Offshore corporations: The secret shell game
Ordinary citizens soon will be able to comb through a portion of the massive Panama Papers data on secretive offshore companies and their owners, a global journalism consortium said Tuesday. The upcoming release is expected to help prosecutors in their hunt for criminal suspects worldwide.
On May 9, the International Consortium of Investigative Journalists will release a searchable database with information on more than 200,000 offshore entities that are part of the Panama Papers investigation.
ICIJ won’t release personal data. The database, for instance, will not include records of bank accounts and financial transactions, emails and other correspondence, passports and telephone numbers.
Authorities nonetheless have expressed interest in scrutinizing all of the data – not just the names of company owners – to make sure that those who used offshores for illegal purposes are brought to justice.
The database comes from the Panamanian law firm Mossack Fonseca, one of the top players in the offshore world, and includes information about companies, trusts, foundations and funds incorporated in 21 tax havens spanning the globe, from Hong Kong to Nevada and Wyoming in the United States. The offshore companies are linked to people in more than 200 countries and territories.
Preet Bharara, the U.S. attorney for the Southern District of New York, has made it clear he wants to examine the data to help his criminal investigation into “matters to which the Panama Papers are relevant.” He didn’t specify what kind of criminal investigation had been launched.
“The Panama Papers exposed that tax dodgers, money launderers, and others who park their money overseas are even more common than we thought,” Sen. Al Franken, D-Minn., a member of the Judiciary Committee, said in a statement this week to McClatchy.
“Laws protecting the security and integrity of our financial system must be strictly enforced, and I was glad to hear that prosecutors are examining this issue to determine whether the leaked documents reveal criminal activity.”
The Panama Papers investigation revealed the secret offshore dealings of world leaders and other politicians as well as criminals and celebrities. It exposed the role of big banks in facilitating secrecy and tax evasion and avoidance. And it showed how companies and individuals blacklisted in the U.S. and elsewhere for their links to terrorism, drug trafficking and other crimes were able to do business through offshore jurisdictions.
The revelations in early April rocked governments in Iceland, Pakistan and Britain and exposed scores of politicians and tycoons in other countries for their use of offshore companies. Russian President Vladimir Putin, whose close associates were revealed to have moved some $2 billion through offshore companies, accused the consortium of twisting facts and releasing selective data, a charge repeated by other officials who were revealed to have been involved in offshore companies themselves.
The upcoming public release will allow citizens worldwide to look at a portion of the data themselves.
Bharara, the New York prosecutor, had asked the consortium, known as ICIJ, to give him access to the data, but the nonprofit declined under First Amendment protections for journalists who seek to shield anonymous sources.
The Panamanian government, meanwhile, appears to have seized more than the 2.6 terabytes of data the nonprofit received in the leak.
As a result, authorities across the world are likely to request the data from Panama, legal experts said.
“The U.S. will make a request and I expect a lot of information will be forthcoming,” said Roma W. Theus II, a former federal prosecutor who is now a white collar defense attorney.
“Other countries should follow suit. The entire world right now is quite sensitive to the corruption and distortion of the financial system. And they realize that the abuse and misuse of the financial system, in additional to the economic issues involved, also impacts political stability and integrity around the world.”
The U.S. government could send technology specialists and equipment to Panama if the country requests help in analyzing the massive amount of data, he said.
“That’s in our national interest to do so,” Theus said. “The U.S. secretary of state, attorney general and the treasury secretary may very well get together and say it’s in the best interest of our country to get a handle on this huge trove of data.”
La Prensa, the Panamanian newspaper participating in the consortium, has reported that authorities seized records kept on more than 100 virtual servers during a raid April 12-13.
Mossack Fonseca has said it has not done anything wrong, but merely registers the offshore companies in the various jurisdictions. Authorities in Panama plan to decide whether to request assistance from other countries. Panamanian Attorney General Kenia Porcell Diaz said she has spoken to officials from Peru, Venezuela, Guatemala, Costa Rica and El Salvador, La Prensa reported.
In a new twist last week, Panamanian investigators removed bags of shredded documents from a property used by Mossack Fonseca, according to a Reuters report.
The State Department and the Justice Department declined to comment Tuesday on whether the U.S. had requested the data from their Panamanian counterparts. A Justice Department spokesman, Peter Carr, reiterated that the Obama administration “takes very seriously all credible allegations of high level, foreign corruption that might have a link to the United States or the U.S. financial system.”
Panamanian judicial authorities did not immediately return calls seeking comment.
ICIJ’s database posting will likely be the largest-ever release of information on secret offshore companies and the people behind them.
When the data is released, users will be able to search through the data and visualize the networks around thousands of offshore entities, including, when possible, Mossack Fonseca’s internal records of the company’s true owners. The interactive database will also include information about more than 100,000 additional companies that were part of the 2013 ICIJ Offshore Leaks investigation.
While the database opens up a world that has never been revealed on such a massive scale, the application will not be a “data dump” of the original documents – it will be a careful release of basic corporate information, ICIJ said in its news story about the matter.
Meanwhile ICIJ, the German newspaper Süddeutsche Zeitung, which originally received the leak, and other global media partners, including McClatchy and its 29 newspapers, will continue to investigate and publish stories in the weeks and months to come. The consortium members have been sifting through the documents for about a year.
Since its release, the Panama Papers investigation has led to high-profile resignations, including the prime minister of Iceland; triggered official inquiries in multiple countries; and put pressure on world leaders and other politicians, such as Britain’s Prime Minister David Cameron, to explain their connections to offshore companies. It sparked a new sense of urgency among lawmakers and regulators to close loopholes and make information about the owners of shell companies public.
In the U.S., where several states act as tax havens for people from all over the world, President Barack Obama commented April 5 on the Panama Papers revelations and said global tax avoidance facilitated by secrecy jurisdictions is “a huge problem.” The president added that “a lot of it is legal, but that’s exactly the problem. It’s not that they’re breaking the laws, it’s that the laws are so poorly designed.”
The database will be published at https://offshoreleaks.icij.org on May 9 at 2 p.m. EDT.
Marisa Taylor: 202-383-6164 @marisaataylor