The embattled prime minister of Iceland stepped aside Tuesday, perhaps temporarily. Pakistan’s leader condemned news reports as a circus. And China tightened its censorship.
All were consequences of an offshore investment scandal known as the Panama Papers that is roiling far corners of the world and ensnaring other political leaders.
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Pakistan’s prime minister went on national television to condemn the “circus” around revelations that three of his four children are linked to offshore companies that control real estate in London.
As a large opposition party called for his resignation, charging that he had hidden family assets, Prime Minister Nawaz Sharif said Tuesday night that he would order a “high-level judicial commission” to investigate his family’s ties to the offshore companies.
The dramatic revelations in the Panama Papers dominated political conversation in many parts of the world. The papers are a trove of leaked internal documents from a Panamanian law firm known globally for establishing offshore companies for the wealthy. McClatchy newspapers and some 110 other media outlets around the globe have collaborated for more than a year on stories unearthed in the data, which include emails, passport copies, bank records and registration papers.
President Barack Obama referenced the stories while speaking about his administration’s moves to halt U.S. companies from seeking lower tax rates by moving their tax address abroad in a process called an inversion.
“Over the last couple of days, we've had another reminder in this big dump of data coming out of Panama that tax avoidance is a big, global problem,” Obama said, noting that wealthier Americans with lawyers and accountants are also taking part.
“They have access to offshore accounts, and they are gaming the system,” Obama said, adding that “a lot of this stuff is legal – not illegal.”
Obama called on the U.S. government to join with allies and “lead by example in closing some of these loopholes and provisions.”
The issue surfaced in the U.S. presidential campaign. Vermont Sen. Bernie Sanders, battling for the Democratic nomination, tweeted: “Offshore tax havens are nothing but legalized tax fraud and the fiscally responsible thing, and the just thing, to do is to eliminate them.”
Anger surged at a meteoric rate in Iceland, a volcanic island nation in the North Atlantic. An hourlong news report about Prime Minister Sigmundur David Gunnlaugsson’s offshore connections drew an audience of 58 percent of Iceland's 323,000 people. An antigovernment rally drew more than 10,000 protesters outside parliament in Reykjavik late Monday. Some protesters threw eggs. It was said to be the largest such protest in modern times on the island.
On Sunday afternoon, media outlets associated with the International Consortium of Investigative Journalists, including McClatchy newspapers, reported that Prime Minister Gunnlaugsson and his wife had jointly obtained an offshore corporation in the British Virgin Islands in late 2007.
Gunnlaugsson was one of 12 current or former world leaders with links to offshore entities through the Panama law firm, Mossack Fonseca.
Icelanders still bear fresh economic wounds from the 2008 global recession that trashed their economy and forced the collapse of their three largest banks. Since then, courts have sentenced and jailed 29 senior bankers.
Gunnlaugsson and his wife obtained an offshore company, Wintris Inc., set up in the British Virgin Islands, a major offshore haven, to invest the proceeds of the sale of her father’s business, an auto distributor. At the end of 2009, months before he won a seat in parliament, Gunnlaugsson sold his share of Wintris to his wife for a symbolic payment of $1.
Gunnlaugsson campaigned for prime minister using the anti-bank anger as part of his platform. And he never declared an interest in the business to the public, even after becoming prime minister in 2013. Wintris held millions of dollars in bonds of the three major collapsed banks.
As prime minister, Gunnlaugsson helped negotiate the pay-offs to bank creditors. That raises conflict-of-interest issues.
In a statement late Tuesday, Gunnlaugsson’s office said he “has not resigned” and was merely stepping aside “for an unspecified amount of time” and would remain as chairman of his ruling Progressive Party. It said the party’s deputy leader, Sigurdur Ingi Jóhannsson, would take over as prime minister. Whether disgruntled Icelanders would allow Gunnlaugsson to return to the post in the future was far from clear.
For the Icelandic reporter instrumental in breaking the story, the events of the past two days brought a sense of relief.
“All this time I have been in a bubble,” Jóhannes Kr. Kristjánsson said in a message. “The last four weeks me and my partners at Reykjavik Media and RUV, the state television of Iceland, have been isolated editing the one-hour program. Two days before airing I began to realize how big the story was.”
It’s been big elsewhere as well, but reactions have varied dramatically, from censorship by China’s prickly ruling Communist Party to accusations by Russian state media that Western intelligence agencies are behind the revelations that President Vladimir Putin’s closest friends have shuffled some $2 billion through offshores.
In Mexico, President Enrique Pena Nieto has said nothing over reports in McClatchy, Univision and two Mexican publications that a chief government contractor, Juan Armando Hinojosa Cantú, holds more than $100 million offshore.
“The prime minister of Iceland resigns over #panamapapers case, and in Mexico nothing happens!” tweeted Sergio Garciadealba, a former economy secretary under the opposition National Action party. “Long live impunity!”
China censored all news related to the Panama Papers scandal amid revelations that relatives of eight sitting or former members of the nation’s most powerful body, the Politburo’s standing committee, have offshore corporations.
President Xi Jinping’s brother-in-law, Deng Jiagui, is among those linked to the Mossack Fonseca archives, as well as the grandson-in-law of the founder of modern China, Mao Zedong. A more in-depth report will be shared later this week, written by ICIJ journalists.
Chinese censorship instructions were printed by the China Digital Times, a media organization based in Berkeley, Calif., that follows such issues closely.
“Find and delete reprinted reports on the Panama Papers. Do not follow up on related content, no exceptions. If material from foreign media attacking China is found on any website, it will be dealt with severely. ... Please act immediately,” said one censorship order.
The ICIJ nonprofit group that organized the investigative collaboration, based on a leak obtained by Germany’s Süddeutsche Zeitung newspaper, rejected calls for the public release of the law firm’s leaked archives, which contain numerous sensitive records such as photocopies of passports and credit card information.
“The ICIJ is not an arm of law enforcement and is not an agent of the government. We are an independent reporting organization, served by and serving our members, the global investigative journalism community and the public,” the group said.
White House correspondent Anita Kumar and reporter Marisa Taylor contributed to this report.
Tim Johnson: 202-383-6028; @timjohnson4