The passports of at least 200 Americans show up in this week’s massive leak of secret data on secretive offshore shell companies.
Given the high-profile nature of some of the foreign names in the leaks – close associates of Russian President Vladimir Putin were seen moving more than $2 billion through shell companies – many of the Americans may seem like small fish.
In four separate cases, the law firm Mossack Fonseca helped register offshore companies for Americans who are now either accused or convicted by federal prosecutors of serious financial crimes, including securities fraud and running a Ponzi scheme.
In some cases, the shell companies created through the Panamanian law firm were part of fraudulent activities. In others, it’s not clear. That’s the purpose of shell companies, after all, to shelter money or assets.
“You don’t know the unknowable,” said Daniel Reeves, a former high-level official with the Internal Revenue Service who helped establish its programs to monitor offshore shell companies. “If a company out of Malta is investing in U.S. securities and generating gains and it turns out it’s owned by a wealthy family in New York, no one is going to know except the incorporator.”
Mossack Fonseca is a leading global player in the incorporation of offshore companies across the globe. It was the subject of the largest-ever financial breach, and 11.5 million of its documents are the subject of a collaborative analysis by McClatchy and about 350 journalists under the umbrella of the International Consortium of Investigative Journalists. McClatchy was the only U.S. newspaper company involved.
Determining a precise number of Americans in the data is difficult. There are at least 200 scanned individual U.S. passports. Some appear to be American retirees purchasing real estate in places like Costa Rica and Panama. Also in the database, about 3,500 shareholders of offshore companies who list U.S. addresses. And almost 3,100 companies are tied to offshore professionals based in Miami, New York, and other parts of the United States.
Further complicating matters, some U.S. citizens enjoy dual citizenship and open accounts under foreign passports. Others appeared to be American retirees purchasing real estate in places like Costa Rica and Panama.
Among the cases McClatchy and its partners found:
▪ Robert Miracle of Bellevue, Wash., is in the files. He was indicted for a $65-million Seattle-area Ponzi scheme involving investment in Indonesian oilfields, with new investors’ money allegedly used to pay off past investors. Miracle was sentenced on May 13, 2011, to 13 years in prison after pleading guilty to wire fraud and tax evasion.
Miracle’s company was called Mcube Petroleum, and it remained an active shareholder in several offshore companies in the British Virgin Islands up until he pleaded guilty. The offshores were created by Mossack Fonseca.
▪ Benjamin Wey is a U.S. citizen and president of New York Global Group. He was indicted last year, along with his Swiss banker, Seref Dogan Erbek, on securities fraud charges. Wey’s alleged scheme to conceal a true ownership interest in publicly traded companies was at the heart of the charges. Wey is accused of using offshores set up with Mossack Fonseca to disguise complicated transactions between Chinese operating companies and publicly traded U.S. shell companies.
The two “are believed to have profited in the tens of millions, while victim shareholders were left holding the bill,” Diego Rodriguez, an FBI official involved in the case, said in a statement at the time of indictment.
▪ Florida billionaire Igor Olenicoff, a commercial real estate mogul, appears in the data as a shareholder of Olen Oil Management Limited. He raised a national stir in 2007 after being sentenced to just two years of probation for tax evasion. He paid a $52 million fine after not declaring more than $200 million in offshore shell companies. More recently, he was found guilty in 2014 for making replicas of a pricey sculpture and was ordered to make restitution to the sculptors whose work he had copied.
▪ There’s Anthony J. Gumbiner, the Dallas-area chairman of Hallwood Group Inc. He’s a British national with deep Texas ties who settled an insider trading case in 1996 with the Securities and Exchange Commission, paying $1.7 million in penalties at the time.
A jetsetter in the 1980s, Gumbiner was known for his lavish lifestyle in Monte Carlo. More recently, he’s been tied up in litigation over oilfield investments. His Hallwood Energy filed for Chapter 11 bankruptcy protection in 2009.
It wasn’t until 2015 that the law firm seemed to catch on to Gumbiner’s legal problems and started to conduct enhanced background checks. By then his offshore companies had been inactive since 2011.
▪ And there’s John Michael “Red” Crim, author of the self-published books “From Here to Malta,” and “I’ve Been Arrested, Now What?”
Federal jurors in Philadelphia in January 2008 convicted Crim and two associates in a plot to have investors use phony trusts to cheat the IRS out of roughly $10 million in tax revenue.
In an interview with McClatchy's project partner Fusion, at a halfway house in Los Angeles last February, Crim described how he brought business to Mossack Fonseca and other registered corporate agents.
"My responsibility is to set-up the documentation, hand it over to the client, and now they're in business," Crim said. "I don't even know sometimes what that business is about, and I didn't want to spend all my time investigating what they're doing. I mean, some of (them) just flat out would tell you it was none of your business."
▪ In a separate case, federal authorities were unaware that a defendant in a fraud case had an offshore account with Mossack Fonseca. Internet phone company executive Jonathan Kaplan pleaded guilty in Bridgeport, Conn., in 2007 to accepting more than $400,000 in a commercial bribery scheme.
Kaplan received probation. A law enforcement source, speaking on condition of anonymity because of pending legal matters, confirmed that prosecutors did not know that Kaplan had established an offshore company in the British Virgin Islands in 2004 called SGA Wireless. It remained active until May 2010.
Reached by phone in New Jersey, Kaplan was asked whether he told authorities about SGA Wireless. He stammered, “I’m going to have to decline. I’ll talk to you.”
He then abruptly hung up.
This story is part of a larger series, involving McClatchy and other news organizations, working under the umbrella of the nonprofit International Consortium for Investigative Journalists.
Marisa Taylor: 202-383-6164; @marisaataylor; firstname.lastname@example.org
Kevin G. Hall: 202-383-6038; @kevinghall; email@example.com
An unprecedented look at offshores
A database leak at the Mossack Fonseca law firm in Panama exposes how it hides money for its clients.
THE LEAK: Munich’s Suddeutsche Zeitung newspaper was given the files, which were shared with the International Consortium of Investigative Journalists.
ITS SIZE: 11.5 million emails and client records. It would take 24 hours to download the 2.6 terabytes at normal internet speeds.
THE MEDIA PARTNERS: More than 350 journalists, including a U.S. McClatchy reporting team, in 77 countries examined the data.
WHO WAS FOUND: 12 current and former heads of state and government, 61 relatives and associates of leaders, and 128 other public officials.