Eric Lipton and Julie Creswell, Panama Papers Show How Rich United States Clients Hid Millions Abroad. The New York Times, 5 June 2016. Financial transactions “for a stable of wealthy clients from the United States are outlined in extraordinary detail in the trove of internal Mossack Fonseca documents known as the Panama Papers. The materials were obtained by the German newspaper Süddeutsche Zeitung and the International Consortium of Investigative Journalists, and have now been shared with The New York Times. In recent weeks, the papers’ revelations about Mossack Fonseca’s international clientele have shaken the financial world. The Times’s examination of the files found that Mossack Fonseca also had at least 2,400 United States-based clients over the past decade, and set up at least 2,800 companies on their behalf in the British Virgin Islands, Panama, the Seychelles and other jurisdictions that specialize in helping hide wealth…. For many of its American clients, Mossack Fonseca offered a how-to guide of sorts on skirting or evading United States tax and financial disclosure laws.”
Many of these transactions were legal; there are legitimate reasons to create offshore accounts, particularly when setting up a business overseas or buying real estate in a foreign country.
But the documents — confidential emails, copies of passports, ledgers of bank transactions and even the various code names used to refer to clients — show that the firm did much more than simply create offshore shell companies and accounts. For many of its American clients, Mossack Fonseca offered a how-to guide of sorts on skirting or evading United States tax and financial disclosure laws.
These included locating an individual from a “tax-convenient” jurisdiction to be the straw man owner of an offshore account, concealing the true American owner, or encouraging one client it knew was a United States resident to use his foreign passports to open accounts offshore, again to avoid scrutiny from regulators, the documents show….
[E]ven though the law firm said publicly that it would not work with clients convicted of crimes or whose financial activities raised “red flags,” several individuals in the United States with criminal records were able to turn to Mossack Fonseca to open new companies offshore, the documents show.
Federal law allows United States citizens to transfer money overseas, but these foreign holdings must be declared to the Treasury Department, and any taxes on capital gains, interest or dividends must be paid — just as if the money had been invested domestically. Federal officials estimate that the government loses between $40 billion and $70 billion a year in unpaid taxes on offshore holdings.
Experts in federal tax law, money laundering and offshore accounts — asked by The Times to examine certain documents or at least to identify legal issues raised by the money management techniques that Mossack Fonseca advocated — said the law firm at times had come up with creative, but apparently legal, strategies to save clients money….
While the experts were reluctant to declare that the law firm or its clients had broken any laws given that no charges have been filed, they said they were surprised at how explicitly Mossack Fonseca had offered advice that appeared carefully crafted to help its clients evade United States tax laws….
The firm’s American client list does not appear to include the sort of high-profile political figures who have emerged from reporting on the Panama Papers in many other countries around the world.
But the services offered by Mossack Fonseca, with 500 employees in more than 30 offices worldwide, were in high demand by the rich and famous in the United States….
The firm’s American clients often expressed disbelief at how much they could lighten their tax burden by using the techniques advocated by Mossack Fonseca.
“At hearing that he can make nearly $8 million per year just on tax savings,” a client from Pennsylvania “was now wide awaken,” a Mossack Fonseca staff member wrote. “I could even detect sweats coming down from his forehead and his cheeks were beginning to blush with crimson excitement. Noticing his interest, I went in for the kill.”…
Black Hole for Assets
In 2006, using a secret email account set up by Mossack Fonseca so his correspondence would not be traced by the authorities, a businessman from Washington State asked a common question among the firm’s potential American clients:
“How does a US citizen legally get funds to Panama without the knowledge of the US government and how can those funds be profitably invested without the US government knowing about them?”
The reply came from Ramsés Owens, then a partner who helped run the firm’s trust division, offering clients “effective solutions to enhance your privacy, protect your wealth.” Mr. Owens laid out a basic menu of services: a package deal setting up an offshore company in what he promised would be a relatively cheap and quick transaction.
“We have right now a special offer by which we create a Private Foundation/company combination for a flat fee of US$4,500.00,” Mr. Owens said. “It includes Charter Documents, Regulations, nominee officers and directors, bank account and management of funds, provision of authorized signatories, neutral phone and fax numbers and mail forwarding services for both the private foundation and its underlying company.”
With this legal structure in place, Mr. Owens went on to explain, any money placed in these accounts would essentially go into a black hole….
Tracey Ponsoldt Powers, William Ponsoldt’s [wealthy manager of a hedge fund] daughter, approached the firm in October 2008 with an urgent request for help in secretly moving some of her family’s money to Panama and then into gold coins. She feared political developments at home.
“I feel VERY unsettled with this election [2008] and how the media is censoring information and spinning the American Public to vote Obama,” she wrote to Mr. Owens at Mossack Fonseca. “It is so obvious to me, that they are setting us up with a Socialist — but most people can’t see it happening before their eyes! It’s like propaganda that is brainwashing Americans to forget the Principles of Hard Work, Ingenuity, Risk and Boundless Success!”…
The use of a stand-in to hide the true ownership of an account is one of the remaining illegal ploys favored by Americans today as international banks, under pressure from the United States, demand proof of account ownership, said Jeffrey Neiman, a former federal prosecutor from Miami who specialized in criminal tax offenses…. “The fact that a law firm was willing to do this legitimizes the process for their clients,” he said.