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Iceland’s Prime Minister Steps Down Amid Panama Papers Scandal Iceland’s Prime Minister Steps Down Amid Panama Papers Scandal
(about 5 hours later)
LONDON — The prime minister of Iceland stepped down on Tuesday, according to his deputy, succumbing to political pressure two days after an enormous leak of documents from a secretive Panamanian law firm about offshore shell companies and tax shelters. LONDON — The revelation of vast wealth hidden by politicians and powerful figures across the globe set off criminal investigations on at least two continents on Tuesday, forced leaders from Europe to Asia to beat back calls for their removal and claimed its first political casualty — pressuring the prime minister of Iceland to step down.
The prime minister, Sigmundur David Gunnlaugsson, was the first prominent political casualty from the document leaks known as the Panama Papers, which have shed a harsh light on the private financial activities of many rich and powerful people. Public outrage over millions of documents leaked from a boutique Panamanian law firm — now known as the Panama Papers — wrenched attention away from wars and humanitarian crises, as harsh new light was shed on the elaborate ways wealthy people hide money in secretive shell companies and offshore tax shelters.
Officials around the world, from Europe to Asia to the Americas, were scrambling on Tuesday to contain the fallout — particularly in Britain, where Prime Minister David Cameron, who has portrayed himself as a champion of financial transparency, was battling revelations in the leaks that British-governed territories are vast havens of hidden wealth, including for members of his own family. The repercussions have come quickly. In Iceland, Prime Minister Sigmundur David Gunnlaugsson, confronted by demands for his resignation after documents revealing that he and his wealthy wife had set up a company in the British Virgin Islands led to accusations of a conflict of interest, asked his deputy to take over on Tuesday.
The leader of Britain’s opposition Labour Party, Jeremy Corbyn, called for an independent investigation into the tax affairs of all Britons linked to the Panama revelations — including Mr. Cameron’s family — and for Britain to impose direct rule on its overseas territories and dependencies, if necessary, to get them to comply with British tax law. In Britain, Prime Minister David Cameron faced calls for a government inquiry and accusations of bald hypocrisy by championing financial transparency — when the leaks showed that his family held undisclosed wealth in tax havens offshore.
“The government needs to stop pussyfooting around on tax dodging,” Mr. Corbyn said. In Pakistan, where roughly 20 percent of the population live on less than $1.25 a day, Prime Minister Nawaz Sharif angrily rebuffed opposition calls to resign, defended his riches as legally acquired, and demanded that his opponents back up their allegations of wrongdoing. His daughter said on Twitter to critics: “prove or apologize.”
The news that Iceland’s prime minister would step aside caused celebration across the tiny island nation of 323,000, which is still recovering from the global financial crisis eight years ago. Officials in France, Germany, Austria and South Korea said they were beginning investigations into possible malfeasance, from money laundering to tax evasion. France’s finance minister, Michel Sapin, told Parliament the government was putting Panama back on a blacklist of havens for tax evaders.
But in a reflection of the political turmoil and maneuvering that the Panama Papers have created, the prime minister’s office issued a statement later Tuesday night saying that he had proposed stepping down in favor of his deputy “for an unspecified amount of time” — as a sort of indefinite leave of absence — and not a formal resignation. It was unclear whether Mr. Gunnlaugsson, who would remain leader of his party, would succeed in his effort to avoid a formal resignation in the face of significant public anger. The leaked papers cover nearly 215,000 companies and 14,153 clients of the Panamanian law firm Mossack Fonseca. Shared with reporters at 100 news media outlets working in 25 languages, the documents include politicians, celebrities, sports figures and close associates of some of the world’s most powerful people, like President Vladimir V. Putin of Russia and members of China’s ruling Politburo.
The leaked Panama Papers consist of more than 11.5 million documents, involving nearly 215,000 companies and 14,153 clients of the Panamanian law firm Mossack Foneca, according to the German newspaper Süddeutsche Zeitung. It shared the information with the International Consortium of Investigative Journalists, a nonprofit group, which helped analyze the data and shared it with a number of other newspapers, which began reporting the findings on Sunday. In China, where the figures identified in the leaked papers include a brother-in-law of President Xi Jinping, the government denounced reports about them as a groundless attack. Its media censors purged mentions of Panama and blocked Internet search inquiries with that word.
The politicians, celebrities and sports figures identified in the leaks included close associates of President Vladimir V. Putin of Russia; President Petro O. Poroshenko of Ukraine; Prime Minister Nawaz Sharif of Pakistan; current and former members of China’s ruling Politburo; and FIFA, the worldwide association for soccer. It has also emerged that Mossack Fonseca worked with 33 people or companies that were the subject of international sanctions, including a relative of the Syrian president, Bashar al-Assad. And in Russia, where officials also dismissed the leaked documents as a baseless political attack on Mr. Putin, the prosecutor general’s office said Tuesday it would look into the reports that high-profile Russian individuals were beneficiaries of offshore companies.
Mr. Gunnlaugsson had insisted on staying in office after the leaked documents revealed that he and his wealthy partner, now his wife, had set up a company in 2007 in the British Virgin Islands through Mossack Fonseca. The documents also suggested that he sold his half of the company to her for $1 on the last day of 2009, just before a new law went into effect that would have required him as a member of Parliament to declare his ownership as a conflict of interest. The ripple effects from the documents extended across continents, from a West African diamond mogul to relatives of a former South Korean president and soccer celebrities in Latin America. Even the Chilean head of Transparency International, a prominent anticorruption advocacy group, was forced to step down after his name appeared in the leaked papers as an agent for offshore companies in the Bahamas.
None of the published leaks have identified American officials so far. Nor do they necessarily show evidence of crimes. But anger and reproach about the revelations have started to swell nonetheless.
“Corruption, whether private or public, is enabled by secrecy,” said John Marti, a former federal prosecutor who is a partner at the international law firm Dorsey and Whitney, based in New York. The revelations, he said, are “kind of pulling back the curtain on the secrecy that exists.”
President Obama, while not commenting directly on the leaked documents, said money shielded by tax avoidance “is a huge problem” and could be in the trillions of dollars.
“A lot of this stuff is legal, not illegal,” Mr. Obama said. “And unless the United States and other countries lead by example in closing some of these loopholes and provisions, then in many cases you can trace what’s taking place but you can’t stop it.”
Gabriel Zucman, a professor at the University of California, Berkeley, and the author of “The Hidden Wealth of Nations,” said in an interview with National Public Radio that the Panamanian law firm represents a fraction of the total in riches obscured from public scrutiny.
“You know, it’s just one firm in one tax haven, and there is much more going on,” Mr. Zucman said, calculating that about 8 percent of the world’s financial wealth is held in tax havens. “So that’s about $7.6 trillion today, a huge amount of wealth.”
It was not immediately clear how Mr. Gunnlaugsson’s decision to step aside would affect Iceland, a tiny island nation of 323,000 that is still recovering from the global financial crisis eight years ago. A new election remains a possibility.
Mr. Gunnlaugsson had insisted on staying in office after the leaked documents revealed that he and his wealthy partner, who is now his wife, had set up the company in the British Virgin Islands in 2007 through Mossack Fonseca. The documents suggested that he sold his half of the company to her for $1 on the last day of 2009, just before a new law took effect that would have required him as a member of Parliament to declare his ownership as a conflict of interest.
Mr. Gunnlaugsson had said that the leak contained no news, adding that he and his wife, Anna Sigurlaug Palsdottir, had not hidden their assets or avoided paying taxes.Mr. Gunnlaugsson had said that the leak contained no news, adding that he and his wife, Anna Sigurlaug Palsdottir, had not hidden their assets or avoided paying taxes.
But the company, Wintris Inc., lost millions of dollars as a result of the 2008 financial crash, which crippled Iceland, and the company is claiming about $4.2 million from three failed Icelandic banks. As prime minister since 2013, Mr. Gunnlaugsson was involved in reaching a deal for the banks’ claimants, so he was accused of a conflict of interest.But the company, Wintris Inc., lost millions of dollars as a result of the 2008 financial crash, which crippled Iceland, and the company is claiming about $4.2 million from three failed Icelandic banks. As prime minister since 2013, Mr. Gunnlaugsson was involved in reaching a deal for the banks’ claimants, so he was accused of a conflict of interest.
In Britain, repercussions centered on Mr. Cameron’s late father, Ian, a stockbroker and investment manager, who was among those named as having used the Panamanian law firm to set up a company based offshore in the British Virgin Islands, a British overseas territory. The controversy of the leaks was also loud in Britain, in part because it illustrated the outsize role of British-governed territories as tax havens.
While there was no suggestion of illegal activity, the overseas investment fund paid no British tax, and the opposition Labour Party wants to know if Prime Minister Cameron retained any interest in the offshore fund, which he denies, and wants him to publicize his tax returns. The leader of Britain’s opposition Labour Party, Jeremy Corbyn, called for an independent investigation into the tax affairs of all Britons linked to the Panama revelations — including Mr. Cameron’s family — and for Britain to impose direct rule on its overseas territories and dependencies, if necessary, to get them to comply with British tax law.
In a further embarrassment to Mr. Cameron, who has claimed leadership in the global fight to crack down on tax havens, the documents also reveal that Britain’s self-governing overseas territories, especially the British Virgin Islands, proved a favored location for companies handled by Mossack Fonseca. “The government needs to stop pussyfooting around on tax dodging,” Mr. Corbyn said.
According to the International Consortium of Investigative Journalists, 113,000 of the nearly 215,000 companies Mossack Fonseca is known to have arranged were set up in the British Virgin Islands. A further 3,000 were set up in other British jurisdictions, including British Anguilla, Jersey, the Isle of Man and Britain itself, according to The Guardian, which also has access to the leaked documents. The focus of anger in Britain centered on Mr. Cameron’s late father, Ian, a stockbroker and investment manager, who was among those named as having used the Panamanian law firm to set up a company based in the British Virgin Islands, a British territory.
The economy of the British Virgin Islands is largely based on such secrecy, with just over half of all government revenues coming from incorporation fees. More than 950,000 offshore companies have been incorporated there. While there was no suggestion of illegal activity, the overseas investment fund paid no British tax. The Labour Party wants to know if the prime minister retained any interest in the offshore fund, which Mr. Cameron denies, and wants him to publicize his tax returns.
With economic inequality a growing political issue in Britain, Mr. Cameron’s privileged upbringing and personal wealth make him vulnerable to such attacks, particularly at a time when his government is reducing spending on welfare payments to the poor.With economic inequality a growing political issue in Britain, Mr. Cameron’s privileged upbringing and personal wealth make him vulnerable to such attacks, particularly at a time when his government is reducing spending on welfare payments to the poor.
In a further embarrassment to Mr. Cameron, who has claimed leadership in the global fight to crack down on tax havens, the documents also reveal that Britain’s self-governing overseas territories, especially the British Virgin Islands, proved a favored location for companies handled by Mossack Fonseca.
The political temperature over the leaked documents has been rising in Britain since Monday, when, asked whether Mr. Cameron’s family still had money offshore, his official spokeswoman, Helen Bower, described this as a “private matter.” Mr. Cameron’s denial came only on Tuesday.The political temperature over the leaked documents has been rising in Britain since Monday, when, asked whether Mr. Cameron’s family still had money offshore, his official spokeswoman, Helen Bower, described this as a “private matter.” Mr. Cameron’s denial came only on Tuesday.
Holding money offshore would not be illegal, providing interest earned was declared to the authorities. Despite saying that he is “very relaxed” about calls to publish his tax return, Mr. Cameron has not done so. Holding money offshore would not be illegal, providing interest earned was declared to the authorities. Despite saying that he is “very relaxed” about calls to publish his tax returns, Mr. Cameron has not done so.
Reports about the Cameron family’s Panamanian connections first surfaced in 2012 when it emerged that Ian Cameron was a director of a fund established in Panama in 1982 called Blairmore Holdings, named after a family mansion in Scotland.Reports about the Cameron family’s Panamanian connections first surfaced in 2012 when it emerged that Ian Cameron was a director of a fund established in Panama in 1982 called Blairmore Holdings, named after a family mansion in Scotland.
Though there is no suggestion of illegality, the leaks have shown how the company used bearer shares, which do not identify owners by name, to conceal who was investing in Blairmore Holdings. The leaks have shown how the company used bearer shares, which do not identify owners by name, to conceal who was investing in Blairmore Holdings.
Mr. Cameron said: “I own no shares, no offshore trusts, no offshore funds, nothing like that.” His office said later that neither he, his wife nor his children benefit from “any offshore funds.”Mr. Cameron said: “I own no shares, no offshore trusts, no offshore funds, nothing like that.” His office said later that neither he, his wife nor his children benefit from “any offshore funds.”