The Panama Papers | The World Weekly
In what looks to be the biggest leak of all time, 11.5 million confidential documents created by the Panamanian law firm Mossack Fonseca have blown the lid off one of the world’s most secretive and uncooperative tax havens, highlighting how some of the world’s richest individuals have hidden their wealth from public scrutiny in offshore accounts.
Over a year ago, an anonymous source sent German newspaper Süddeutsche Zeitung (SZ) encrypted internal documents from Mossack Fonseca, the world’s fourth-largest offshore company provider, which sells shell companies allowing their owners to conceal their business dealings. Over the course of several months, as SZ acquired more and more documents, the leak ballooned to an unprecedented 2.6 terabytes of data, in sheer size dwarfing other leaks that have rocked the world such as WikiLeaks’ Cablegate and the Snowden Files. The political ramifications may prove to be every bit as huge.
SZ opted to analyse the vast trove of data in cooperation with the International Consortium of Investigative Journalists (ICIJ). The investigation over the course of the last year, which involved around 400 journalists from over 100 media organisations in more than 80 countries is, SZ asserts, the largest international cooperation of its kind and has shone a light into one of Earth’s most financially murky nations. According to the ICIJ, the enormous cache “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”.
John Christensen, director of the Tax Justice Network, which has been leading the global fight against tax havens for well over a decade and has been involved in the recent revelations, is not in the least bit surprised by the Panama Papers.
“For decades, offshore law firms have been key to the secretive offshore economy,” Mr. Christensen tells The World Weekly. “They create the offshore trusts and offshore foundations which their clients use to hide their identity. They provide the nominee directors and shareholders for the offshore companies used to own their client's assets. Law firms use the privilege of client confidentiality arrangements to block investigation and protect their clients from prosecution.”
Mr. Christensen points out that Mossack Fonseca has been one of the giants of the offshore world for decades. “I used them extensively when I was working offshore in the 1980s, and they had a reputation for extreme secrecy and discretion on their clients' behalf, which needless to say was attractive to many clients engaged in tax evasion, fraud, hiding conflicts of interest, and other white collar crimes,” he argues.
Nor, he says, is it a coincidence that Mossack Fonseca is based in Panama, since this is one of the most secretive and least cooperative jurisdictions on the planet, an assessment shared by Ralph Cunningham, managing editor of International Tax Review. He points out that Panama has “resisted the changes on automatic exchange of information that more than 100 countries have signed up to”. Mr. Cunningham adds that, despite the efforts of international bodies such as the OECD and the G20 in recent years, international financial centres are still being used for criminal activities.
Although the complex web of tax havens, offshore companies and their service providers will survive this leak, things look bleak for Mossack Fonseca itself. The company’s founding partner Ramon Fonseca attests that no laws were broken and all operations were legal. Claiming the leak was the result of a hack rather than an inside job, he said “the only crime that has been proven is the hack”.
Time will tell whether Mossack Fonseca will find itself hauled before the courts. Either way, its credibility and reliability as a provider of discrete offshore services is likely shot and it seems unlikely its business will be able to continue as before. Meanwhile, the offshore firms, which Mr. Christensen has “no doubt” are engaged in similar activities to Mossack Fonseca, may also find their activities coming under greater scrutiny.
For the moment, though, the greatest attention is being focused on the individuals and companies named in the leak, including 12 current and former world leaders. One, Sigmundur Davíd Gunnlaugsson of Iceland, became a former leader precisely because of the leak. But in a scandal that continues to escalate as more information comes to light, Mr. Gunnlaugsson is unlikely to be the last casualty of the Panama Papers. The World Weekly looks at some of the biggest names implicated.
The Panama Papers show how numerous prominent individuals have hidden their money from public view, but this does not mean the people listed have done anything illegal. Even in instances where individuals have used offshore accounts to reduce their tax bills, it is important to state that tax avoidance is not a crime and there are numerous ways for companies to reduce their tax bills within the confines of the law. The opaque nature of the offshore industry means it is not even possible to assert that the individuals listed have used shell companies to reduce their tax bills. In most cases, the question is not one of legality, but rather morality, and it is these moral questions that world leaders are most likely to have to answer in light of these revelations. The World Weekly, as an aggregator of the global press, has not been able to independently review these documents.
Although the Panama Papers spell trouble for numerous world leaders, there are few who could do with the attention less right now than South Africa’s President Jacob Zuma. Meanwhile, the leaked documents have called into question the role of tax havens in bypassing sanctions against countries such as Zimbabwe.
Jacob Zuma’s headaches grow
In a week where he was already facing the possibility of impeachment proceedings, the Panama Papers came at a bad time for South Africa’s controversial president, with revelations about his family. Jacob Zuma’s nephew, Clive Khulubuse Zuma, a mining magnate and an African National Congress (ANC) donor, has been no stranger to controversy in the past. Now the Panama Papers reveal new facets to the story of a 2010 multibillion-dollar oil contract signed in the Democratic Republic of Congo (DRC) through Mossack Fonseca.
At the time, Khulubuse Zuma was representing Caprikat Limited and Foxwhelp, a pair of companies registered offshore, in talks with President Joseph Kabila of the DRC. The Kabila government would allocate two major oil fields worth ZAR100 billion ($6.6 billion) to the company.
Allegedly, President Zuma had met with Mr. Kabila in September 2009 to discuss the deal. According to the Times newspaper in the UK, President Kabila claimed that the oil fields would be of great value to the Zuma family, as well as the ruling ANC and South Africa. The Kabila government wanted to secure South African support for a major hydroelectric power project.
Reportedly, President Zuma turned down the offer to benefit personally from such a deal, but passed it onto his nephew. Several months later in 2010, Khulubuse Zuma set up two companies in the British Virgin Islands (BVI) and signed the contract. These same fields were owned by Tullow Oil, but the government appropriated the fields to reallocate them to Caprikat and Foxwhelp.
The oil deal was closed with a “management fee” of $6 million. Yet campaign group Platform estimates that the DRC government lost over $10 billion in revenue after it dropped Tullow. The new arrangement with Khulubuse Zuma pledged 60% of net revenues for the first 12 million barrels of oil. Reportedly, Mr. Zuma signed the deal for Caprikat, while Jacob Zuma’s aide Michael Hulley signed for Foxwhelp. With investment from Israeli billionaire Dan Gertler, the two companies established Oil of DRCongo to manage the concessions.
In the meantime, the Zuma administration made its own arrangements, signing up to support the development of the new power plant. The Grand Inga Project, a massive hydroelectric power complex based on the Congo river, would cost between $80 billion and $100 billion to build. At the same time, South Africa would maintain its troop presence in the eastern Congo to support the Kabila government and fend off rebel groups. This includes the oil-rich areas around Lake Albert.
Questions were soon raised about the acquisition of the oil fields, so the BVI authorities began to pressure Mossack Fonseca to provide background information on the president’s nephew. Later in 2010, Mossack Fonseca would decide to end its relationship with Caprikat Limited and Foxwhelp. Khulubuse Zuma denied claims of wrongdoing, but the Panama Papers have reopened this story for a South African public already wary of corruption surrounding the president and his associates.
As such, the Panama Papers could not have come at a worse time for the Zuma family. The controversy surrounding security upgrades to the Nkandla homestead continues to dog President Zuma at every turn. Last week, South Africa’s highest court ruled the president violated the constitution; and this week, the ANC had to defeat an attempt to impeach Mr. Zuma over the case. As for the president’s nephew, last year Khulubuse Zuma was found to be liable for the collapse of Aurora, a gold mining company, which cost 5,300 people their jobs.
After the Mossack Fonseca leak, South African journalist Richard Poplak called Khulubuse Zuma “a big fat scumbag”, while the Solidarity trade union has called upon the litigators in the Aurora case to investigate Mr. Zuma’s financial assets. Solidarity wants to unearth any interests concealed by offshore holdings and has called upon the litigators to freeze the offshore accounts.
Robert Mugabe’s financial backers
The leaks have created negative headlines about a number of the world’s more controversial figures, among them Zimbabwe’s President Robert Mugabe. Zimbabwean entrepreneurs John Bredenkamp and Billy Rautenbach have been named in the Panama Papers. Allegedly, both men have longstanding ties to President Mugabe and, consequently, were hit with sanctions and blacklisted by the US and EU.
Notably, Mr. Bredenkamp and Mr. Rautenbach are alleged to have helped funnel mining profits from the DRC to the Mugabe government. During the Second Congo War (1998-2003), Zimbabwe was fighting on the side of the Kabila government against rebels and proxies in the eastern DRC. As a reward, President Kabila offered the Zimbabweans highly lucrative deals and both men were involved in operating mines in the DRC. Allegedly, Mr. Bredenkamp’s arms company, ACS, procured weaponry for the Congolese army during this period. He denies any wrongdoing.
Mossack Fonseca has historical links with both Mr. Rautenbach and Mr. Bredenkamp, who registered numerous companies in the BVI. Once Mr. Rautenbach and Mr. Bredenkamp’s companies were blacklisted by the EU, Mossack Fonseca partners involved with these companies resigned and reported them to the BVI authorities. The relationship between Mossack Fonseca and the two businessmen officially ended in 2009, but it appears the firm was slow to close down some of the companies in question. It took until 2013 for all 16 offshore companies belonging to Mr. Bredenkamp to be deactivated.
Mossack Fonseca was even an agent to ACS when the company received $40 million from UK weapons manufacturer BAE as part of a South African arms deal. In the early 2000s, Mr. Rautenbach served as chairman of Gecamines, a company owned by the DRC government, which operated cobalt mines with Ridgepointe Overseas Developments Ltd - one of Mr. Rautenbach’s companies registered in the BVI and also on Mossack Fonseca’s books. The relationship with Ridgepointe was meant to end when the sanctions were put in place. It took six months.
Each firm was wound down, one after another; Mossack Fonseca claims this process can take longer sometimes, given the varying jurisdictions. The firm added: “Sometimes the authorities require the registered agent not to file any resignation in order to prevent obstructing their investigation”.
Mossack Fonseca claims it does not allow its companies to work with any individuals or countries sanctioned or blacklisted by the EU and the US.
EU sanctions have since been lifted against Mr. Bredenkamp, though he remains blacklisted by the US; American sanctions against Mr. Rautenbach were lifted in 2014.
King Mohammed’s mines
Since the revelations came out, Le Monde has reported that King Mohammed VI of Morocco owns numerous companies registered in the BVI. Officially, these firms are under the control of Mohamed Mounir El-Majidi, the king’s personal secretary since 2000. As part of the job, Mr. Majidi was made head of SIGER, a holding company of stakes belonging to the Moroccan royal family. These interests include mining, agriculture and telecommunications.
They also include SMCD Limited, which purchased the luxurious schooner Aquarius W. The vessel was renamed El Boughaz I and now belongs to King Mohammed. Another BVI company authorised a no-interest loan of $42 million to Immobiliere Orion SA, a firm based in Luxembourg, also managed by Mr. Majidi. These funds were then used to buy and renovate an apartment in Paris. Although it is unclear who lent the money, Le Monde claims that the company behind the loan was under the control of King Mohammed.
The last time Le Monde grappled with Mr. Majidi, the result was a defamation case. The French newspaper published an article in 2012 by Moroccan journalist Ahmed Reda Benchemsi accusing the king’s personal secretary of corruption and embezzling public money. In the end, the French courts ruled in Mr. Majidi’s favour and concluded the article was defamatory. This was received as a great victory for the king’s personal secretary.
Although the US news cycle is yet to be overtaken by the Panama papers, with no US citizens so far named, the fallout has been widely reported in Latin America. Nevertheless, stories of high level corruption are far from novelties in the region, and while the accusations have flown, there has been a marked level of assurance in the response of some of those so far apparently implicated.
Even so the revelations are likely to have a significant political impact, at least in the short term. The reputations of some of the region’s emerging centre-right technocrats, whose fortunes have been on the rise as the ‘pink-tide’ has ebbed, seem particularly likely to be tarnished.
Although investigations in recent years have led to groundbreaking prosecutions of corrupt politicians and business leaders, the levels of political uncertainty left in their wake have made them far from universally popular. In this context the papers might simply appear to many as just another log on an already blazing fire. Whether the papers help the region enter an era of greater political and financial accountability, or a period of elite retrenchment, remains unclear.
Mauricio Macri: Meet the new boss
The most high-profile name in the Americas linked to the scandal so far is that of Mauricio Macri, the centre-right president of Argentina, who took office only in December. Mr. Macri is listed as the director of a Bahamas-based company ‘Fleg Trading’, in operation from 1998 to 2009.
Questions have been raised over why Mr. Macri didn’t include the company in a formal declaration of assets while he was mayor of Buenos Aires. The presidential office has released a statement stating that Mr. Macri was not obliged to declare anything about the company because he had no shares in it. "It was linked to the family business group," the statement said of the company. "Senor Macri happened to be designated the director, without any shares."
Without explaining why the company had been founded, Mr. Macri gave an interview on Monday to local television channels, Channel C and LaVoz.com, dismissing the suggestion the company had any malign intent. "Others use tax havens to hide money from irregular earnings,” he said. “We didn’t even have a banking account.”
However, the allegations may not prove that easy to brush away, with the Buenos Aires Herald swiftly noting that it is “not the first time” Mr. Macri has been accused of breaking the law. Several Argentine papers have used the allegations to revisit a story concerning the order Mr. Macri allegedly gave, when Buenos Aires mayor, to the city’s former police chief Jorge ‘Fino’ Palacios, to wiretap businessmen and politicians. An indictment concerning the case was dropped two weeks after Mr. Macri became president. The Buenos Aires Herald also brought up a 1997 case in which Mr. Macri and his father faced charges of allegedly running contraband, a case that eventually reached the country’s supreme court, where the pair were acquitted.
Cristina Kirchner: Same as the old boss
The pressure on Mr. Macri, however, is likely to be tempered somewhat by revelations that the previous president, Cristina Kirchner, has also been indirectly linked to the law firm through Daniel Munoz, former private secretary to her late husband Nestor Kirchner. Mr. Munoz was the main shareholder of a Cayman Islands company, Gold Black Ltd., set up in 2010. In 2013, he was accused of transferring money for Mr. Kirchner in “bags” from Buenos Aires to the Kirchners’ home state of Santa Cruz, a case later dropped for lack of evidence. Whereas Mr. Munoz has yet to respond to the revelations, Cristina Kirchner has angrily denied any association to the shell company held in the name of her late husband’s private secretary, alleging in a statement that the news was “one more of the long list of the lies and insults meant to confuse and mislead citizens”.
Lionel Messi’s offside money
In some quarters arguably more likely to garner attention than either set of politicians are allegations linking the five-time world footballer of the year, Lionel Messi, to a Panamanian company, Mega Star Enterprises, whose sole shareholder is his father and whose only beneficiaries are the player and his father. With the pair already due to appear in court in Spain on May 31 on charges of evading a €4.1 million ($4.7 million) tax bill, the news is likely to further damage the player’s reputation. A statement released by the Messi family stressed that "Lionel Messi has not carried out any of the actions he is accused of, the accusations of having 'created a new web of tax fraud' and, even, money laundering, are false and libelous."
He’s not the only famous footballer to have been caught up in the scandal: Gabriel Ivan Heinze, the former Manchester United player, who captained Argentina, also appears in the Panama Papers, as does one of Chile’s most successful players of all time: Ivan Zamorano.
Meanwhile, Uruguayan lawyer Juan Pedro Damiani, a key member of FIFA’s powerful ethics committee, currently examining how to clean up the scandal-ridden body, has resigned after it emerged he had acted as a lawyer for individuals and companies recently charged with bribery and corruption, in particular his work for at least seven companies linked to the former FIFA vice-president Eugenio Figueredo, who was arrested for corruption last May by the US justice department.
Armando Hinojosa Cantu’s portfolio
Mexicans, meanwhile, have had their attention drawn to the inclusion of businessman Juan Armando Hinojosa Cantu, the beneficiary of several highly profitable government contracts since President Enrique Pena Nieto entered office.
Mr. Hinojosa became widely known towards the end of 2014, when an investigation by the investigative website Aristegui Noticias revealed one of his companies had built a multimillion-dollar mansion for the president’s family and that another had sold the country’s finance minister, Luis Videgaray, a luxury holiday home on credit, on which interest was charged at far below the market rate.
The president and finance minister were cleared of any conflict of interest issues last year, but the Panama Papers have revealed that Mr. Hinojosa moved at least $100 million through a complex network of companies and trusts to New Zealand in 2015. An email marked ‘urgent’ and dated July 2015 describes Mr. Hinojosa as “one of the most prominent” businessmen in Mexico and states that the $100 million sum is “only a small part” of the client's portfolio.
Mr. Hinojosa has never spoken publicly about the high-profile property scandals his companies have been linked to. He is also yet to comment on the series of major financial transactions carried out with Mossack Fonseca at the time the scandals were dominating Mexican news headlines.
Other Mexicans named in the report include the head of the TV Azteca network, a vice president of the Televisa TV network, and the recently deposed head of the state-owned oil company Pemex. All have denied wrongdoing in short statements.
"This is valuable information but it is not a surprise," Aristoteles Nunez, the head of the country’s tax authority, said during an interview with Radio Formula. "We will have to see if the people cited in the papers have paid all their taxes and if they haven't they will be audited."
Eduardo Cunha: Brazil’s waters grow muddier
In Brazil, media outlets UOL, O Estado de Sao Paulo and Rede TV reported that 57 individuals already linked to the country’s ongoing Petrobras scandal have been linked to Mossack Fonseca.
Most notably, the list includes Eduardo Cunha, the speaker of the lower house of Brazil’s legislature, who has been heading efforts to impeach President Dilma Rousseff. Mr Cunha is already facing his own impeachment over accusations he received $5 million in kickbacks between 2006 and 2012. Mr. Cunha is alleged to have received payments indirectly from Portuguese business mogul Idalecio de Castro Rodrigues de Oliveira, linked to 14 companies registered in the British Virgin islands.
Mossack Fonseca had already been accused of corruption in Brazil for its involvement in the scandal, with Brazilian police accusing the firm specifically of helping clients to create offshore entities to hide stolen funds.
Other Brazilians linked to the leak include a former cabinet minister and a former legislator, but no members of President Dilma Rousseff’s Workers Party have been named.
In contrast, construction firm Odebrecht, whose former head Marcelo Odebrecht was sentenced in March to nearly 20 years in prison for corruption, once again finds itself linked to tax evasion, with its name featuring prominently in several reports.
In Panama itself, the country’s top prosecutor has confirmed it is launching an investigation into Mossack Fonseca.
However, the country is also facing up to reports that link the head of the Panamanian state bank, Caja de Ahorro, and the vice-president of Tocumen International Airport’s authority, Ricardo Francolini, to the law firm.
The International Consortium of Investigative Journalists (ICIJ) alleges that Mr. Francolini is linked to a $500,000 bribe-system that operated as part of a failed irrigation project during former president Ricardo Martinelli’s administration. The country’s reputation for money laundering, already badly damaged by the Lucom affair (in which $50 million, earmarked by a US expatriate millionaire to go to poor and needy children, vanished following his death) is likely to be renewed, and existing trade agreements, such as the controversial free trade agreement the country shares with the US could be reexamined by outside legislators.
Peru’s forthcoming national elections could also be affected by the leak, with financial backers of favourite Keiko Fujimori (whose father, Alberto Fujimori, the former Peruvian president, is now in jail for embezzlement and corruption) tied to Mossack Fonseca, while her rivals Pedro Pablo Kuczynski and Alan Garcia, a former president of the country seeking to return to office, have also been linked.
Elsewhere across Latin America, significant names linked to the law film include Pedro Delgado, the former governor of Ecuador’s Central Bank and cousin of current President Rafael Correa. In Venezuela, several prominent politicians have been named, including former security chief of the Venezuelan Presidential House Adrian Jose Velasquez Figueroa, former head of the Treasury Office Claudia Diaz Guillen, and former commander-in-chief of the Venezuelan Armed Forces Victor Cruz Weffer - all of whom served under the late President Hugo Chavez.
In perhaps the most glaring example of double standards in the region, the head of the Chilean branch of the global corruption watchdog Transparency International, Gonzalo Delaveau, resigned after being linked to five offshore companies. His embarrassment is likely to put pressure on a group that some on the left see as being motivated by an ‘anti-state’ agenda.
And what of the US?
One glaring absentee from the initial batch of leaks so far is the United States, with no individuals yet linked to accounts overseen by Mossack Fonseca. Questioned over the omission, the editor of Suddeutsche Zeitung, Stefan Plochinger, told journalists: "Just wait for what is coming next".
One person who may welcome further revelations is US presidential candidate Bernie Sanders, one of the country’s few politicians to openly oppose the 2011 US-Panama Free Trade Agreement. He spoke out then against the deal, arguing it had been advanced only to allow corporations and wealthy Americans opportunities to avoid US taxes by stashing their cash in offshore tax havens run from the Central American state. With rumours now circulating over the behaviour of some of his political opponents, he could yet be the leaks’ greatest beneficiary.
The Panama Papers caused embarrassment to Chinese President Xi Jinping, revived accusations of corruption against Pakistani Prime Minister Nawaz Sharif, raised questions about Bollywood icon Amitabh Bachchan, and added to Japan's list of recent corporate scandals. But besides these red faces, the impact in Asia is likely to be less than in other regions.
Xi Jinping's 'hunt for tigers and flies' is undermined
The Papers revealed that the families of eight current and former members of China’s Politburo Standing Committee, the most powerful arm of the ruling Communist Party, have used offshore tax havens to conceal their fortunes.
Among them is Deng Jiagui, the brother-in-law of President Xi Jinping, who has conducted a sweeping campaign against corruption in state enterprises and the powerful military since being appointed in 2013. It is often characterised by the state media as his ‘hunt for tigers and flies’.
Mr. Deng set up two British Virgin Islands (BVI) companies in 2009, when Mr. Xi was a member of the Politburo, according to the International Consortium of Investigative Journalists (ICIJ). Previously, Mr. Deng was the target of 2012 investigations by Bloomberg News and the New York Times, which reported he and his wife, the elder sister of Mr. Xi, had accumulated several hundred million dollars in company shares and property assets.
Unsurprisingly, the Chinese state 'great firewall' blocked access to the ICIJ website. Searches for 'Panama Papers' in Chinese brought up a warning that the results "may not accord with relevant laws and rules so can't be shown". Similarly, searches for 'Panama' on Chinese search engines brought up Chinese media stories on the topic, but many of the links were disabled.
However, a discussion did briefly break out on the micro-blogs Sina Weibo and Wechat before the posts were quickly removed by the Internet regulator. "My confidence in socialism has suddenly collapsed," commented one user quoted by AFP.
Beijing and the state media have not commented directly on the revelations, but influential Communist Party tabloid the Global Times said the Western media and governments were using the Papers to target non-Western leaders.
"The Western media has taken control of the interpretation each time there has been such a document dump, and Washington has demonstrated particular influence in it," the paper said.
"Information that is negative to the US can always be minimised, while exposure of non-Western leaders, such as Putin, can get extra spin," it added.
Nawaz Sharif's closet skeletons
The Papers revived longstanding questions about Pakistan Prime Minister Nawaz Sharif's record as a taxpayer and his overseas business interests.
According to documents posted on the ICIJ website, the prime minister's children - Mariam, Hassan and Hussain - were "owners or had the right to authorise transactions for several companies".
Mariam Nawaz, who oversees the strategic communications team at the prime minister's secretariat, is described as the owner of BVI-based firms Nielsen Enterprises Ltd. and Nescoll Ltd. She and brother Hussain Nawaz, who runs the family's businesses from their homes in Jeddah, Saudi Arabia, and London, were signatories to transactions under which Deutsche Bank Geneva lent the two firms $13.8 million, using the family's properties in London as collateral. Their sibling Hassan Nawaz owns BVI-incorporated firm Hangon Property Holdings Ltd, which acquired another Liberian company, Cascon Holdings Establishment Ltd., for about $11.2 million in August 2007.
Those numbers contrast vastly with Prime Minister Sharif's declared income, upon which he paid PKR2.65 million ($25,278) in income tax in 2014. At 11%, Pakistan has one of the lowest tax-to-GDP ratios in the world and the government acknowledges that the undocumented economy is far bigger than the legitimate one. Pakistan has been dependent on IMF bail-outs to stabilise its economy since a Taliban insurgency erupted in 2007.
"Nawaz Sharif does not own any company, but having companies in the name of his children also raises questions," Umar Cheema of The News International, an English language newspaper, told AFP; he was the Pakistan correspondent for the ICIJ investigation.
However, the political furore caused by the revelations - some 900,000 Pakistanis tweeted about it on Monday - soon lost steam because there was no evidence of the prime minister breaking the law.
His son Hussain told Geo, Pakistan's largest private broadcaster, his family had done "nothing wrong".
"Those apartments are ours and those offshore companies are also ours," he said. Hussain said he left Pakistan in 1992 and was not legally required to declare his assets to the Pakistani authorities. "There is nothing wrong with it and I have never concealed them, nor do I need to do that. It is according to British law and laws of other countries that it is a legal way to avoid unnecessary tax via offshore companies."
In a televised address to the nation on Tuesday evening, a visibly irritated Prime Minister Sharif complained "my family has faced a barrage of accusations". And to snuff out the matter, he appointed a judicial probe to examine any evidence of financial wrongdoing that his opponents could present.
Amitabh Bachchan’s Bollywood star struck
The one Asian government to be gladdened by the Papers was that of Indian Prime Minister Narendra Modi, who has been struggling to raise the country's revenue base by cracking down on tax avoidance.
However, even he would probably have been perturbed that the Papers pointed the finger at Amitabh Bachchan, without question the most iconic figure in Bollywood, the Mumbai-based cinematic industry, since the 1980s. His daughter-in-law, former Miss World Aishwarya Rai, was also implicated.
According to documents reproduced in the Indian Express, an English language newspaper and national partner of the ICIJ, Mr. Bachchan was appointed director of four offshore shipping companies - one in the BVI, three in the Bahamas - in November 1993.
However, Mr. Bachchan denied any connection with the company - telling the Indian Express "it is possible that my name has been misused" - or any tax evasion.
"I have paid all my taxes including on monies spent by me overseas. Monies that I have remitted overseas have been in compliance with law... after paying Indian taxes," he said, in a written statement issued on Tuesday. "In any event, the news report in Indian Express does not even suggest any illegality on my part."
Nonetheless, Prime Minister Modi constituted a multi-agency team on Tuesday to investigate the nearly 500 Indian nationals, including celebrities and billionaire tycoons, identified by the Papers as having offshore business interests and accounts.
Most are likely to get away with a small fine, however, the Indian Express reported.
Scarred corporate legacy
The ICIJ news partner in Japan, the Kyodo News agency, reported how the founders of Secom Co., the country's oldest and largest security firm, hid ¥70 billion ($626 million) of its considerable wealth in offshore shell corporations in the BVI and the British Crown Dependency of Guernsey.
"By using the shell firms, the two founders were able to effectively manage a large number of Secom shares that were not listed as directly under their control," Kyodo reported.
The Papers implicated 83-year-old Secom director Makoto Iida, the late former director Juichi Toda, and some of their relatives. The two men founded Secom in 1962.
The news agency quoted an unidentified certified public accountant well-versed in international tax affairs as saying that Mr. Iida and Mr. Toda had likely taken the step to “prevent their relatives from going bankrupt when they inherited the shareholdings and paid the taxes”.
Secom denied that charge, in a written response to Kyodo, saying it disclosed all relevant financial information about the offshore companies. "The tax authorities, as well as the legal experts we had consulted, have not questioned its legality and we trust their views," it said.
When news of the disclosures broke, it was the suspected multibillion-dollar money-laundering ring revolving around Russian President Vladimir Putin that captured headlines. But the Kremlin dismissed the allegations as the work of American agents and the inevitable result of “Putinophobia”, and by Tuesday another, far smaller European country was at the eye of the storm.
Sigmundur David Gunnlaugsson’s Nordic noir
Icelandic Prime Minister Sigmundur David Gunnlaugsson became the first high-profile casualty when he stepped down on April 5. Opposition politicians, members of his own party and tens of thousands of protesters had called on him to resign after he was accused of hiding family-held assets worth millions of dollars in an offshore company called Wintris.
According to the papers, Mr. Gunnlaugsson and his wife, Anna Sigurlaug Pálsdóttir, purchased Wintris in 2007. He sold his stake to his wife for $1 in 2009, just after entering parliament for the first time, but never disclosed an interest in the company. Wintris held bonds issued by the three Icelandic banks whose collapse in 2008 plunged the country into deep recession, leading critics to say he must have harboured a conflict of interest when overseeing sensitive negotiations between these institutions and their creditors.
Mr. Gunnlaugsson denied all wrongdoing and the Guardian, which helped comb through the documents, wrote that it “has seen no evidence to suggest tax avoidance, evasion or any dishonest financial gain on the part of Gunnlaugsson, Pálsdóttir or Wintris”.
Yet for many Icelanders, reports of widespread financial sleaze (the finance and interior ministers were also implicated) evoked painful memories of the economic crash. The anti-establishment Pirate Party held a commanding lead in opinion polls even before this week, and protesters are now demanding a full flushing out of the Augean stables through snap elections.
Vladimir Putin’s orchestrated money-laundering?
In Russia, the allegations centred around cellist Sergei Roldugin, who once described Mr. Putin as being “like a brother” to him and is godfather to the president’s eldest daughter. The documents show Mr. Roldugin moved at least $2 billion through a shadowy network of offshore companies and amassed assets worth at least $100 million through financial schemes run by Bank Rossiya, which has been widely described as Mr. Putin’s “crony bank”.
Although Mr. Putin is not named personally in the files, for critics they confirmed that he has become fabulously but covertly wealthy. When the US imposed sanctions on a number of his associates in 2014, the Treasury Department accused them of acting as personal “cashiers” by managing investments on his behalf. “It’s obvious that Roldugin couldn’t have earned this himself - he’s a musician”, said Alexei Navalny, an anti-corruption activist and political opponent of the president, this week.
The Guardian explains how Mr. Putin may have hidden “a billion dollars in five easy steps”.
Dmitry Peskov, Mr. Putin’s spokesman, decried the reports as an “information exercise” concocted by “former employees of the State Department, the CIA, and other secret services”. Perhaps piqued by the fact his wife was reported to have managed $1 million in offshore assets, Mr. Peskov told reporters that “the degree of Putinophobia has reached such a level that you can’t say anything good about Russia or talk about Russia’s successes a priori. You need to say bad things. Essentially there isn’t that much new here. Here I can express my disappointment.”
The reaction in Russia is ‘Ha, ha, they only found two billion?’ It’s petty cash for personal expenses.” - Alexei Navalny, anti-corruption activist and opposition politician
A few activists protested outside the State Duma on Monday demanding Mr. Putin’s impeachment, but most analysts thought the leak would not drag down his sky-high approval ratings. “People already had an idea that Putin is a kind of head of a mafia clan and that such is the order of things,” Lev Gudkov, head of independent pollster Levada-Centre, told the Wall Street Journal.
Petro Poroshenko’s offshore chocolate factory
In any case, Russian state media largely ignored the news, apart from parotting the Kremlin’s line and detailing alleged wrongdoing by national enemy Petro Poroshenko, who accumulated billions of dollars as a confectioner before becoming Ukrainian president in 2014.
According to the Papers, Mr. Poroshenko established a company in the British Virgin Islands (BVI) in the same year. His lawyers responded that they had created the company to transfer his businesses into a blind trust, which can be used to avoid conflicts of interest. “I believe I might be the first top official in Ukraine who treats declaring of assets, paying taxes, conflict of interest issues seriously,” he tweeted.
Although the state prosecutor’s office announced that a preliminary assessment had uncovered no criminal activity, the reports threaten to exacerbate Ukraine’s ongoing political turmoil and further undermine domestic and international faith in a government which promised to clean up endemic corruption.
“The revelations of Poroshenko’s offshore accounts will further destabilise the Ukrainian government, which has been in a state of crisis for over a month,” said Daragh McDowell, principal Europe and Central Asia analyst at risk consultancy Verisk Maplecroft. “Corruption scandals have been particularly corrosive to the government’s credibility and public support. The release of the Panama Papers significantly increases the risk of early elections.”
Mr. McDowell added that “Poroshenko’s credibility in the eyes of Ukraine’s Western allies will take a massive hit at a time when political infighting has already delayed the release of IMF loans” desperately needed to stabilise the country’s fragile economy. “If Kiev cannot re-establish international confidence in anti-corruption reforms, either under the current government or after fresh elections, then the outlook for Ukraine’s economy and future integration with Europe are quite poor.”
David Cameron’s imperial inheritances
By far the main location for wealth transfers recorded by Mossack Fonseca was the BVI, an embarrassing, if unsurprising, revelation for a UK government that has presented itself as a champion of tax transparency but failed to shake off the country's reputation as the linchpin of global financial secrecy. The UK ranked 15th in a financial secrecy index compiled by the Tax Justice Network (TJN) last year, but the advocacy group said it would “easily” have been rated the most secretive financial jurisdiction in the world if treated as a single entity along with its dependencies and overseas territories.
“What is it that makes a secret worth keeping?” ask the British Virgin Islands in this tourism advert.
Pressure on Prime Minister David Cameron to end Britain’s central role in offshore finance was compounded by the news that he had intervened to stop the European Union forcing trusts to reveal their beneficiaries in 2013, and that his late father had established an investment fund run from the Bahamas. The fund never paid UK taxes.
Jeremy Corbyn, leader of the opposition Labour Party, announced he would publish his tax returns and asked Mr. Cameron to do the same. Reportedly livid at the personal nature of Mr. Corbyn’s attack, the prime minister said he had "no shares, no offshore trusts, no offshore funds, nothing like that". But he was unable to disprove suggestions he had benefited or would ever gain personally from the fund, and eventually admitted to having owned a stake in the trust sold in 2010.
John Christensen, director of the TJN, tells The World Weekly that “Cameron will now be under intense pressure to deal with Britain's overseas territories and crown dependencies, in particular ensure a public registry of beneficial owners". That pressure will be all the more acute because Mr. Cameron hosts an anti-corruption summit due to discuss financial secrecy in May, Mr. Christensen said. “He will now have to be seen to be acting.”
Marine Le Pen speaks too soon
French daily Le Monde reported on April 5 that Frederic Chatillon, a businessman, had moved around €300,000 ($342,000) offshore with the help of Nicolas Crochet, an accountant.
Mr. Chatillon is a longstanding friend of Marine Le Pen and runs a company which has previously handled communications for her far-right National Front Party, while Mr. Crochet wrote the economic manifesto for her 2012 presidential bid. Their aim, Le Monde claimed, was "to get money out of France, through shell companies and false invoices, to evade French anti-money-laundering authorities".
The irony that the party had earlier seized on the papers to slam the dire consequences of “wild globalisation” was lost on its officials. “Any attempt to link these allegations to the National Front or to Marine Le Pen will simply amount to defamation,” declared National Front Vice-President Florian Philippot.
Yet the party is no stranger to scandal and the latest batch of negative headlines may do little to dent Ms. Le Pen’s prospects for next year’s presidential election.
Banks cash in while the sun shines
The files underlined the deep involvement of some of the world’s largest banks in creating offshore companies. According to the ICIJ, HSBC and its subsidiaries accounted for more than 2,300 of the 15,600 shell firms created by Mossack Fonseca over 40 years. Swiss banks UBS and Credit Suisse created more than 1,100 each, Société Générale 979, the Royal Bank of Canada 378 and Commerzbank 92.
HSBC said it thoroughly vetted clients with offshore accounts and UBS claimed to have “no interest in funds that are not taxed or derive from unlawful activities”. UBS, Credit Suisse and Société Générale released statements clarifying that they comply with all applicable laws and regulations.
The market for financial secrecy is “highly profitable” for “banks, law firms and accounting practices that sell secrecy products to their clients”, said Mr. Christensen.
“If people are determined to keep their affairs secret because they are up to no good, they will have no trouble finding an institution, a professional or a jurisdiction to help them do so,” Ralph Cunningham, managing editor of International Tax Review, tells The World Weekly.
But the leak also points to some success in recent international efforts to clamp down on tax avoidance and evasion. By 2015, Mossack Fonseca was setting up many fewer shell companies and deactivating many more than a decade earlier. For Angel Gurría, secretary-general of OECD, this was “a testament to the incredible transformation effected in the last seven years to establish robust international standards on tax transparency”.
A quick look at the list of former and current leaders of countries named in connection with the Panama Papers reveals that around half of them are from the Middle East, including the king of Saudi Arabia and the president of the United Arab Emirates.
Additionally, powerful members of the clan of Syrian President Bashar al-Assad appear in the files, as does a son of former Egyptian President Hosni Mubarak. Hidden in the vast trove are references to at least 33 people or companies blacklisted by the US government, including Iranian interests and Hezbollah, which is listed by the US and other countries as a terrorist organisation.
Many of the trails lead around the world from Middle Eastern capitals to the British Virgin Islands (BVI) and multimillion-dollar properties in London.
Qatar’s elite in the spotlight
Two of those directly named in the papers are the former emir of Qatar, Sheikh Hamad bin Khalifa bin al-Thani, and former Qatari Prime Minister Hamad bin Jassim bin Jaber al-Thani. The former prime minister in 2002 bought a company in the BVI and three registered in the Bahamas. Mr. bin Jaber al-Thani, estimated to be worth $7 billion, used these companies to manage his $300 million super yacht.
Almost a decade later, he bought four companies in Panama which had bank accounts in Luxembourg. He co-owned two of these companies with the former emir of Qatar. An attorney for Mr. bin Jaber al-Thani told the ICIJ he “doesn’t have the right” to answer questions because he is “bound by professional secrecy”.
The former emir himself, who ruled the energy-rich Gulf state for 18 years before abdicating to make way for his son, was listed as the majority shareholder of the companies Rienne SA and Yalis SA, which held a term deposit with the Bank of China in Luxembourg. Another company he had acquired held bank accounts in the Grand Duchy and shares in two South African companies.
Sheikh Khalifa bin Zayed bin Sultan al-Nahyan’s empire
Looking not far south of Qatar, another case involves one of the richest men in the world, the president of the United Arab Emirates and emir of Abu Dhabi, Sheikh Khalifa bin Zayed bin Sultan al-Nahyan. A large donor to various humanitarian and medical causes around the world, the president once built himself the world’s biggest yacht and has the world’s tallest building named after him, the Burj al-Khalifa in Dubai.
According to the Mossack Fonseca data, the sheikh was the beneficial owner of at least 30 companies established in the BVI, “through which he held commercial and residential properties in pricey areas of London such as Kensington and Mayfair, worth at least $1.7 billion”. The Panamanian law firm built trust structures for the emir in which he or his wife, son or daughter remained the true beneficiaries.
The papers also reveal that the UAE president has secretly built one of the largest offshore property empires in the UK. His portfolio in the British capital includes the BHS building in Oxford Street, properties at the exquisite Berkeley Square in Mayfair and a Kensington townhouse. As the Guardian notes, it was reported two years ago that the al-Nahyan family had become the largest landowners in the prime Mayfair district after the Duke of Westminster.
On top of that, Dubai, one of the UAE’s seven sheikhdoms, is ranked as number 10 in the Financial Secrecy Index compiled by the Tax Justice Network. While accounting for less than 0.1% of the global offshore financial services market, Dubai is, according to the report, “unquestionably one of the world’s best known tax havens or secrecy jurisdictions built on an increasingly complex array of offshore facilities”.
King Salman of Saudi Arabia: From Riyadh to the British Virgin Islands, London and Luxembourg
The most powerful Middle Eastern actor named in connection with the Panama Papers is King Salman of Saudi Arabia, who ascended to the throne in early 2015. The trail of his involvement leads from Erga palace in Riyadh to the British Virgin Islands, London real estate and the banking sector of Luxembourg. According to the leaked data, the Saudi king used a BVI-based company to obtain mortgages on luxury homes and to hold a yacht.
He held an unspecified role in the Luxembourg company Safason SPF SA, which in turn was the shareholder of two other companies that took out mortgages worth around $34 million for homes in central London. The International Consortium of Investigative Journalists says both mortgages are mentioned “in relation to him”.
All energy-rich countries in the Gulf region are currently feeling the pinch, having lost several hundred billions of dollars in income due to falling oil prices. While their ruling systems are unlikely to suffer any repercussions on the back of these revelations, they highlight how far-flung and complex their financial and real estate empires have grown to be.
Ayad Allawi’s London homes
Among the ex-leaders mentioned in the Panama Papers is the former vice-president and interim prime minister of Iraq, Ayad Allawi, a longtime opponent of Saddam Hussein who lived in exile for 30 years. His time in office as interim prime minister between 2004 and 2005 was marked by widespread allegations of corruption in the country. Also owing to his hardline security stance, some Iraqis called him 'Saddam without a moustache', Adam Lusher notes in the Independent.
According to the leaked data, firms were created for Mr. Allawi to hold property in London. Mossack Fonseca supplied his Panama-registered IMF Holdings Inc. with directors. In combination with a BVI-registered company, the former prime minister held two properties in London.
After a media request, a spokesperson for Mr. Allawi said that the property the former prime minister owned in London through offshore companies was taxed according to British law and that he had paid all his taxes. His media office said IMF Holdings was “established to own residential property purchased with Mr. Allawi's personal assets based on security and legal advice ‘in light of an assassination attempt on him’".
Iraq has been rocked by anti-corruption protests over the last year. Many Iraqis are furious about the way those living in the fortified Green Zone have amassed fortunes in the country and abroad after the fall of Saddam Hussein. Some local rumours even say treasures are hidden in the exclusive area. Iraq has been plagued by corruption, according to Transparency International, ranking 161st out of 168 countries in the organisation’s corruption perceptions index.
The Assad clan’s wheeling and dealing
In war-torn Syria, the leak has revealed the involvement of President Bashar al-Assad’s wider family with Mossack Fonseca, in particular the president’s maternal cousins, Rami and Hafez Makhlouf. The two brothers are notorious figures in Syria due to their wealth and ties to the Assad regime. Rami Makhlouf used his connections to control key economic sectors such as telecommunications and oil, and was seen as a gatekeeper for anyone wanting to do business in Syria. His brother was a general who served in Syria’s feared intelligence services until he lost his post two years ago.
Another connection to the Assad family is businessman Soulieman Marouf, dubbed by the media as President Assad’s London-based fixer. Mr. Marouf, the Panama Papers reveal, has held six luxury flats in the British capital worth almost $8.5 million through British Virgin Islands-registered companies. In addition, while Syria was descending into civil war, he went shopping for the president’s wife Asma, providing her with luxury goods. The Guardian newspaper previously revealed details of personal emails by Asma al-Assad about shopping and exchanges between the president and the first lady.
Alaa Mubarak, son of Hosni
Significant inequality prevailing in the Middle East and North Africa was a major factor sparking the protests dubbed the Arab Spring at the end of 2010. This was no different in Egypt where mass protests led to the resignation of longtime ruler Hosni Mubarak. A large part of popular anger was directed against his sons and the wealth they had accumulated under their father’s reign. The Mossack Fonseca data names Alaa Mubarak as the owner of a BVI firm called Pan World Investments Inc., which was managed by Credit Suisse.
In May 2015, the former president and his two sons, Alaa and Gamal, were sentenced to three years in jail for embezzling millions of dollars in state funds intended for the renovation of palaces. Alaa and his brother were, however, released in October 2015 due to the time they had already served in prison since their initial arrest in 2011. Hosni Mubarak is to this day in custody in a military hospital.
In 2011, BVI authorities told Mossack Fonseca to freeze Pan World Investments’ assets, following the enactment of an EU law. Süddeutsche Zeitung reported that the Panamanian law firm in 2012 still regarded Mr. Mubarak as low-risk, despite the EU sanctions listing. One year later, the firm was fined $37,500 for failing to properly check Alaa Mubarak. Internal correspondence revealed by the leaks show that Mossack Fonseca admitted its procedures were “seriously flawed” because Mr. Mubarak had not been identified sufficiently early. Although one Mossack Fonseca employee noted in 2014 that the firm had “very little control”, if any, over Mr. Mubarak’s company, they stopped doing business with him only in April 2015.
The Panama Papers became a major topic in the Arab press with reactions ranging “from calls for legal action against leading figures whose names were implicated to claims that the whole thing was a CIA conspiracy”, Sameh Habeeb wrote for Middle East Eye. In many cases, the region’s media outlets cherry picked cases, as the Gulf media, for example, widely ignored the names of current and former Gulf leaders named in connection with the leaks. On the other side of the spectrum, Lebanese pro-Hezbollah Al Akhbar focused on the revelations about the group’s traditional enemies Saudi Arabia, Qatar and the UAE.