PANAMA IS NOT A COUNTRY, IT’S A BUSINESS... SO IS PUTTING MOSSACK AND FONSECA IN THE DOCK GOOD FOR BUSINESS?
Old fashioned storyteller. International bestselling author of THE LAUNDRYMEN. 30 books & counting. Expert on money laundering & financial crime. Seasoned investigative journalist, television, film & keynote speaker.
April 16, 2024
(c) Jeffrey Robinson, 2024
The trial of lawyers Jurgen Mossack and Ramon Fonseca Mora, the outed-sleazebags behind the law firm Mossack-Fonseca – who came to international prominence thanks to the documents leak in 2016 known as The Panama Papers - went on trial this month (April 2024) in Panama, along with 25 of their employees.
Considering that their past is a sordid tale of aiding and abetting money laundering, fraud and tax evasion, how good an idea is this trial?
Conventional wisdom has it that several people in Panama are betting this will finally put an end to the ultimate embarrassment of sordid offshore shenanigans. That Panama can finally claim, we always wanted justice and here it is.
But in Panama, proper justice can be bad for business.
A full eight years after they were first exposed, and during which they denied any wrong doing, the trial opened with their repeated claims of innocence. “We had no control over the offshore companies that the firm set up for our clients.”
Of course that’s crap. But whwould you expect them to say?
Mossack was born in Germany in 1948. His father, who’d served during WWII in Waffen-SS, moved the family to Panama sometime around 1961. Mossack attended the small private Catholic university there and graduated with his law degree in 1973. He then left for London to practice foreign law. Admitted to the Law Society, he stayed for two years before returning home to open his own office.
Fonseca was born in Panama in 1952 studied at the Universidad de Panama got his law degree in 1976, and also offed to the UK. In his case, it was to spend a year at the London School of Economics.
It was in 1986 that the two merged their businesses to form Mossack-Fonseca and specialize in various aspects of offshore company formation and asset protection. The following year, they opened their first outpost in the British Virgin Islands. Thirty years later, BVI is believed to have registered over one million offshore entities, accounting for as much as 40% of companies registered in the entire offshore world. Mossack-Fonseca were believed to have registered 54% percent of their own clients’ companies and trusts in the BVI.
Shockingly, Mossack-Fonseca was merely the third largest company formation agency in Panama, and only the fifth largest in the world. In other words, with all the nefarious BS that Mossack and Fonseca were peddling, there are four other firms that have, so far, escaped the microscope.
Now consider, for the sake of argument, the kind of money Mossack and Fonseca were making by selling chicanery. Depending on the jurisdiction, they were charging from $750 to twice that, and sometimes even more, per client. There were 214,000 companies included in the Panama Papers. At an average of say, $1000 that comes to $214 million just in basic formation fees.
Agreed, that’s spread out over several years. But they were also charging annual fees for their services. Say those annual management fees averaged $800. Nominee shareholders and/or directors fees can be $500. Mail forwarding and powers of attorney can add another $500. On top of that, throw in $200 for miscellaneous fees. That rounds out the annual total to $2000.
If, out of 214,000 companies, they were servicing just 100,000, when you multiply that by $2000, you’re talking $200 million a year. And that doesn’t include charges for bank introductions, certificates of good standing, certificates of Apostille – which are necessary to do business in many countries – and a host of other up-selling.
Nor does it include the businesses Mossack-Fonseca had moved into in recent years, such as private aircraft and yacht registration.
Nor does it include what they referred to as “discretionary portfolio management.”
Inside Mossack-Fonseca, they formed a company called Mossfon Asset Management (MAMSA). Records obtained by the International Consortium of Investigative Journalists (ICIJ) suggest that MAMSA – during the years 2006-2015 - was dealing with some 6000 transactions for their most private clients, on which they would have taken a fee. The value of those transactions was $1.2 billion.
When the sky came crashing down on their heads, both Mossack and Fonseca automatically responded with the tired ploy of blaming the media. “Information that has been accessed from our files has fallen into the hands of reporters from certain media outlets who have been taking information out of context and making false assumptions about the nature of our services.”
Robinson’s Law: When people in power blame the media, you know the bastards are guilty.
What became evident from reading so many of the documents, is that Mossack and Fonseca were smart enough, in most instances, to avoid working directly with end-users. To maintain plausible deniability, they turned to intermediaries, such as banks and asset management firms.
That brings up the question, what did the two lawyers really know about the end users of the products they were selling to middlemen?
They say, nothing.
But a serious answer would be, more than enough to create plausible deniability for themselves by hiding behind middlemen. Whenever a big name would surface, they’d insist, “None of Mossack-Fonseca’s companies mentioned in various publications with regard to this matter have been investigated for any crimes related to money laundering or any other unlawful behavior.”
Or, they’d sidestep with, “If you find one case where Mossack-Fonseca has been the defendant in a court case with regard to any of the actors or activities described above, please send us that documentation.”
Buenos dias cabelleros, here it is!
In studying the Panama Papers, several media outlets remarked that the leaks contained very few American names. There are two likely reasons why.
First, when it comes to company formation, Americans have the convenience of Delaware. When it comes to tax evasion, there are traditional pipelines running through the Caymans and the Bahamas. Anyway, for many of those Americans, Panama, as an alternative, seems downmarket and shoddy.
Second, Mossack and Fonseca deliberately steered a wide berth around American clients because they feared the long reach of American prosecutors.
Like Colombian and Mexican drug traffickers, the last thing in the world they wanted was to find themselves in the dock in a US Federal Court. That is, definitely, a bad news destination, especially if you come from a culture where you need to count on bribes to save your sorry asses.
Which, with hindsight, makes setting up MF Corporate Services (Nevada) and AAA Corporate Services (Wyoming) – both run by one employee out of the Nevada office – seem uncharacteristically careless.
It hasn’t hurt them yet, but it might.
Interestingly, this is the second time Mossack and Fonseca find themselves in the dock in Panama. The two were acquitted of different charges two years ago in connection with a massive scandal in Brazil, known as Lava Jato or Car Wash.
What began as a money laundering inquiry, turned into the most significant political and financial corruption scandal in Latin America’s history. Several businesses were revealed to have cooperated with each other, bribed company officials and bribed politicians to corrupt the bidding process for contracts with state-controlled oil conglomerate Petróleo Brasileiro SA (Petrobras).
One of those companies Odebrecht, is the largest construction firm in all of Latin America. The CEO, Marcelo Odebrecht, sprinkled money all over South and Central America – and is said to have used purpose built structures in Angola and Panama to funnel bribes – in order to win corrupt contracts for offshore oil drilling rigs, tankers, oil and gas pipelines and other heavy constructions deals. Apparently, the company even had a dedicated bribe department, known as “The Structured Operations Section.”
Unfortunately for Odebrecht, he was arrested, found guilty and is currently serving 19 years in prison.
As the scandal grew, and more names were added to the mix, the prosecutors accused Mossack-Fonseca’s office in Brazil of helping to create shell companies that were used in the commission of crimes. They called Mossack-Fonseca “a big money launderer,” and filed criminal charges against five employees for money laundering offenses and the destruction of evidence.
The excuse from Mossack and Fonseca in Panama was that their office of the same name in Brazil, was just a franchise. (The McDonalds Defense?) That the firm in Panama practiced only in Panama and, therefore, they had no responsibility for anything that might have happened in Brazil.
Fonseca even insisted that he and Mossack were just “unwitting victims” of a political smear campaign.
Nevertheless, the prosecutor in Brazil continued to insist, “It is clear to us that there were at least two crimes committed by Mossack-Fonseca’s office in Brazil — financial crime and organized crime.” And that by registering companies offshores, Mossack-Fonseca’s objective was, “To hide the truthful beneficiaries of these shell companies.”
In and of itself, the situation in Brazil was bad enough for Mossack and Fonseca. But they escaped and must have felt safe, knowing that Panama does not extradite Panamanians on criminal charges. However, their Achilles heel might still, someday, turn out to be Nevada.
As investigators in Brazil were looking at Odebrecht’s activities in Argentina, a private investigator there was looking for $65 million that was allegedly embezzled by a building tycoon named Lazaro Baez. His company, Austral Construcciones was a sometimes competitor and sometimes ally of Odebrecht.
And, like Odebrecht, Baez has since been arrested, convicted of money laundering and is in prison.
One private investigator managed to identify 123 shell companies that might be linked to the missing money – or at least to people who might be linked to the missing money – and each of those shells had been incorporated by MF Corporate Services.
When he asked Mossack-Fonseca about them, the response came back that Nevada operated independently of Panama and, consequently, they had nothing to do with each other.
The same excuse they’d given for the office in Brazil.
So now that private investigator set out to establish that the Nevada office worked exclusively for the Panama office. And he managed to do just that. He took his evidence to court in Nevada and a federal judge ordered Mossack-Fonseca to comply.
Mossack, who by then must have been living in fantasy land, flatly denied that MF Corporate Services (Nevada), was part of his group. He even testified in a deposition, under oath, that the two companies did not have a parent-subsidiary relationship, and swore that his firm in Panama did not control the daily operations of the outpost in Nevada.
Information contained in the Panama Papers, and discovered by the ICIJ, suggest that Mossack may have lied under oath. Apparently, they show the Nevada office as being wholly owned by Mossack-Fonseca in Panama. Apparently, they also show that certain Panama based IT people tried, remotely, to clean the logs of the PCs in the Nevada office, intending, as well, to eliminate any traces of Nevada’s access to the firm’s computer information system. And, apparently, a Mossack-Fonseca employee in Panama was sent to Nevada to get documents out of the country before the US Justice Department could find them.
There is even an email that reads, “When Andrés came to Nevada he cleaned up everything and brought all documents to Panama.”
As the investigations into illegalities by Odebrecht and Baez widened in Brazil, Argentina, Panama and, especially, Nevada, the pressure on both Mossack and Fonseca continued to mount.
Word on the street was that the police were, also, now taking a very close look at their MossFon Asset Management company.
Back in April 2016, the police raided the Mossack-Fonseca offices seeking evidence of wrong doing as a result of the Panama Papers.
In early February 2017, the Panamanian prosecutors ordered a second raid, this time looking for connections to Odebrech.
And in the States, there were serious people who wanted to know a lot more about Mossack-Fonseca’s adventures in Nevada and Wyoming.
With incoming from all sides, Fonseca found himself under siege. And he finally snapped. Perhaps feeling personally betrayed, he reacted to the second raid of his offices by openly accusing his longtime friend, the then President of Panama, Juan Carlos Varela, of taking bribes from Obedrecht.
At first Varela absolutely denied it. Then he decided, well, maybe there was some money from Odebrecht but it was a campaign contribution. He stated firmly that his campaign coffers were transparent and even released records to show all the donations he received. Nothing appeared to be from Odebrecht.
At that point, Mossack and Fonseca were both arrested, in conjunction with the investigation in Brazil. They were held without bail, as flight risks.
Sitting in their cells, Mossack and Fonseca continued to maintain their innocence and fought to have the “no bail” decision overturned. In April 2017, an appeals court over-turned the lower court and, without explanation, released them on $500,000 each.
And now here they are back in court in Panama.
What’s at risk this time is more than just their liberty. The entire offshore company formation industry that is the business of Panama is also at risk.
Or could be, if no one deals off the bottom of the deck.
But this is Panama. And there is no way the powers-that-be will allow the criminal trial of Mssrs. Mossack and Fonseca to drag the those same powers down with them.
So just in case the evidence is so powerful that it might, the defense has been thrown a lifeline.
Nothing suspicious here.
By pure coincidence, well enough in advance of this trial, Panama’s Supreme Court ruled, in a previous case, that shell companies and/or trusts used for tax fraud could not be considered a crime if those entities were incorporated before 2019.
Which is long after Mossack and Fonseca had been put out of business.
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