The Panama Papers

On the face of it, the Panama Papers don't look good for Russia. Reporters investigating the huge leak of financial data from a Panamanian legal firm have suggested that up to $2 billion in offshore bank accounts could be linked to a circle of friends closely associated with President Vladimir Putin. For many, this information seems to corroborate what has long been rumored: that Putin is corrupt, on a huge scale.

After a few days of silence, the Russian president himself has taken aim at the allegations, suggesting they were part of a broader U.S. plot to destabilize Russia. But another very different theory is making the rounds in the Russia-watching world. In short, the theory says that Moscow isn't a victim of a Panama Papers plot.

Instead, perhaps it is the Russians who are behind the leak.

Okay, it sounds far-fetched, but this particular idea is especially noteworthy because of who has advanced it: Clifford Gaddy, an economist who works with the Brookings Institution. Gaddy is one of the foremost Western experts on Russia's economy and a former adviser to the Russian Finance Ministry in the 1990s. Along with Fiona Hill of Brookings, he is one of the co-authors of a well-regarded book on the personality of the Russian leader, "Mr. Putin: Operative in the Kremlin."

In a blog post published Thursday on the Brookings website, Gaddy outlined his thoughts on the matter. You should read it all for yourself, but I'll break down his idea into four quick points.

1, It was a hacker backed by the Russian government who emailed the German newspaper Süddeutsche Zeitung to offer the leak in early 2015, the initial contact that would eventually lead to the release of the Panama Papers.

2, There's deliberately little information within the Panama Papers that harms Putin: While the $2 billion figure has been reported widely, the link to Putin is relatively obscure, and the Russian president has survived far worse accusations of corruption.

3, Meanwhile, there's plenty of information in the Panama Papers that has already proven extremely embarrassing for other world leaders. At the least, Gaddy argues, this makes Putin and his reputation for corruption seem like less of an outlier and more of standard operating practice.

4, The fact that so few Americans have been linked to the Panama Papers could suggest that their details were deleted from the documents given to Süddeutsche Zeitung and passed on to other media outlets. If this is true, Gaddy suggests that the lack of this information in the release means that it could be being held back for blackmail purposes.

It's a bold claim, Gaddy admitted in an email Friday, and one that he isn't totally sure of himself. "It's certainly not a theory, hardly even a 'hypothesis,'" Gaddy wrote, adding that it was "more a suggestion of something that ought to be seriously investigated."

Peruvian authorities have raided the home of a Mossack Fonseca representative in Lima.
A team of 20 from Peru's tax agency searched and seized all accounting documents belonging to Monica Ycaza Clerc, who represents the global lawfirm Mossack Fonseca in Peru.

Authorities said the seizure was part of an investigation into tax evasion and fraud involving the law firm and Peruvian taxpayers. Last week, the National Customs and Tax Administration created a team to verify whether any tax evasion cases it had been investigating in the past year, correlate with companies and individuals mentioned in the Panama Papers.

Monday's search was done "in order to thoroughly investigate her and also to check for possible connections that she would have with the 'Panama Papers' case and with Peruvian taxpayers," according to a statement by the Peruvian tax agency.

Facing pressure to disclose more information on how the world’s wealthiest people may be avoiding their taxes, the International Consortium of Investigative Journalists and German newspaper Süddeutsche Zeitung released on Monday a searchable database of the Panama Papers, detailing names, banks, trusts and other entities participating in offshore tax shelters.

Among them are top American banks, including Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, Morgan Stanley and Goldman Sachs. The database also named foreign banks with a strong presence in the U.S., including HSBC, Barclays, Deutsche Bank, BNP Paribas, Société Générale, ABN Amro, Credit Suisse and UBS.

None of the banks were immediately available for comment on Monday, but all have declined to discuss the Panama Papers with Newsweek since the massive trove of data was originally revealed April 3 by the International Consortium of Investigative Journalists, a Washington-based nonprofit, nonpartisan research group, along with hundreds of its partner media organizations and Süddeutsche Zeitung, which received the initial Panama Papers leak from an anonymous source in 2015.

Tax shelters are frequently legal vehicles; a 401(k), for instance, is technically a tax shelter. But because they tend to shield financial activities from view, they may also conceal illegal behavior such as bribery, serious financial crimes or tax dodging.

For many banks, global wealth and investment management, which can sometimes involve setting up tax shelters, brings in enormous fees that amount to hundreds of millions of dollars a quarter. For example, Bank of America’s global wealth and investment management arm brought in nearly 20 percent of its total earnings last year. (The bank, which reported the numbers in its latest annual report, declined to comment further.)

The U.K.-based Tax Justice Network, a nonprofit that investigates global tax shelters, estimates that nearly 75 percent of all offshore private wealth is either directly or indirectly concentrated in the hands of the world’s top 50 private banks, particularly about 20 financial institutions, which each have at least $100 billion in private cross-border assets under management.

From 2005 to 2010, these banks included UBS, Credit Suisse, Citigroup, Morgan Stanley, Deutsche Bank, Bank of America, Merrill Lynch (since 2009, the wealth-management division of Bank of America), JPMorgan Chase, BNP Paribas, HSBC, Goldman Sachs, ABN Amro, Société Générale and Barclays, according to the Tax Justice Network. Their total private assets under management came to $12.2 trillion but are thought to have grown since then, the nonprofit says.

While many global big banks do not openly promote advisory services for tax shelters, they do advertise financial planning that can include these services. Some have recently found themselves pulled into legal tussles, including one in 2012 where a U.S. businessman blamed UBS for giving him poor legal advice that resulted, he claimed, in his decision to plead guilty to tax evasion.

The searchable trove of documents released on Monday covers more than 200,000 offshore entities and spans nearly 30 years of records derived from Panama law firm Mossack Fonseca, through 2010. The firm says the data may have come from a hack and denies any wrongdoing.

The database represents a fraction of the entire cache of Panama Papers documents, says Hamish Boland-Rudder, online editor for the International Consortium of Investigative Journalists. He told Newsweek on Monday that the streamlined data aimed to omit individuals’ personal information, emails and financial details. He says the database intends to mainly show the full range of directors, beneficiaries, shareholders, foundations, trusts, companies and funds incorporated in 10 offshore jurisdictions, including the British Virgin Islands, the Cook Islands and Singapore.

“It’s not a data dump,” he says, “but a release of data in the public interest.”

Boland-Rudder stated that his organization has no intention of releasing all 2.6 terabytes of documents that make up the totality of the Panama Papers. But the anonymous source behind the original leak—known only as “John Doe”— issued a 1,800-word statement through Süddeutsche Zeitung and the International Consortium of Investigative Journalists on May 6. The statement indicated a willingness to release the full set of records in exchange for greater whistleblower protection.

“In the end, thousands of prosecutions could stem from the Panama Papers, if only law enforcement could access and evaluate the actual documents,” the source said.

The source also hinted that the driving motivation behind the Panama Papers’ release was an increasingly unfair global financial system that favors the rich and is marred by “massive, pervasive, corruption,” according to the statement.

“Income inequality is one of the defining issues of our time,” the source said, lamenting how “politicians, academics and activists alike [are] helpless to stop its steady growth, despite countless speeches, political analyses and a few meager protests.”

The source also claimed to have no association with “any government or intelligence agency, directly or as a contractor, and I never have.” The source added, “My viewpoint is entirely my own.”

Since the leak, the Panama Papers have led to the resignation of Icelandic Prime Minister Sigmundur David Gunnlaugsson and embroiled British Prime Minister David Cameron in a scandal over his personally profiting from tax shelters set up by his family.

The revelations have also implicated leaders across Asia, the Middle East and South America and have led to the raiding of multiple Mossack Fonseca offices. The notable exception: American offices, which include locations in Nevada and Wyoming.

They even point out that tax avoidance is legal, give them some credit for that.

The Swiss anti-corruption expert, Mark Pieth, has told the BBC he resigned from the Panama Papers commission because of government interference.

Mr Pieth said officials told him that they would have final say on whether to publish the panel's findings on the offshore tax evasion scandal.

Joseph Stiglitz, a Nobel Prize-winning economist, also resigned.

The seven-person panel was set up by Panama's government in April 2016 to improve transparency.

Speaking on the BBC's Newshour programme, Mr Pieth said he had received a letter from Panama's authorities stating that they would have the final say on whether to publish the panel's report.

"They told us they were going to decide in the end whether (the report) is going to be publicised or not," he said.

"I think that the official Panamanians were in a state of denial. They were basically saying 'well, what we've been seeing in the Panama Papers is something that you observe everywhere in the world.'"

Mr Stiglitz also told Reuters news agency he was concerned that the panel's final report would not be published.

"We can only infer that the government is facing pressure from those who are making profits from the current non-transparent financial system in Panama," he said....

We are trying to foster a culture of inclusion. Everyone is equal here, without concern for sex, gender, color, creed, or any other attribute (except love of bad MLP fan fiction, which is a federally protected class to discriminate against).