by Farooque Chowdhury
The leak once again reveals how states collude with private interests to protect the criminality of the powerful. How could journalists uncover the Panama Papers while states which carry on surveillance on millions of people, listen to billions of phone calls and read billions of e-mails were apparently unaware of the underhand dealings?
Panama Papers: Denials Expose More Than the Original Exposé
by Farooque Chowdhury
This article previously appeared in Pambazuka News.
“The Panama law firm offering the services knew the identities of the real owners of just 204 of 14,086 companies it had incorporated in Seychelles.”
The denials issued after the exposure by the now-famous Panama Papers expose more about the world of property, its political power and power of its legal arrangements. The entire episode that has now got exposed is nothing but a confirmation of property’s power, its play with instruments called law, which is enacted only to secure property, and the ethical and moral standing, a zero from people’s point of view, the property holders hold on to. The historic revelations, biggest in the history of leaks, once again confirm earlier findings about super-rich.
The Panama Papers, the giant leak of documents, exposes offshore holdings of about 150 kings, crown princes, presidents, prime ministers, politicians, public officials, industrialists, bureaucrats, arms dealers, ganglords, businessmen, tea traders, jute giants, celebrities, film stars and players – all are players in the infamous world of property. The leak, a collective investigation by hundreds of journalists, specifically the International Consortium of Investigative Journalists (ICIJ), of more than 11 million records of about half-a-century, reveals the extent of big property holders’ use of shell companies to conceal their amassed wealth, launder money considered illegal even in the eyes of the laws their political arrangements enact, and their evasion of taxes with the help of “more than 214,000 offshore entities connected to people in more than 200 countries and territories”.
Who is not there in the asset-web? About a dozen current or former world leaders, more than 100 politicians and public officials, Prime Minister of Iceland and his wife, families and associates of Egypt’s Hosni Mubarak, Ukraine’s Petro Poroshenko, Pakistan’s prime minister, South Africa’s Jacob Zuma, a Chinese leader, a king and crown prince of a desert oildom, Argentine President Mauricio Macri, his father and brother, a father and son owning a sports marketing business in Argentina, six members of the House of Lords including a Baroness and life peer, three former British Conservative MPs, dozens of donors to UK political parties, David Cameron’s late father, hundreds of British individuals, a member of FIFA’s ethics committee, disgraced FIFA officials, 20 high-profile footballers and many more are there. Mexican drug lords and terror organizations are also there in the business. More than 500 banks including major ones have contributed to the “game.”
“There are financial services to hide wealth, disregarding and misinterpreting of law, opening of bank accounts to keep commissions from government contracts, money made illegally, and offering of fake ownership records to hide money from the authorities.”
What’s not there? There are addresses, but not persons named in a few documents. There are over-invoicing and under-invoicing, spirit of liberalization, diversification of assets, promotion of “trade”, boosting of exports and earnings, payoffs ranging between 5 percent and 17 percent, for defense supplies including electronic warfare and intelligence systems, and assets of the super-rich. There are deals involving governments. There are masks and secrecy of information on real owners, secret shell companies, offshore accounts, cricket franchise deals, laundering of money, dodging of sanctions and evasion of taxes, profits from suspicious deals, and about 2,000 British firms including banks, law firms, and company incorporators working as “intermediaries” between Mossack Fonesca, the “noble” service providing Panama law firm and its clients. There are frauds. There are financial services to hide wealth, disregarding and misinterpreting of law, opening of bank accounts to keep commissions from government contracts, money made illegally, and offering of fake ownership records to hide money from the authorities: Use of “a natural person who will act as the beneficial owner”, whose “name will be disclosed to the bank.”
According to the ICIJ, a 2015 internal audit found that the Panama law firm offering the services knew the identities of the real owners of just 204 of 14,086 companies it had incorporated in Seychelles. “Ninety-five per cent of our work”, says a memorandum from a Mossack Fonseca partner, “consists in selling vehicles to avoid taxes”.
However, after all these “small” businesses, there are bold denials of any wrongdoing. A statement from Mossack Fonseca has defended its practices: “It is legal and common for companies to establish commercial entities in different jurisdictions for a variety of legitimate reasons, including conducting cross-border mergers and acquisitions, bankruptcies, estate planning, personal safety, restructuring and pooling of investment capital from different jurisdictions in neutral legal and tax regimes that does not benefit or disadvantage any one investor.”
“The real beneficiary remains hidden.”
The law firm in a statement to ICIJ said that it conducts “a thorough due-diligence process” [the “just 204 of 14,086” figure in the paragraph above should not disturb reader] before helping to incorporate companies. “In providing those services, we follow both the letter and spirit of the law. [Bravo law!] Because we do, we have not once in nearly 40 years of operation been charged with criminal wrongdoing,” said the statement. “We’re proud of the work we do, notwithstanding recent and willful attempts by some to mischaracterize it.” The company’s operation is, as is claimed, beyond reproach for decades. It says offshore companies available worldwide are used for legitimate purposes. “If we detect suspicious activity or misconduct, we are quick to report it to the authorities,” it said. “Similarly, when authorities approach us with evidence of possible misconduct, we always co-operate fully with them.”
In this “transparent” business conducted diligently, an intermediary law firm or a bank acts as a director or a nominee shareholder. So the real beneficiary remains hidden. So, there’s no wrongdoing, so there’s nothing criminal.
Leaders and officials have also responded with denials and outrage to the allegations raised against them: Use of secret offshore companies and accounts to hide billions of dollars. Their claim? The documents do not indicate illegal activity.
However, one official said the reports about him were “ridiculous” and “outrageous”. A spokesman for the Argentinian president said the president never had a stake in the company mentioned in the report. A spokesperson for a British Lord denied any wrongdoing and dismissed any allegations of his connection to Mossack Fonseca as “completely untrue.” A prime minister said he has not broken any rules and his wife did not benefit financially from his decisions.
So, it comes out: there is legal coverage, the persons reported to be involved are fair in the eyes of law; anonymous companies in offshore sovereign areas are not illegal; foreign investment laws carry legal gaps with interpretations and technical opportunities; shell companies and offshore accounts can be legally used to mask origin of transactions and ownership. So, law is in favor of money; or, money shapes law. And, law doesn’t hang from a void; state machinery is there to extend support to law.
“Law is in favor of money; or, money shapes law.”
Otherwise, how could a few hundred journalists uncover and check the present information named Panama Papers while states with their vast resources, surveillance and networks were unaware of the business for decades, while states carry on surveillance on millions of people, listen to billions of phone calls and read billions of e-mails? State machineries are not inefficient. Efficiency of these machineries is always evident in cases of ruling, invading, gagging, brutalizing. It turns blind and deaf whenever comes the question of surveillance on capital until that appears as harmful to its overall interest. Even, in that case, the machinery is manipulated. It’s the biased character of the machinery.
It’s not that this is the exposure for the first time. There were earlier exposures in countries including the “Offshore Leaks” and “Swiss Leaks” in India. The present leak is hitherto the largest data leak, larger than leaks by Edward Snowden and the WikiLeaks. How far progress has been made since the earlier leaks?
The biasness of the machineries can be clearly seen whenever a comparison is made between its behavior with the poor and with the rich in cases of implementation of laws it enacts. How many poor people have succeeded in evading taxes and to what amount? How was it in cases of the rich? How much capacity do the poor have to evade law and taxes? Can they or their money travel to offshore companies? Can they float shell companies? Do the poor loudly announce their innocence? What’s it in case of the rich?
The Panama Papers and the following denials have exposed power of the rich, length of their hands, their tact in hiding their wealth, their love for non-transparency, giant banks’ modus operandi, and fear of the rich. They don’t like to let people know the facts of their property and power. Origin of their property is a most sensitive issue to them. Finding out a relationship between the acts and assets exposed by the Panama Papers and origin of resources tell the extent of brutality of capital involved. Lands and labor were appropriated, and the appropriated resources were amassed for quenching blood-thirst of a few. So, questions regarding origin of those assets expose a lot: a lot of lies, deceptions, thievery, appropriation and expropriation.
Farooque Chowdhury, a Dhaka-based freelancer, has authored/edited three books in English: Micro Credit Myth Manufactured (ed.), The Age of Crisis, What Next?