This is an interesting and very thoroughly researched account of the ‘Panama Papers’ leak from the law firm Mossack Fonseca that began in 2015. The amount of data released is staggeringly large, some 11.5 million documents or 22.6 terabytes of data. The journalists involved needed very expensive and advanced computers to search such a large database, including a $20,000 super computer!
The German journalists who originally received this data leak from an anonymous source shared the data with other investigative journalist around the world through an organisation called ICIJ (The International Consortium of Investigative Journalists). As such, hundreds of journalists from different countries simultaneously searched the data for high profile figures in their countries and collaborated together on building evidence and writing stories. The whole project was kept secret for probably 12-24 months, which is a staggering achievement given the sensitivity of the data and the number of people involved. It says a great deal about the integrity of the consortium and its members!
Essentially, there is really one story; the rich and powerful make extensive usage of offshore companies and trust structures to move and conceal their assets. These same structures are used by thieves, gangsters, terrorists, drug and human traffickers and all sorts of other criminals too. They are also used by lots of the world’s largest corporations to avoid tax. We are taken through several iterations of how the journalists built up evidence of such dealings for politicians, art dealers, corporate executives and footballers. This gives a good example of the journalistic technique involved but the point, for me at least, always remains the same: Why are these structures allowed to persist? I really struggle to think of a legitimate use for a company with nominee directors, nominee beneficial shareholders and zero transparency on ultimate ownership.
I read in the FT yesterday (May 2017) that assets in the BVI have doubled since 2010 to $1.5trn. Two-thirds of these companies are used by corporations for ‘tax structuring’ so it certainly doesn’t seem like the Panama Papers have caused a big fall in their usage. It is probably worth noting that the majority of corporations using these structures don’t use illegally obtained assets, which making them less gratuitously illegal than say Putin’s best friend amassing billions of dollars in Russian shares. However, the question still remains as to why these structures are allowed to survive, and flourish, today. One possible answer might make appeal to the sanctity of privacy whereby we shouldn’t be obliged to divulge everything to the government. However, as the authors point out, all that would be required here is the name, date of birth and business address of an asset’s owner. This sort of system already exists in some Scandinavian countries although, presumably, their citizens could still use offshore structures to avoid it! A more likely explanation may be that these structures suit the rich and powerful very nicely and so they will be very reluctant to seem them go. This argument holds for countries as well as individuals as both the US and the UK benefit from the existence of tax havens within, or closely linked to, their jurisdictions. Neither argument have much merit to me but the latter strikes me as the far more likely explanation for their continued existence.
These structures are really a slap in the face to the average citizen of an average country. They’re saying explicitly what many people probably intuited already; there is one rule for you and another for people with money or power. I see this as a serious problem and one that is only likely to get worse as changes in technology and data leaks like this one make secrecy harder and harder to achieve. As Brunello Cucinelli, the CEO of cashmere company whose clients would certainly be rich enough to use the type of products offered by Mossack Fonseca, says, “Mankind is becoming more ethical, but it is not happening because man has decided to become better than he was 100 years ago. It’s because we know we live in a glass house where everybody can see.” Leaks like the Panama Papers demonstrate the veracity of this idea and it seems like increasing digitisation will see this trend continue notwithstanding improvements in encryption.
One of the most evocative examples given in the book concerned a man whose father had lost a famous Modigliani painting, Seated Man with Cane, to the Nazis in occupied France. The painting had been auctioned by the Nazis, disappeared for a while and then been auctioned again by Christie’s in 1996 to an offshore company without named beneficiaries. When a relation of the looted art collector attempts to have his painting restored to him, the court finds it has no official owner and so the suit is withdrawn. The Panama Papers reveal that the gallery owner Helly Nahmad, who had displayed the painting twice since its purchase at Christie’s and was suspected to be the current owner, was in fact the ultimate beneficiary even though he denied this on several occasion in order to keep the stolen painting. It’s a sad story of dishonesty and a lack of decency. I can’t comment on the strength of the legal case presented but I think it is obvious to everyone that Nahmad lied about his ownership of the painting. Encouragingly, this painting was seized at the Swiss Freeport in 2016 as a result of the Panama Papers.
What about all the other people mentioned in the leak? Have they been held to account and brought to justice? Without having investigated each case individually it’s hard to comment definitively. However, I have the overall impression that not a great deal happened after these incredible revelations. Perhaps it’s because, in most cases, the ultimate beneficiaries of these companies and trusts are protected by the law. If that’s the case, it’s simply yet another restatement of the double standards that exist for the rich. Or as Leona Helmsley said famously, “only the little people pay taxes”. In the end, whether it’s stolen state assets or untaxed assets moved offshore, the rich and powerful are still taking from those who don’t have much, which is the bleak and uncharitable reality.
This book is moving and powerful for the spotlight it shines on the dark corners of the global financial and legal systems. It was also fascinating to learn about the journalistic practicalities of dealing with such a large and sensitive leak. The negative points for me were the fact that, even though the individuals involved are different in each case, the stories have the same essential narrative. So and so shouldn’t have an account or, better still, claims he doesn’t have one but then, lo and behold, he or she does have one! The style of prose was also slightly grating to me. There is a lot mock surprise and attempted irony in the vein of, “X said he didn’t have any offshore dealings so it was confusing / surprising to find….” or “if X really didn’t have any knowledge, it’s odd to find him sending an email to….”. I didn’t particularly enjoy it and found it got a bit repetitive. On the whole, it was an informative account of an amazingly large data leak and the staggering amount of hard work the journalists involved with the ICIJ did to bring their findings from the data to press. All of them deserve our thanks and congratulations for doing such important, and in some cases dangerous, work.
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