Panama

The Panama Papers Could Lead to Capitalism’s Great Crisis
Rana Foroohar, Time
April 4, 2016

Mossack Fonseca was working with big name financial groups like UBS, HSBC, Société Générale, and many others to help elites from the Communist Party leadership of China, to soccer star Lionel Messi, to global financiers hide cash in offshore havens around the world.

It’s just the tip of a much bigger iceberg. “The size of the leak is unprecedented, but the tricks Mossack Fonseca has allegedly used for its clients are neither new nor surprising. Anonymous shell companies and the failure of governments to require lawyers, corporate service companies, or banks to collect beneficial ownership information on clients leave the door wide open for dirty money to flow around the globe virtually unhindered,” says Heather Lowe, the Director of Government Affairs for Global Financial Integrity, a Washington DC-based consultancy.

To me, this is one of the key issues at work in the U.S. presidential election. Voters know at a gut level that our system of global capitalism is working mainly for the 1 %, not the 99 %. That’s a large part of why both Sanders and Trump have done well, because they tap into that truth, albeit in different ways. The Panama Papers illuminate a key aspect of why the system isn’t working–because globalization has allowed the capital and assets of the 1 % (be they individuals or corporations) to travel freely, while those of the 99 % cannot. Globalization is supposed to be about the free movement of people, goods, and capital. But in fact, the system is set up to enable that mobility mainly for the rich (or for large corporations). The result is global tax evasion, the offshoring of labor, and an elite that flies 35,000 feet over the problems of nation states and the tax payers within them.
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“I expect that the populist backlash will be intense and will impact everything from high-end real estate to PACs (effectively political shell companies),” says one of my favorite sources, Peter Atwater, a behavioral economist. “Voters are increasingly angry at the seeming transience of the financial/corporate/political elite. The 1% can move anywhere they want—and profit handsomely from the relocation, but the 99% can’t. Worse, the 99% are left with the aftermath—the empty buildings of a deserted Detroit, the toxic waste from chemical plants in West Virginia or the unsustainable tax liabilities of Puerto Rico.”

Panama Papers Expose Kleptocracy in Action

Inside the Panama Papers: Massive leak shows just how extensive corruption is worldwide, implicating politicians, human traffickers and drug dealers
by Ben Norton, Salon
Monday, Apr 4, 2016 05:22 PM EST

Many Western media reports on the Panama Papers framed the story around Russian President Vladimir Putin, whose close friends are involved in the corruption, but he is just one small part of the much larger scandal.

King Salman of Saudi Arabia and Petro Poroshenko, president of Ukraine, both of whom are close Western allies, are directly implicated in the corruption.

A slew of other leaders are involved, including Nawaz Sharif, the prime minister of Pakistan; Ayad Allawi, the ex-interim prime minister and former vice-president of Iraq; Sigmundur Davíð Gunnlaugsson, the prime minister of Iceland; Alaa Mubarak, the son of Egypt’s former Western-backed dictator; and the children of Ilham Aliyev, the president of Azerbaijan.

Joining them are a key member of the ethics committee of international soccer association FIFA, family members of Syrian President Bashar al-Assad and even the son of former U.N. Secretary General Kofi Annan.

British lawmakers and the father of U.K. Prime Minister David Cameron are also implicated, along with donors to political parties. So too are the families of members of China’s ruling body, the politburo.

Panama Papers: World Leaders From Iceland to Argentina Exposed in Massive Tax Evasion Scheme

A Key Similarity Between Snowden Leak and Panama Papers: Scandal Is What’s Been Legalized
by Glenn Greenwald, The Intercept
Apr. 4 2016, 8:52 a.m.

(I)llegality was never the crux of the scandal triggered by (the) NSA revelations. Instead, what was most shocking was what had been legalized: the secret construction of the largest system of suspicionless spying in human history. What was scandalous was not that most of this spying was against the law, but rather that the law — at least as applied and interpreted by the Justice Department and secret, one-sided FISA “courts” — now permitted the U.S. government and its partners to engage in mass surveillance of entire populations, including their own. As the ACLU’s Jameel Jaffer put it after the Washington Post’s publication of documents showing NSA analysts engaged in illegal spying: “The ‘non-compliance’ angle is important, but don’t get carried away. The deeper scandal is what’s legal, not what’s not.”

Yesterday, dozens of newspapers around the world reported on what they are calling the Panama Papers: a gargantuan leak of documents from a Panama-based law firm that specializes in creating offshore shell companies. The documents reveal billions of dollars being funneled to offshore tax havens by leading governmental and corporate officials in numerous countries (the U.S. was oddly missing from the initial reporting, though journalists vow that will change shortly).

Some of these documents undoubtedly reveal criminality: either monies that were illegally obtained (and are being hidden for that reason) or assets being concealed in order to criminally evade tax debts. But the crux of this activity — placing assets offshore in order to avoid incurring tax liability — has been legalized. That’s because Western democracies, along with overt tyrannies, are typically controlled by societies’ wealthiest, and laws are enacted to serve their interests.
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Proving that certain behavior is “legal” does not prove that it is ethical or just. That’s because corrupted political systems, by definition, often protect and legalize exactly the behavior that is most unjust. Vital journalism does not only expose law breaking. It also highlights how corrupted political and legal systems can be co-opted by the most powerful in order to legally sanction atrocious and destructive behavior that serves their interests, typically with little or no public awareness that it’s been done.

In such cases, as Jaffer put it, “The deeper scandal is what’s legal, not what’s not.” The key revelation is not the illegality of the specific behavior in question but rather the light shined on how our political systems function and for whose benefit they work. That was true of the Snowden leak, and it’s true of the Panama Papers as well.

Did Bernie Sanders Predict the Panama Papers When He Opposed Clinton-Backed U.S.-Panama Trade Deal?

This is much worse than the Panama Papers: How America became a world leader in tax avoidance
by David Dayen, Salon
Tuesday, Apr 5, 2016 05:58 AM EST

What we have not yet seen is any U.S. individual implicated in the leak, which seems unlikely given our stable of international wealth. The editor of Süddeutsche Zeitung, the German newspaper which first received the documents, promises there will be more to come. But one reason why Americans haven’t yet been implicated is that they already have a perfectly good place for their tax avoidance schemes: right here in the United States.

While several developed countries are already moving to reduce the anonymity behind shell companies, including a public registry of “beneficial ownership” information in the United Kingdom and a directive to collect similar information throughout the European Union, the United States has resisted such transparency. According to recent research, the United States is the second-easiest country in the world to obtain an anonymous shell corporation account. (The first is Kenya.) You can create one in Delaware for your cat.

While we force foreign financial institutions to give up information on accounts held by U.S. taxpayers through the Foreign Account Tax Compliance Act of 2010, we don’t reciprocate by complying with international disclosure requirements standardized by the Organization for Economic Co-Operation and Development (OECD) and agreed to by 97 other nations. As a result, the U.S. is becoming one of the world’s foremost tax havens.

Several states – Delaware, Nevada, South Dakota, Wyoming – specialize in incorporating anonymous shell corporations. Delaware earns between one-quarter and one-third of their budget from incorporation fees, according to Clark Gascoigne of the FACT Coalition. The appeal of this revenue has emboldened small states, and now Wyoming bank accounts are the new Swiss bank accounts. America has become a lure, not only for foreign elites looking to seal money away from their own governments, but to launder their money through the purchase of U.S. real estate.

In addition, if the United States really wanted to stop Panama or the Cayman Islands or other offshore tax havens from allowing the wealthy to avoid hundreds of billions in payments, they could do so in about 15 minutes. Our recent free trade deal with Panama allegedly prevents Americans from creating offshore tax havens there, but in general, such tax information exchanges are insufferably weak. And the little America does abroad to police tax evasion dwarfs the next to nothing we do at home.

The intertwining of global and political elites makes tax avoidance, whether legal or illegal, a secondary concern for the country, regardless of how it robs the country of resources and promotes the conception of a two-tiered economic and justice system where the upper class need not follow the same rules as the rest of us. Our politicians made a consistent choice that this rampant tax avoidance doesn’t bother them.

“Anonymous shell companies have been used to rip off Medicare,” said Gascoigne. “They’ve been used to evade U.S. sanctions. Arms dealers like Viktor Bout, the so-called Merchant of Death, used U.S. shell companies to launder money.” Indeed, Mossack Fonseca has affiliated offices in Wyoming, Nevada, and Florida. America is up to its eyeballs in this style of corruption.

It’s a fixable situation. The U.S. could sign on to the OECD standards tomorrow. In addition, the Incorporation Transparency and Law Enforcement Assistance Act would require data collection on the beneficial ownership of shell companies and limited liability corporations. But opposition from the states benefiting from foreign tax havens, as well as the National Association of Secretaries of State, has stalled progress. Secretaries of State typically have the authority to register corporations, and they prosper from registration fees. Delaware and its companion states that offer corporate secrecy convinced the Secretaries of State organization to oppose the bill.

If every state gave up this information, Delaware would still be a friendly place for corporations to register, given their legal regime, low corporate tax rates, and several other advantages. But without a federal law, states can just compete with each other over how much corporate information to hide from domestic and foreign authorities.

Extremely powerful forces hope that the Panama Papers reaction mirrors previous leaks about tax avoidance – a lot of grumbling but no lasting changes. They try to guarantee that by lobbying their respective governments. And they care more than the masses of people who don’t lobby every day for the rick to pay their taxes. The core problem doesn’t stop with the bare facts, pointed out in lurid detail by this leak. It’s that nobody really wants to do anything about it.

Panama Papers’ Reporters Explain How the Biggest Leak in Data Journalism’s History Materialized

Perfectly Reasonable Question: Why No Big Splash for ‘Panama Papers’?
By Margaret Sullivan, Public Editor, The New York Times
April 4, 2016 3:51 pm

By Monday, I had heard from many Times readers who wanted to know why The Times didn’t seem to be giving the news a big ride. The Times posted a wire-service article on Sunday afternoon. It wasn’t until 9:15 p.m. that a staff-produced piece of moderate length went onto the website. It was not given prominent display; in Monday’s paper, the story did not make the front page. It ran at the top of Page A3.

Despite that, readers clearly were extremely interested. (And for good reason. Esquire’s Charles Pierce wrote Monday that the revelations raise the distinct possibility “that every political system in the world — even the nakedly authoritarian ones — is hopelessly rigged, and that the marvelous new world of the miraculous global economy is an even bigger thieves’ paradise than you, me, or even Jamie Dimon thought it was.”)

Quietly displayed and delayed as it was, the story nevertheless was among The Times’s 10 most widely read articles on Monday morning.
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I asked Matt Purdy, a deputy executive editor, to respond. He told me by phone that The Times is very interested in the data leak, and the articles produced from it. But he said Times editors believe that they owe it to their readers to do their own evaluation of the material. And that, he said, is happening now.

Because The Times was not a part of the global consortium and was not aware that the story was coming, it needed some time to get its own story going. “We didn’t know these documents were out there and being worked on,” he said.

“We didn’t have access to the documents, and that is a very big issue,” he said. But Mr. Purdy said he hoped, and had good reason to believe, that that would change soon.

“This is a great trove of documents — certainly interesting and valuable — and it takes a while to know what to make of them,” he said. Failing that on Sunday night, the story didn’t seem appropriate for the front page, he said. (In addition, I’ll note, The Times was publishing a major enterprise piece about corruption in Brazil. Very well done in its own right, it was given the most prominent space on Monday’s front page.)

Mr. Purdy was quick to say that the consortium journalists “did a really good job” with the Panama Papers reporting.

“We tried to put something in place, to do our best without the documents,” he told me.

Why did it take so long to post a staff-written story? Many Times readers told me that as soon as they heard about the story, they went to the Times website to find such a story and were disappointed not to find one. The staff article was published at 9:15 p.m.

“This was not a case of a single-fact story that we could simply confirm and go with,” Mr. Purdy said. “This was a case where hundreds of reporters had been working on it for a long time.”

He pointed out that the article that was published added some information from The Times’s own previous digging on Russian financial holdings.

“We have a serious obligation to make sense of this as best we can, evaluate it and put it in context,” he said. He said reporters and editors were working on a follow-up article on Monday and would be doing more soon, “integrating it with our own reporting” on offshore accounts and related topics.