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A group of global news organizations published articles based on a trove of leaked confidential documents from a law firm in Panama, Mossack Fonseca. They exposed how some of the world’s most powerful people were said to have used offshore bank accounts to conceal their wealth or avoid taxes.
The Panama Papers have exposed how some of the world’s most powerful people may have used offshore bank accounts and shell companies to conceal their wealth or avoid taxes.
Here are some significant developments:
The papers — millions of leaked confidential documents from the Mossack Fonseca law firm in Panama — identify international politicians, business leaders and celebrities involved in webs of suspicious financial transactions. The revelations have raised questions about secrecy and corruption in the global financial system.
• President Vladimir V. Putin of Russia said the leak was an American plot.
Among others, the documents named close associates of President Vladimir V. Putin of Russia, the father of Prime Minister David Cameron of Britain and relatives of President Xi Jinping of China and members of the Chinese Communist Party Politburo Standing Committee. Articles published by news organizations in cooperation with the International Consortium of Investigative Journalists also named King Salman of Saudi Arabia; Sigmundur David Gunnlaugsson, who resigned as prime minister of Iceland after the revelations; President Mauricio Macri of Argentina; and the soccer star Lionel Messi, one of the world’s wealthiest athletes.
• Prime Minister David Cameron of Britain admitted that he had profited from an offshore trust.
Other soccer players; officials from FIFA, the sport’s world governing body; and UEFA, the governing body of European soccer, were also tied to firms incorporated offshore through the Panamanian firm.
• A federal prosecutor sought to open a criminal investigation into the business activities of President Mauricio Macri of Argentina.
Those prominent names were among the hundreds of people that the papers tie to thousands of offshore shell companies. Such companies can be used to shield vast wealth from tax collectors, regulators and creditors.
• A founder of the law firm, Ramón Fonseca, told The Times that the firm was innocent of any wrongdoing.
Many of the people named in the papers have denied in the strongest terms that they have broken any laws.
• Relatives of President Xi Jinping of China and two other members of the Communist Party’s most powerful body were linked to offshore companies.
Mr. Putin said allegations that his friends shuffled $2 billion among several shell companies were an American plot to undermine Russian unity.
• The prime minister of Iceland, Sigmundur David Gunnlaugsson, stepped aside.
Mr. Cameron, whose father was a client of the Panamanian law firm, initially said he had not benefited from any “offshore funds,” only to confirm later that he and his wife had profited when they sold shares in an offshore trust for 30,000 pounds ($42,160) in 2010, the year he became prime minister. (The dividends they earned were declared and taxed, Mr. Cameron said.)
• The Swiss authorities raided the headquarters of the Union of European Football Associations.
It is not clear how many United States citizens may have been involved. So far, the documents cited in news reports have not connected any prominent American politicians or other influential Americans to Mossack Fonseca.
• Gonzalo Delaveau Swett, the president of Transparency Chile, a branch of a global anticorruption group, stepped down.
One reason may be that it is fairly easy to form opaque shell companies in the United States. Americans “really don’t need to go to Panama,” James Henry, an economist and senior adviser to the Tax Justice Network, told Fusion. “Basically, we have an onshore haven industry in the U.S. that is as secretive as anywhere.”
The documents, known as the Panama Papers, named international politicians, business leaders and celebrities in a web of unseemly financial transactions, according to the articles, and raised questions about corruption in the global financial system. Many of the figures named in the leak have denied that they had broken any laws.
It is not clear whether the papers document any lawbreaking. The holding of money in an offshore company is generally not illegal by itself, but it may be done to hide criminality from prying eyes, for example, by facilitating tax evasion or money laundering.
What are the Panama Papers?
There are many valid reasons for multinational corporations, joint ventures or wealthy individuals to set up and use such companies.
The Panama Papers are 11.5 million documents — or 2.6 terabytes of data — provided by an unnamed source to a German newspaper, Süddeutsche Zeitung, more than one year ago. They were taken from the files of Mossack Fonseca, described as the fourth-largest offshore law firm in the world.
For example, many countries allow land to be owned only by citizens or locally registered companies. So a foreigner seeking a retirement or vacation home would set up a local shell company to purchase the property.
Süddeutsche Zeitung shared the data with the International Consortium of Investigative Journalists, a nonprofit organization, along with reporters from over 100 news agencies around the world, including The Guardian, the McClatchy newspapers, Fusion and other outlets. The New York Times did not have access to the leaked documents.
A corporation establishing a joint venture in a country with a weak or corrupt legal system may want to do so through an offshore company based in a place like the British Virgin Islands or the Cayman Islands, so the venture can gain access to stronger courts and operate under more sophisticated financial laws.
Those media outlets are expected to publish more articles based on the Panama Papers in the coming days.
They may be set up for other aboveboard financial planning purposes as well, with no intent to deceive the authorities. But experts say the secrecy provided by shell companies makes it all too easy and tempting to stray into tax evasion.
What are the most serious accusations made by the articles?
The articles said nearly 215,000 offshore shell companies and 14,153 clients were tied to Mossack Fonseca. They linked 143 politicians, their families and close associates — including 12 highly placed political leaders — to the use of tax havens to shield vast wealth.
Among those linked to involvement in offshore companies were President Macri of Argentina; President Petro O. Poroshenko of Ukraine; Mr. Gunnlaugsson, then the prime minister of Iceland; Prime Minister Nawaz Sharif of Pakistan; King Salman of Saudi Arabia; the former emir of Qatar, Hamad bin Khalifa al-Thani, and its former prime minister, Hamad bin Jassim bin Jaber al-Thani; and the Argentine soccer star Lionel Messi, according to the consortium.
The cellist Sergei Roldugin, a close friend of Mr. Putin’s, was named in the documents. The Guardian described Mr. Roldugin as being at the center of a $2 billion scheme “in which money from Russian state banks is hidden offshore.”
The president of FIFA, Gianni Infantino was linked to the scandal. The Guardian reported that the leak showed the first ties between the Union of European Football Associations (U.E.F.A.), the governing body of European soccer, and an offshore company owned by a businessman involved in the corruption scandal that lead to the ouster of Sepp Blatter as FIFA chief last year.
That link came in the form of a series of contracts between U.E.F.A. and the company, Cross Trading, that were signed by Mr. Infantino, who succeeded Mr. Blatter and served at the time as the director of legal services for U.E.F.A. On Wednesday, Swiss authorities raided the headquarters of the European soccer agency.
Juan Armando Hinojosa, who has been described as the “favorite contractor” of the Mexican president, Enrique Peña Nieto, was also mentioned in the leaked documents, which the consortium said showed that he had created “a complex offshore network” spread across nine corporate entities in New Zealand, the United Kingdom and the Netherlands to hold roughly $100 million.
Mossack Fonseca also counted among its clients close associates of President Bashar al-Assad of Syria, according to the BBC, and eight current and former members of China’s Politburo and the families of top Chinese officials. Dozens of influential donors and politicians in Britain have also been named, including Ian Cameron, the father of Prime Minister Cameron, who admitted he had earned money through an offshore trust established by his father. The older man had been a client of Mossack Fonseca with an offshore investment fund that avoided paying taxes in the United Kingdom, according to The Guardian. The elder Mr. Cameron died in 2010.
Are any Americans named in the leaked documents?
The documents indicated that 3,500 people who owned shares in offshore companies provided the Panamanian law firm with an address in the United States, but that does not mean they are American citizens. Scanned copies of at least 200 American passports were included in the trove of documents, according to McClatchy, which said that many appeared to be retirees using offshore companies to buy real estate in Latin America.
Almost 3,100 companies incorporated by the law firm were linked to what McClatchy called “offshore professionals” based in the United States. But it is not clear how many United States citizens were implicated in the schemes described by the articles. So far, the documents have connected no American politicians or other influential people to Mossack Fonseca, according to McClatchy and Fusion.
One reason there may be relatively few Americans named in the documents is that it is fairly easy to form shell companies in the United States. James Henry, an economist and senior adviser to the Tax Justice Network, told Fusion that Americans “really don’t need to go to Panama.”
“Basically, we have an onshore haven industry in the U.S. that is as secretive as anywhere,” he said.
Do the Panama Papers show evidence of any crimes?
It is not clear. Several countries began investigations into the leaked data on Monday, including the United States, France, Germany, Australia, Austria, Sweden and the Netherlands.
Holding money in an offshore company is generally not illegal, although such financial arrangements can be used in illegal ways — for example, to facilitate tax evasion or money laundering.
Are there legitimate reasons for setting up foreign shell companies?
There are many valid uses of offshore shell companies for multinational corporations, joint ventures and wealthy individuals. Many countries restrict the sale of real estate to their citizens or to companies registered there. American retirees looking to purchase homes in such countries form offshore companies that buy the properties to abide by the law.
Companies establishing joint ventures in countries with weak or corrupt legal systems also create offshore companies, based in a jurisdiction like the British Virgin Islands or the Cayman Islands, that own the enterprises.
“They then get access to good courts and sophisticated financial laws,” said Jason Sharman, a professor at the Center for Governance and Public Policy at Griffith University in Brisbane, Australia. “If you can’t move the company out of a place like China, you can change the law that governs the business.”
Michel Magnan, a corporate governance professor at Concordia University in Montreal, said that for many multinationals, “setting up offshore affiliates is key for financial planning purposes, with no goal of evading taxes.”
“They can facilitate the seamless flow of funds within an organization that has extensive operations all over the world.” But, Professor Magnan added, “Their legitimate use for tax efficiency, if pushed too far, can cross over into tax avoidance.”
What has Mossack Fonseca said about the leak?
Panama’s president has vowed to cooperate with any judicial investigations. And in an interview conducted over the messaging platform WhatsApp, Mr. Fonseca, a founder of the law firm, told The Times, “At the end of this storm the sky will be blue again and people will find that the only crime is the hacking.”
In a previous statement to The Guardian, the Panamanian law firm defended its practices and appeared to threaten the news agency with legal action.
The firm said that it was “legal and common for companies to establish commercial entities in different jurisdictions for a variety of legitimate reasons” and maintained that it had “always complied with international protocols” to the best of its ability to ensure that companies it incorporated were not being used for illegal or illicit purposes.
But it said the news agency had obtained “unauthorized access to proprietary documents and information taken from our company.”
“Using information/documentation unlawfully obtained is a crime, and we will not hesitate to pursue all available criminal and civil remedies,” its spokesman, Carlos Sousa, wrote.
What has been the fallout from the leak so far?
One of the first major repercussions occurred in Iceland, where Prime Minister Gunnlaugsson asked his deputy to take over his position, after thousands of people protested outside Parliament calling for him to resign.
Mr. Gunnlaugsson’s name appeared in the leaked documents in connection with an offshore company he established in the British Virgin Islands with a partner, whom he later married. The leak suggested that he had sold his shares of the company to his wife for $1 just before a new law took effect that would have required him to report his ownership of it as a conflict of interest.
Mr. Gunnlaugsson maintained that he had not concealed his assets or avoided paying tax.
In Chile, the president of the country’s branch of Transparency International, an anti-corruption group, quit after the Panama Papers linked him to at least five offshore companies.
The organization said in a statement that though its president, Mr. Delaveau, was not accused of illegal activities, it was “deeply troubled by what has happened.”
Many of the other figures named in the leaks have denied any wrongdoing. A spokesman for the Kremlin, Dmitri Peskov, called the Panama Papers a case of “Putinophobia” and a plot to destabilize the country.
The spokesman’s wife was also named in the documents as the owner of an offshore company.
