Thanks to the efforts of some intrepid reporters and a few industry whistle blowers, most people are now aware of the corruption embedded in the operations of many of the world’s large financial institutions. From HSBC laundering money for drug cartels to price fixing scandals like Libor and Forex, much is known but, aside from fines, almost no one has been held criminally responsible. In fact, these entities usually pay up on the precondition that they will not have to admit to any wrongdoing.
In the last few weeks there have been two major stories that have proven this type of financial corruption goes beyond the systemically dangerous scams being perpetrated by the investment and trading arms of big banks and hedge funds. The first has made headlines in the mainstream press throughout the world, the second came and went so quickly that one could be forgiven for missing it.
Offshore Fixing: The Panama Papers
The first stories related to the “Panama Papers” came with great fanfare in early April.The leak was advertised as the largest of all time, with the claim that “400 journalists have been secretly decoding 11.5 million documents leaked from Panamanian law firm Mossack Fonseca.” The documents reportedly go back 40 years and offer a window into how the 1% hide their money in offshore tax havens like the British Virgin Islands.
A German paper, Suddeutsche Zeitung International, was the first to receive the information, from an as yet unrevealed source. The paper then forwarded the cache to the Consortium of Investigative Journalists (ICIJ) who have worked with a number of news organizations, including the BBC, Le Monde and the Miami Herald, to search through them for newsworthy disclosures.
The first batch of stories to come out of the leak revealed that 12 world leaders, some still in government, used the services of the Panama based law firm with offices in more than 30 countries. What makes this newsworthy is that the firm specializes parking money, art and other assets offshore. A few of those named so far are: the current Prime Minister of Ukraine, Petro Poroshenko, the President of Argentina, Mauricio Macri and Iceland’s Prime Minister, Sigmundur Gunnlaugsson, who resigned his post in the wake of the scandal.
Although the ICIJ has promised more stories to come from the leak, revealing that there are 211 US based individuals or companies that have been discovered in documents from more recent years, so far almost as interesting as what we’ve learned is the reaction of the mainstream media, especially in Europe and North America. The words feeding frenzy come to mind.
The ICIJ has gone out of its way to differentiate itself and the MF documents from those made public by Wikileaks, especially the trove supplied by Chelsea Manning in 2010. The director of the group, Gerard Ryle, told Wired magazine that “We’re not Wikileaks, we’re trying to show that journalism can be done responsibly,” in reference to a question about whether the group has plans to release the whole dataset on line.
While most of the services provided by Mossack Fonseca to clients are technically legal, this argument is only brought up in regards to “innocent” people whose information could be compromised by releasing the whole trove in a searchable database as Wikileaks has done in the past. Also, with so many highly regarded news organizations involved, couldn’t redactions be made where necessary to protect the identities of those presumed innocent?
Many news organizations repeat the now standard trope that Wikileaks was reckless in the way they brought the information they had to the public, some went so far as to say that they have “blood on their hands”. In reality these earlier leaks were redacted by professionals in some of the very same news organizations now working with the ICIJ. What they did do is embarrass many powerful people, especially in the US State Department, military and the NSA, showing their occasional callousness and serial incompetence.
There is also the interesting coincidence that most of the coverage of the Panama Papers has focused on countries that are seen as competitors to the US and its allies at best and enemies at worst, including Syria, China and, of course, Russia. The early headlines prominently featured perennial villain Vladimir Putin, but reading below them revealed that his name isn’t in any of the documents themselves.
It appears that friends of the Russian President, who may or may not have enriched themselves through their connections to the Kremlin, were using the services of the law firm. Putin didn’t deny the information when asked about it shortly after, “However strange it may seem, the information is correct. I have the feeling that it was prepared not by journalists but by lawyers, given the way it is presented. And it doesn’t actually accuse anyone of anything, and that’s the whole point. They are just trying to cause confusion, saying that some of my friends are involved in business, and suggesting that some of the money from these offshore accounts finds its way to officials, including the president.”
As a point of contrast, take the case of British Prime Minister David Cameron. His deceased father, Ian, had used MF’s services but many outlets went out of their way to point out that everything done was above board, that Cameron himself had paid taxes on the money he inherited in the offshore fund and that he had sold his shares in it before taking office.
According to the PM and his subordinates, the resulting mini scandal is the result of his fumbling in explaining this connection to the press and his colleagues in the House of Commons. This begs the question: why is Putin deemed ultimately responsible for the actions of those close to him but Cameron’s family connection to similar dealings is, to use a British expression, “a tempest in a teapot”?
With more information to come from the leak and a recent raid on their Panamanian headquarters it seems likely Mossack Fonseca will either scale back or shutter its operations altogether and that Panama (and the British Virgin Islands where MF incorporated many shell companies for clients) will become less attractive to those looking for these kinds of services.
This will hardly mean an end to this kind of off-shoring however. As noted by many commentators in the alternative and online press, Delaware is one of four US states that legally offer many of the same services that MF was securing for its clients. In fact, as David Dayen reported on Salon.com, in Delaware it is possible to create a limited liability company (LLC) in the name of your cat and that MF itself has offices in Wyoming, Nevada and Florida.
Now You See it, Now You Don’t
The Panama Papers came on the heels of another leak related news story, that of Unaoil, a company based in Monaco engaged in corruption the old fashioned way: straight up bribes. Some of the biggest companies in the world, using various levels of discretion, were implicated in another set of leaks which triggered an exhaustive six month investigation by the Huffington Post and Fairfax Media.
Many of the companies and people involved in the Unaoil’s elaborate corruption and old-fashioned bid rigging schemes are much closer to home in terms of western powers than the figures featured in the Panama Papers leaks so far. The investigations, which sometimes read like they were pulled from the pages of a suspense novel, revealed “that billions of dollars of government contracts were rewarded as the direct result of bribes paid on behalf of firms including British icon Rolls-Royce, US giant Halliburton, Australia’s Leighton Holdings and Korean heavyweights Samsung and Hyundai.”
Although the Australian press has offered some follow up on the story, it feels as if most of the mainstream western press has chosen to ignore it, preferring the innuendo and big names attached to the Panama Papers. Despite this lack of coverage, the stories about Unaoil have “already sparked investigations by the US Department of Justice, the FBI, Britain’s National Crime Agency and other authorities.” Perhaps future indictments will make the corruption around Unaoil more newsworthy, we will have to wait and see.
With more revelations set to come from the Panama Papers, it’s too early to dismiss them. Still, there’s something strange about the fact that what so far amounts to gossip about tax havens that most people already vaguely knew about is heralded as the most important leak of our time. The much more damning allegations against Unaoil and its partners demonstrate blatant corruption and criminality on a world wide scale but if you didn’t see the initial stories online then you probably didn’t know about it at all.