In the spring of 2015, Miami-based Citigroup banker Victor Olivo emailed the law firm at the heart of the Panama Papers scandal. He had a wealthy client who needed assistance.
Mossack Fonseca’s leaked emails describe the client as globetrotting entrepreneur Naman Wakil, who is worth about $400 million and has business interests in both North Carolina and Miami. He wanted to reduce his U.S. tax liability and protect his assets from creditors, his lawyer’s memo indicates.
The law firm quickly proposed to create a series of trusts and offshore companies for the client. A year later, Wakil was embroiled in a controversy that tied him to a Venezuelan general in an alleged procurement scam that reportedly netted $76 million.
More than 500 banks, their subsidiaries and branches registered nearly 15,600 shell companies with Mossack Fonseca between 1985 and 2015, according to an analysis by the International Consortium of Investigative Journalists. That’s the umbrella group that partnered with 370 journalists from news organizations in 80 countries, including McClatchy as the sole U.S. newspaper partner, to examine the 11.5 million leaked documents from the law firm.
U.S. and global banks have come under intense regulatory scrutiny in recent years because of customers who stashed their wealth in secret Swiss bank accounts.
Yet the Panama Papers are full of examples of the wealth-management and “private banking” divisions of U.S. and global banks working with customers to hide their assets elsewhere. Banks listed in the documents – including Citigroup, Morgan Stanley, Wells Fargo, Merrill Lynch and SunTrust – declined to comment.
Many of these bankers in the Mossack Fonseca documents are located in Miami.
Ken Thomas, a Miami-based banking consultant, said there’s a lot of money and a lot of wealth in Latin America and Central America and “it’s all centered in Miami.”
In November 2004, for example, Mossack Fonseca met with Merrill Lynch Miami-based adviser Sandra Caldera. The law firm’s Florida representative Olga Santini wrote a note back to her bosses explaining that Caldera, a Panamanian, said Merrill advisers were prohibited from opening offshores with the law firm. They were, however, open to informal channels, the email said.
“Client advisors are encouraged to use their inhouse [Merrill] (sic) services but are also not allowed to obtain offshore corporate services for their clients; what they can do, however is recommend someone.... as a personal thing,” Santini recounted of Caldera’s advice, adding she “has promised to use us in the future.”
Caldera’s name appears in the Panama Papers as the reference on 13 Mossack Fonseca-created offshore companies. Caldera and Charlotte-based Bank of America, which acquired Merrill in 2009, declined to comment.
Big regional banks are part of Mossack Fonseca’s dealings as well.
In a Sept. 12, 2008, email to headquarters, Santini writes to Edison Teano, then-head of the Mossack Fonseca Corporations Department, that a Miami-based vice president in the private-wealth arm of SunTrust Bank needed a document.
It wasn’t just any document. First Vice President Jeanette Barker needed certification of who holds secretive bearer shares for a shell company the law firm registered in the Seychelles, remote islands in the Indian Ocean.
“A certification that we have these shares in custody is enough for them,” Santini tells Mossack’s Teano.
The Atlanta-based bank wanted to know only that these secretive ownership shares, now banned almost everywhere because they provide anonymity from regulators, are in Mossack Fonseca’s possession.
The email trail in the Panama Papers shows that the law firm days later produced a notarized certificate listing the Faith Foundation as the shareholder of two Seychelles companies. That Panama-based foundation is run by Mossack Fonseca and appears as a director or shareholder of several dozen offshore companies. The law firm used it to offer clients a cloak on true ownership. The real owners for the Seychelles company was not clear from the documents.
SunTrust declined to comment.
Here’s why it matters that there’s an intersection between offshore-formation companies and U.S. banks and their private-wealth management arms: After Sept. 11, banks were held accountable for knowing who their customers are, a safeguard aimed at preventing the movement of money for terrorism or other unlawful purposes.
Politically exposed individuals are also red flags for both banks and law firms in the due-diligence process. Iceland’s prime minister stepped aside after his offshore involvement became public.
Wakil had ties to the highest levels of the government of Venezuela, an oil-rich nation and U.S. nemesis that suffers under triple-digit inflation and appears near collapse.
Wakil is a Syrian-born U.S resident with a Venezuelan passport, and was named in a 2015 book called El Gran Saqueo (The Great Plunder), which alleged widespread government corruption. Then on April 19, online investigative news site www.cuentasclarasdigital.org posted a report alleging Wakil had provided nearly $6 million to the brothers-in-law of a powerful Venezuelan general, Carlos Osorio Zambrano, in exchange for a lucrative supply contract.
The general commands the state food distribution agency known by its acronym CASA, and his wife, Iraida, is the sister of the two men whom Wakil allegedly paid to secure a government contract to provide beef. The watchdog website’s report says that Wakil in 2012 bought 40,000 tons of Brazilian beef at a discount because it was reaching its use-by date, but invoiced the government at normal prices, pocketing a difference of $76 million.
Gen. Osorio has denied any role in the transaction, which involved offshore companies that were not created by Mossack Fonseca. News reports on May 11 said embattled President Nicolas Maduro declined to investigate government food purchases.
The Panama papers also include the U.S. passports for Wakil's three children and a Venzuelan passport for his wife, Ingrid Sayegh. In Panama's company registry, she appears as treasurer of a company called Perdigao Agroindustrial Group Inc., created for Wakil by a competitor of Mossack Fonseca. The government of Curacao froze almost $13 million in assets tied to Perdigao, considering it a suspicious operation, cuentasclarasdigital.org reported.
When Olivo brought his customer Wakil to Mossack Fonseca, he did so via a personal email address. But the law firm was clearly aware of Olivo’s Citigroup ties. The leaked documents show Mossack Fonseca listed at least nine companies where Citigroup is the client and Olivo is the “reference,” an internal term for customer referrals.
Olivo did not respond to a request for comment. He left Citigroup in April, but started this month at UBS in Miami, according to a BrokerCheck Report from the Financial Industry Regulatory Authority. Citigroup declined to comment, and Wakil did not respond to calls to his company, Wakil Properties, in Miami.
To open his offshores with Mossack Fonseca, Wakil provided a copy of his own passport and those of his relatives. He included a utility bill that showed a multimillion-dollar address on the Biscayne Bay in Coconut Grove, near Miami.
Olivo provided a letter that showed Wakil, now 54, had an account with Citigroup in the “low seven figures” and a reference letter from Wakil’s childhood friend Souheil “Tony” Azar, who lives in the North Carolina town of Gastonia.
Wakil “is an outstanding self-made man,” Azar wrote, adding his friend was an “enthusiastic and helpful individual who displays a strong moral character.”
Records show that Azar is a co-manager with Wakil and Wakil’s wife, Ingrid, in a real estate investment company in Gastonia called Wakil Properties. The company is also incorporated in Florida, records show. Azar declined to comment.
The Panama Papers show Citigroup Private Bank and Olivo on two Panamanian company profiles with Wakil as the shareholder – Obelisk Global S.A. and Conferencee S.A. A series of trusts were planned for Wakil with help from a West Palm Beach lawyer, Lazaro Mur.
In an August 2015 memo sent to Olivo, Mur described Wakil as a wealthy individual and a U.S. resident for U.S. income tax purposes. Of Wakil’s $400 million in worldwide holdings, only about $14 million would be involved in the transaction, the memo said.
Transferring these assets into a type of trust would mean they weren’t subject to U.S. income taxes, Mur wrote. The trust would also keep these assets “beyond the reach of creditors,” according to the memo. Mur declined to comment.
Offshore companies can be used for a number of legitimate reasons, including easier transfer of properties in estate planning. But they can also be used to avoid paying taxes or to hide money from creditors and associates, said Daniel Reeves, a former high-level executive in the IRS.
“There could be a variety of reasons, but I guarantee that taxes are in the mix there somewhere,” he said.
Banks risk their reputation when stepping into the offshore world, warned Brent Newman, an executive vice president of Accuity, which provides compliance services to banks.
“It lends itself to issues around reputation even if some of these are created for legitimate purposes,” he said, noting that “peeling back the onion” to learn about the customer is essential.
Banks must determine the name, address and tax identification number of clients, but they should dig deeper, said Bob Pasley, an Alexandria, Va.-based anti-money-laundering specialist.
“The question has to be asked: Why are you trying to set up this trust for tax-related purposes?” he said. “What is the tax-related purpose? Is it tax evasion or legitimate tax avoidance? And why are you or we, the bank, using this Panamanian law firm? This is a bit unusual.”
Kevin Hall: 202-383-6038, @kevinghall; Rick Rothacker 704-358-5170, @rickrothacker