in order” and join the fight against tax evasion and offshore secrecy.
He could have looked no further than his late father to see how challenging that would be.
Ian Cameron, a stockbroker and multimillionaire, was a Mossack Fonseca client who used the law firm to shield his investment fund, Blairmore Holdings, Inc., from U.K. taxes.
The fund’s name came from Blairmore House, his family’s ancestral country estate. Mossack Fonseca registered the investment fund in Panama even though many of its key investors were British. Ian Cameron controlled the fund from its birth in 1982 until his death in 2010.
A prospectus for investors said the fund “should be managed and conducted so that it does not become resident in the United Kingdom for United Kingdom taxation purposes.”
The fund did this by using untraceable certificates of ownership known as “bearer shares” and by employing “nominee” company officers based in the Bahamas, the law firm’s leaked records show.
Ian Cameron’s tax-haven history is an example of how deeply offshore secrecy is woven into the lives of political and financial elites around the world. It’s also an important economic engine for many countries. The weight of that self-interest has made reform difficult.
In the U.S., for example, states like Delaware and Nevada, which have allowed company owners to remain anonymous, continue to fight against efforts to require greater corporate transparency.
Mossack Fonseca’s home country, Panama, has refused to embrace a plan for worldwide exchange of information about bank accounts — out of concern that its offshore industry could be left at a competitive disadvantage. Panama officials say they will exchange information, but on a more modest scale.
The challenge that reformers and law enforcers face is how to find and stop criminal behavior when it’s buried beneath layers of secrecy. The most effective tool for breaking through this secrecy has been leaks of offshore documents that have dragged hidden dealings into the open.
Document leaks uncovered by ICIJ and its media partners have prompted legislation and official investigations in dozens of countries — and fanned fears among offshore customers who worry their secrets will be revealed.
In April 2013, after ICIJ released its “Offshore Leaks” stories based on confidential documents from the British Virgin Islands and Singapore, some Mossack Fonseca customers emailed the firm looking for reassurance that their offshore holdings were safe from scrutiny.
Mossack Fonseca told customers not to worry. It said its commitment to its clients’ privacy “has always been paramount, and in this regard your confidential information is stored in our state-of-the-art data center, and any communication within our global network is handled through an encryption algorithm that complies with the highest world-class standards.”
This story was reported and written by Bastian Obermayer , Gerard Ryle, Marina Walker Guevara, Michael Hudson, Jake Bernstein, Will Fitzgibbon, Mar Cabra, Martha M. Hamilton, Frederik Obermaier, Ryan Chittum, Emilia Diaz-Struck, Rigoberto Carvajal, Cécile Schilis-Gallego, Marcos Garcia Rey, Delphine Reuter, Matthew Caruana Galizia, Hamish Boland-Rudder, Miguel Fiandor and Mago Torres
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