If you’re a fan of Saturday Night Live, you may remember Stefon, a character who regularly appeared during the show’s Weekend Update. Bill Hader and John Mulaney co-wrote the sketches that always featured long, ridiculous descriptions of “New York’s hottest club,” but the biggest laughs always came when Hader, who played Stefon, broke character and started laughing himself. As a result, Mulaney started adding a joke to the queue cards between dress rehearsal and the live show, so when Hader began each sketch by saying, “This place has everything…,” he never really knew exactly what he was about to say.
Not nearly as funny but just as ridiculous, the Panama Papers also have everything: FIFA kickbacks, political corruption, money laundering, fraud, and pretty much any nefarious use for an offshore bank account owned by a shell corporation you can imagine. It is a term used for the collection of over eleven million leaked documents from the Panamanian law firm Mossack Fonseca. A source only identified as “John Doe” released them to the German newspaper, Süddeutsche Zeitung, in early 2015 who, in turn, enlisted the help of the International Consortium of Investigative Journalists to review the massive amount of data. The following are just a few of the stories exposed:
The roster of individuals implicated in the Panama Papers is extensive: 12 current and former heads of state, 128 other public servants, and 33 individuals and corporations blacklisted by the US government. Since they are unable to prosecute, the US government blacklists international entities for evidence linking them to illegal activities. The 33 identified companies are linked to drug cartels, Hezbollah, North Korea, and Iran. Gabriel Zucman, who is an economist at the University of California, Berkeley and author of The Hidden Wealth of Nations: The Scourge of Tax Havens, which was coincidently published at the end of 2015, said that, “These findings show how deeply ingrained harmful practices and criminality are in the offshore world.” In other words, crime and corruption proliferate when left outside of public scrutiny.
In 2010, after paying $780 million in fines and admitting to fostering tax evasion, UBS turned over information regarding its US customers, marking the beginning of the end for Swiss banking secrecy. Until this point, UBS and Mossack Fonseca had extremely complimentary businesses and worked together often. UBS clients needed offshore companies to hold assets, and Mossack Fonseca could provide them. The Panama Papers include countless emails not only detailing this close relationship between the firm and UBS, but also HSBC, Société Générale, RBC, and Credit Suisse. This web points to years of hiding assets from tax authorities and fostering tax evasion.
We all know that divorces are expensive, but when you are Russia’s fourteenth wealthiest man, it’s expensive enough to start an international game of hide and seek with your marital assets, which is exactly what Dmitri Rybolovlev did according to the Panama Papers. With the help of Mossack Fonseca, he created a company called Xitrans Finance Ltd that held a vast wealth in paintings by Picasso, Van Gogh, Monet, Degas, and Rothko. When their marriage went south, Rybolovlev physically moved the paintings to Singapore and London, away from their Swiss home. Hiding assets in divorce proceedings is considered marital fraud, but if you make the assets too expensive and difficult to find, it’s very difficult to prove.
The Panama Papers do not share the familiar intrigue of Ashley Madison where you are likely to know someone on the list, but with more names to come, this massive leak will have many legal and financial implications in the years to come.
Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@LeFleurFinancial.com.