Mossack Fonseca traces its beginnings to 1986, when Ram\u00f3n Fonseca merged his small, one-secretary law firm in Panama with another local firm headed by J\u00fcrgen Mossack, a Panamanian of German origin.<\/p>\n
\u201cTogether,\u201d Fonseca later mused to a journalist, \u201cwe have created a monster.\u201d<\/p>\n
Both men had international pedigrees and backgrounds in the worlds of money, power and secrets.<\/p>\n
Fonseca was born in Panama in 1952 and studied law and political science at the University of Panama and the London School of Economics. As a young man, he once recalled, he hoped to save the world, first yearning to be a priest and later working for six years for the United Nations in Geneva.<\/p>\n
\u201cI didn\u2019t save anything, I didn\u2019t make any change,\u201d he recalled in a television interview in 2008. \u201cI decided then, as I was a little more mature, to dedicate myself to my profession, to have a family, to get married and have a regular life \u2026 As one gets older, you turn more materialistic.\u201d<\/p>\n
Mossack was born in Germany in 1948. He moved to Panama with his family in the early 1960s, according to his law partner.<\/p>\n
Mossack\u2019s father had been a member of the Waffen-SS, the notorious armed wing of the Nazi Party during World War II, according to US Army intelligence files obtained by ICIJ.<\/p>\n
After the war the father offered his services to the US government as an informant, the files show, claiming \u201che was about to join a clandestine organization, either of former Nazis now turned Communist . . . or of unconverted Nazis cloaking themselves as Communists.\u201d An Army intelligence officer wrote that the offer to spy for the US might simply be \u201ca shrewd attempt to get out of an awkward situation.\u201d<\/p>\n
Nevertheless, the old intelligence files indicate that Mossack\u2019s father later ended up in Panama, where he offered to spy, this time for the CIA, on Communist activity in nearby Cuba.<\/p>\n
After earning a law degree in Panama in 1973, the son worked for a time as a lawyer in London before returning to Panama to start the firm that he would later merge to form Mossack Fonseca & Co.<\/p>\n
Today, both partners move in the highest circles of Panamanian society.<\/p>\n
As well as being a lawyer, Fonseca leads an equally high profile second life as an award-winning novelist. Among his books is \u201cMister Politicus,\u201d a political thriller that, his literary\u00a0 website<\/a> says,\u00a0\u201carticulates the tangled processes that unscrupulous officials use to gain power and achieve their detestable ambitions.\u201d<\/p>\n Fonseca knows the world of politics through his work until recently as a top adviser to the Panama President, Juan Carlos Varela.<\/p>\n Fonseca announced in early March that he was taking a\u00a0 leave of absence<\/a> from that position after allegations that the Mossack Fonseca\u2019s Brazilian office was involved in a still-growing bribery and money-laundering scandal centered on Brazil\u2019s state-controlled oil company. He took the action, he said, \u201cto defend my honour and my firm and my country.<\/a>\u201d<\/p>\n Denying any involvement in wrong-doing during a television interview, he used an analogy the company has employed before, saying that if an offshore firm is put to bad use, the company is no more culpable than an automobile factory that built a car later used in a robbery.<\/p>\n Mossack is a member of the prestigious Club Union, where his daughter Nicole made her debut in 2008. He also served on the Conarex, Panama\u2019s council on foreign relations, from 2009 to 2014.<\/p>\n Mossack\u2019s holdings, according to the files obtained by ICIJ, include a teak plantation and other real estate, an executive helicopter, a yacht named Rex Maris and a collection of gold coins.<\/p>\n Path breaking in the BVI<\/em><\/strong><\/p>\n The merger that created Mossack Fonseca came at a difficult time in Panama\u2019s history. The country faced political and economic instability under military dictator Manuel Noriega, who was getting\u00a0 unwelcome attention<\/a> because of growing evidence that he was involved in money laundering and drug running.<\/p>\n In 1987, with Panama under a shadow, Mossack Fonseca made its first big move abroad, establishing a branch in the British Virgin Islands, which a few years before had passed a law that made it easy to set up offshore companies without public disclosure of owners and directors.<\/p>\n \u201cMossack Fonseca was the first to come from Panama to the BVI and others followed,\u201d Rosemarie Flax, Mossack Fonseca\u2019s longtime managing director there, told a British Virgin Islands news outlet in May 2014.<\/p>\n Today, the British Virgin Islands are home to about 40% of the world\u2019s offshore companies. Of the companies that appear in Mossack Fonseca\u2019s files, one out of every two companies \u2014 more than 113\u00a0000 \u2014 were incorporated in the British Virgin Islands.<\/p>\n Tales of the South Pacific<\/em><\/strong><\/p>\n Mossack Fonseca made another significant move in 1994.<\/p>\n It helped the tiny nation of Niue \u2014 a South Pacific coral outcrop with a population of fewer than 2,000 \u2014 craft legislation that provided for incorporation of offshore companies. The law firm had picked Niue, Mossack later told Agence France-Presse, because it wanted a location in an Asia-Pacific time zone and because it would face no competitors: \u201cIf we had a jurisdiction that was small, and we had it from the beginning, we could offer people a stable environment, a stable price.\u201d<\/p>\n The firm then signed a 20-year-deal with the small atoll\u2019s government for exclusive rights to register offshore companies in Niue. Importantly, Niue offered registration in Chinese or Cyrillic characters, making it attractive to Chinese and Russian customers.<\/p>\n By 2001, Mossack Fonseca was doing so much business out of Niue that it was paying the equivalent of $1.6-million of the Niue government\u2019s projected $2-million annual budget.<\/p>\n But the firm\u2019s cosy relations with the island nation also began attracting unwanted scrutiny.<\/p>\n That same year the US State Department questioned the \u201cawkward sharing arrangements\u201d between Niue and Mossack Fonseca and warned that Niue\u2019s offshore industry had been \u201clinked with the laundering of criminal proceeds from Russia and South America.\u201d<\/p>\n The Financial Action Taskforce, an intergovernmental organization set up by major nations to combat money laundering, put Niue on a blacklist of jurisdictions that were failing to take steps to prevent money laundering, threatening economic sanctions.<\/p>\n Though Mossack denied that Niue was involved in money laundering, in 2001 the Bank of New York and Chase Manhattan imposed embargoes on transfers of dollars to Niue. In 2003, Niue declined to renew four Mossack Fonseca-incorporated companies, signaling that it would be shutting down the firm\u2019s exclusive franchise.<\/p>\n Shifting operations<\/em><\/strong><\/p>\n Losing Niue didn\u2019t slow Mossack Fonseca down. It simply shifted its operations, with the law firm encouraging customers who had companies in Niue to simply re-incorporate in the nearby nation of Samoa.<\/p>\n The switch was part of a pattern that emerges in the documents. When legal crackdowns have hindered Mossack Fonseca\u2019s ability to serve its clients, it has quickly adapted and found other places to work.<\/p>\n When the British Virgin Islands cracked down on bearer shares in 2005, Mossack Fonseca moved that particular business to Panama.<\/p>\n Companies that have bearer shares don\u2019t display an owner\u2019s name. If they\u2019re in your hands, you own them. They have long been considered a vehicle for money laundering and other wrongdoing, and have been gradually disappearing worldwide. In some jurisdictions, they are still allowed, although subject to more restrictions.<\/p>\n Mossack Fonseca\u2019s ability to move its business swiftly shows up in a big increase in incorporations in one of those jurisdictions, the Caribbean island Anguilla, which saw the number of companies incorporated there more than double between 2010 and 2011. Anguilla is now one of Mossack Fonseca’s top four jurisdictions for incorporations.<\/p>\n Mossack Fonseca has also expanded its operations to take care of the additional needs of its customers, including registering private aircraft and yachts.<\/p>\n By 2006, according to the files, Mossack Fonseca expanded its business further by handling the finances of some clients or, as the company described it, \u201cdiscretionary portfolio management.\u201d<\/p>\n According to the documents the firm\u2019s in-house asset manager operations \u2014 called Mossfon Asset Management SA, or MAMSA \u2014 handled more than 4\u00a0700 transactions and at least $1.2-billion in client money between mid-2007 and mid-2015.<\/p>\n MAMSA worked with several banks, including at least two that have been the subjects of money laundering investigations: Banca Privada d\u2019Andorra, accused by the US Treasury Department in a 2015 report of\u00a0 money laundering for powerful criminal gangs<\/a>, and Deutsche Bank Switzerland, whose parent company has been investigated by authorities in the United Kingdom and the United States for possible money laundering for Russian clients. The US treasury withdrew its finding on Banca Privada d\u2019Andorra on February 19, 2016, saying that it \u201cno longer operates in a manner that poses a threat to the US financial system.\u201d<\/p>\n The former non-executive chairmen of the bank, brothers Ramon and Higini Cierco, whose family is the majority shareholder, said that they believed at the Treasury action could not withstand a court challenge and that the allegations were based on cases that the Andorran regulator has “been aware of for years.”<\/p>\n Secrecy for sale\u00a0<\/em><\/strong><\/p>\n The files show that as well as Deutsche Bank, the firm works with some of the world\u2019s other biggest financial institutions, such as HSBC, Soci\u00e9t\u00e9 G\u00e9n\u00e9rale, Credit Suisse, UBS, and Commerzbank, in some cases to help the banks\u2019 clients set up complex structures that make it hard for tax collectors and investigators to track the flow of money from one place to another.<\/p>\n Mossack Fonseca said that allegation that it provides structures designed to hide the identity of owners is \u201ccompletely unsupported and false\u201d.<\/p>\n Soci\u00e9t\u00e9 G\u00e9n\u00e9rale and Credit Suisse said they emphasize tax compliance and are vigilant against fraud and money laundering.<\/p>\n Credit Suisse said that, since 2013, it has been putting in place programs that ask private clients to provide evidence of tax compliance or lose their banking relationship.<\/p>\n \u201cThe allegations are historical, in some cases dating back 20 years,<\/p>\n predating our significant, well-publicised reforms implemented over the last few years,\u201d said Rob Sherman, a spokesperson for HSBC in New York.<\/p>\n UBS said it knows the identity of the owners of all companies that it is asked to work with and has strict anti-money-laundering rules. Deutsche Bank noted that it reached an agreement November 24, 2015 with the US Justice Department to pay $31-million in exchange for a non-prosecution agreement in a US investigation of Swiss banks that helped US citizens evade taxes.<\/p>\n Commerzbank said it would have no comment.<\/p>\n The real owners of bank accounts that appear under the name of anonymous offshore companies registered by Mossack Fonseca may be hidden behind so-called nominee directors \u2014 stand-in directors supplied by Mossack Fonseca \u2014 who provide cover for the real owners.<\/p>\n Depending on how much a client pays, more than one secrecy jurisdiction and more than one anonymous company can be involved, adding to the frustration of authorities if they try to trace the real owners.<\/p>\n In Panama, Mossack Fonseca\u2019s products include private foundations, which are not subject to taxes in Panama and operate under a law that does not require the names of the founders or beneficiaries to be revealed.<\/p>\n Other activities found in the files include Mossack Fonseca changing and backdating documents when a client is in trouble and allowing customers to hide their assets by setting up foundations in Panama that initially list non-profits such as the World Wildlife Fund as the beneficiary but allow the customer to change the beneficiary at will.<\/p>\n Backdating is a common industry practice, sometimes reflecting the date of a decision made before it was recorded, Mossack Fonseca said.\u00a0 The aim \u201cis not to cover up or hide unlawful acts.\u201d<\/p>\n In one case, the firm helped a financial advice author from New York hide $1-million from the United States Internal Revenue Service by providing the author with \u201ca natural person nominee\u201d \u2014 a straw man who worked for Mossack Fonseca \u2014 who pretended to be the owner of an investment account with HSBC bank in Guernsey, an island nation in the English Channel.<\/p>\n \u201cWe do not provide beneficiary services to deceive banks,\u201d said Mossack Fonseca in written answers to ICIJ.<\/p>\n Most wanted<\/em><\/strong><\/p>\n Though Mossack Fonseca publicly says it \u201cconducts exhaustive due diligence to verify the legitimacy of each our clients\u201d and says it would never work with political grafters, criminals or other shady characters, the firm\u2019s internal records paint a different picture.<\/p>\n An analysis by ICIJ found, for example, that Mossack Fonseca has worked with at least 33 companies and people blacklisted by US authorities because of their links to terrorism, narcotics trafficking or because they aided rogue regimes such as North Korea or Iran.<\/p>\n Mossack Fonseca said it \u201cdoes not foster or promote unlawful acts\u201d and has \u201cnever knowingly allowed the use of our companies\u201d by individuals working with sanctioned governments. In most cases, the obligation to vet customers belongs to the banks, law firms and other intermediaries that are the link between the Panama firm and the owners of their shell companies, it said.<\/p>\n The files show that Mossack Fonseca sometimes made a financial calculation to hang onto clients who were big sources of fees for the company, even after they were revealed by authorities to be undesirable.<\/p>\n In other cases, Mossack Fonseca\u2019s loose procedures allowed blacklisted individuals and other questionable clients to slip by without even the firm itself knowing with whom it was dealing.<\/p>\n In an episode involving Rafael Caro Quintero, the one-time head of the Guadalajara drug cartel in Mexico, the firm\u2019s actions were apparently based on a more visceral consideration \u2014 fear.<\/p>\n Authorities arrested Caro Quintero in Costa Rica in 1985 for the torture and murder of U.S. drug agent Enrique \u201cKiki\u201d Camarena. He was extradited to Mexico and sentenced in 1989 to 40 years in prison. The Mexican government confiscated his wealth \u2014 including a property that belonged to an offshore company set up by Mossack Fonseca \u2014 and handed it over to Costa Rica\u2019s government, which then passed it to Costa Rica\u2019s National Olympic Committee.<\/p>\n The files show that in March 2005, Costa Rican Olympic officials asked Mossack Fonseca to help them obtain clear title to the property.<\/p>\n A lawyer working for Mossack Fonseca told the Costa Rican visitors that the offshore company\u2019s shareholders would have to decide. A document in Caro Quintero\u2019s company files labeled “Case details > shareholders” contained only a notation: “No data found!” But the lawyer wrote in an internal email exchange that it \u201cappears the real owner of the estate, and therefore of the company, was the narcotrafficker Rafael Caro Quintero.\u201d<\/p>\n Mossack, one of three directors listed for the company, wasn\u2019t interested in getting on Caro Quintero\u2019s bad side.<\/p>\n \u201cCompared to Quintero even Pablo Escobar was a baby!\u201d he wrote in an email exchange, the upshot of which was that Mossack Fonseca would resign from its representation of Caro Quintero\u2019s offshore. \u201cI don’t want to be among those Quintero visits after jail.\u201d<\/p>\n In 2013, Caro Quintero was released from prison on a technicality and immediately disappeared. He remains at large and is back on Interpol\u2019s Most Wanted list.<\/p>\n Playing defence<\/em><\/strong><\/p>\n Despite the notoriety of some of its clients, Mossack Fonseca has managed to keep a remarkably low profile. The Economist<\/em> called it \u201cthe tight-lipped Mossack Fonseca\u201d in a 2012 article about offshore middlemen.<\/p>\n That same year, in July 2012 according to the files, the firm engaged the services of Mercatrade SA, a company that provides \u201conline reputation management.\u201d<\/p>\n The contract promises to launder Mossack Fonseca\u2019s image by removing negative entries on the Internet related to 12 keywords in English and Spanish: \u201cLavado de dinero, lavado de activos, evasi\u00f3n fiscal, fraude fiscal, Delito, Trafico de armas, Money Laundering, Tax Evasion, Tax Fraud, dirty Money, scandal, esc\u00e1ndalo.\u201d<\/p>\n Mossack Fonseca has since retained one of the world\u2019s most powerful public relations agencies, Burson-Marsteller, which specializes in representing controversial clients, including dictators in Argentina, Indonesia and Romania and Union Carbide after a deadly chemical explosion in Bhopal, India.<\/p>\n Despite the attempts at public relations, nations have begun to take a harder look at Mossack Fonseca\u2019s practices.<\/p>\n In 2012 and 2013 regulators in the British Virgin Islands hit the firm with a series of fines for violating the country\u2019s anti-money-laundering rules, including a $37\u00a0500 penalty for failing to properly screen a \u201chigh risk\u201d client \u2014 Alaa Mubarak, the son of Egypt\u2019s ousted former dictator.<\/p>\n In February 2015, German authorities launched a series of raids on the Commerzbank office and private homes in Frankfurt. S\u00fcddeutsche Zeitung reported at the time that the German authorities were considering legal actions against Mossack Fonseca employees for possible contributions to tax evasion involving the bank\u2019s offices in nearby Luxembourg.<\/p>\n In early 2016 in Brazil, Mossack Fonseca became one of the targets of a bribery and money laundering investigation dubbed \u201cOperation Car Wash,\u201d which is rapidly growing into one of the biggest corruption scandals in Latin American history.<\/p>\n Prosecutors allege that Brazilian businesses cooperated with each other to divide up the bidding for contracts with state-controlled oil conglomerate Petrobras, inflating prices and using the extra money to bribe politicians and oil company officials and to enrich themselves.<\/p>\n Brazilian prosecutors claim Mossack Fonseca\u2019s office in Brazil helped some of the defendants by creating shell companies that were used to commit crimes. At a news conference in January 2016, they called Mossack Fonseca \u201ca big money launderer\u201d and announced they had filed criminal charges against five employees of Mossack Fonseca\u2019s Brazilian office, involving crimes ranging from money laundering to destroying and hiding documents.<\/p>\n The firm denies any wrongdoing in the case. It said in a statement that the Mossack Fonseca office in Brazil is a franchise, and the Panama law firm, which practices only in Panama, \u201cis being erroneously implicated in issues for which it has no responsibility.\u201d<\/p>\n The argument was similar to the one used in Vegas.<\/p>\n The recently settled court action in Las Vegas was begun by a US company, NML Capital, which is controlled by billionaire investor Paul Singer \u2014 a hedge fund manager perhaps best known for his massive donations to the US Republican Party.<\/p>\n Mossack Fonseca was not a defendant, but it has been the subject of court orders seeking to obtain information about Nevada companies that the hedge fund claimed had been set up through Mossack Fonseca by L\u00e1zaro B\u00e1ez, a businessman close to former Argentine presidents N\u00e9stor Kirchner and Cristina Fern\u00e1ndez.<\/p>\n Internal emails obtained by ICIJ show Mossack Fonseca employees in Panama scrambled to hide or destroy evidence of the firm\u2019s control of MF Nevada out of concern that the court case might lead to a search of the Nevada branch.<\/p>\n Another concern, the emails show, was whether the manager of the MF Nevada branch, Patricia Amunategui, could be forced to testify. In one email, a Mossack Fonseca official said the parent firm wanted her to \u201cbehave\u00a0as if she was a provider\u201d \u2014 acting as if she was leading an independent US company that had a business relationship with Mossack Fonseca but no ownership connection.<\/p>\n But Mossack Fonseca officials worried that she wasn\u2019t savvy enough to pull it off.<\/p>\n Mossack Fonseca\u2019s IT manager wrote that IT staffers were concerned Amunategui \u201cdoes not have the skills to pass a basic audit without allowing ourselves to be in evidence \u2014 Look out!!!. . . I\u2019m deeply worried about Mrs Patricia forgetting things and getting very nervous. I think that in this situation it could easily become clear that we are hiding something.\u201d<\/p>\n US Magistrate Judge Cam Ferenbach rejected the parent firm\u2019s attempt to distance itself from MF Nevada.<\/p>\n He noted that the branch manager\u2019s contract was signed by the firm\u2019s partners, Mossack and Fonseca, and that she received \u201call of her directions\u201d from a Mossack Fonseca employee who lives and works in Panama. \u201cMossack Fonseca & Co\u2019s own website advertises the services of MF Corporate Services as its own,\u201d the judge wrote.<\/p>\n The judge ruled in March 2015 that Mossack Fonseca and MF Nevada were one in the same.<\/p>\n Contributors: Rigoberto Carvajal, Emilia D\u00edaz-Struck, Cecile Schillis-Gallego,\u00a0 Mar Cabra, Mago Torres, and Sol Laur\u00eda.<\/em><\/p>\n Files show client roster that includes drug dealers, Mafia members, corrupt politicians and tax evaders \u2014 and wrongdoing galore<\/p>\n","protected":false},"author":2,"featured_media":22570,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-4140","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stories"],"acf":[],"_links":{"self":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/4140","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/comments?post=4140"}],"version-history":[{"count":1,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/4140\/revisions"}],"predecessor-version":[{"id":30742,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/4140\/revisions\/30742"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media\/22570"}],"wp:attachment":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media?parent=4140"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/categories?post=4140"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/tags?post=4140"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![](\"https:\/\/amabhungane.org\/wp-content\/uploads\/2018\/03\/250x106.jpg\")
<\/a>
\nThe amaBhungane Centre for Investigative Journalism\u00a0provided this story. Like it?\u00a0Be an amaB supporter<\/a> and help us do more. Know more? Send us\u00a0<\/em>a tip-off.<\/em><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"