The Panama Papers: Victims of offshore
Police in Panama arrested the founders of Mossack Fonseca, the law firm at the center of the Panama Papers scandal, on money-laundering charges Thursday after authorities raided the firm’s headquarters as part of investigations into Brazil’s largest-ever bribery scandal.
The firm’s founding partners, Ramón Fonseca and Jürgen Mossack, spent Thursday night in police cells, according to the men’s lawyer. Kenia Porcell, Panama’s attorney general, released a statement that said evidence gathered by her office indicated that the law firm was a potential “criminal organization” that concealed and removed evidence related to “illegal activity.”
Both Fonseca and Mossack are well-known in business and political circles in Panama. Fonseca is a former adviser to Panama’s president, Juan Varela, and Mossack served on Panama’s council on foreign relations from 2009 to 2014.
They have consistently denied any wrongdoing. Their law firm says it is not at fault in cases in which offshore companies it set up for clients were later used for illegitimate purposes. The firm told ICIJ last year that it follows “both the letter and spirit of the law.”
Mossack Fonseca issued a statement that accused Panamanian officials of “an attempt to divert the attention from those who really merit a deep and proactive investigation.” It said authorities “have not presented a single piece of evidence that shows us guilty.”
The arrests come 10 months after an investigation by the International Consortium of Investigative Journalists and its media partners revealed that Mossack Fonseca had set up or managed offshore companies and other hard-to-trace corporate structures for world leaders, drug kingpins, American fraudsters and other clients. ICIJ, the German daily Süddeutsche Zeitung and more than 100 other media partners, including the Miami Herald and its parent company, McClatchy, worked together to investigate a trove of 11.5 million leaked documents detailing the law firm’s day-to-day operations over nearly 40 years.
The Herald described how money routed through opaque offshore companies and then funneled into South Florida real estate was distorting the market by pushing up prices, especially for luxury waterfront condos.
Shortly before the media partnership began releasing its findings, Brazilian and Panamanian authorities began targeting Mossack Fonseca as part of a wide-ranging bribery investigation in Brazil — dubbed Lava Jato (“Operation Car Wash”) — that has led to criminal charges against leading Brazilian politicians. Brazilian prosecutors said in January 2016 that they were investigating the law firm’s alleged role in helping individuals involved in the multimillion-dollar bribery case use offshore companies to launder money.
The International Consortium of Investigative Journalists and more than 100 media partners, including the Miami Herald and its parent company, McClatchy, worked together to investigate a trove of 11.5 million leaked documents that became known as the Panama Papers.
Porcell, Panama’s attorney general, said in her statement that bribe money circulated through various companies and was then “laundered or washed through Panama.”
The business dealings of Odebrecht, a Brazil-based construction conglomerate, have been a focus of the Lava Jato investigation. In December, Odebrecht pleaded guilty in the United States and reached settlements with authorities in Switzerland and Brazil over allegations that it paid millions of dollars in bribes to government officials on three continents.
After Thursday’s surprise raid, Ramón Fonseca lashed out at President Varela, telling reporters that Varela had told him the president had accepted money from Odebrecht “because he couldn’t fight everyone.” Varela said the contributions were donations, not bribes.
Despite official statements that Thursday’s raid and detentions were related to Brazil’s Lava Jato case, Mossack Fonseca’s Twitter account posted an image of a search warrant from the attorney general’s office that referred to “a criminal investigation into alleged economic crimes, in particular money laundering, that has its origins in the journalistic investigation ‘Panama Papers.’”
“The documents obtained by the International Consortium of Investigative Journalists [ICIJ] are related to the creation and sale of offshore companies by the Panamanian law firm Mossack Fonseca,” the document from the attorney general’s office said. The companies were “allegedly used for laundering millions of dollars from multiple illicit activities around the world.”
“Lava Jato case?” Mossack Fonseca tweeted. “Here is a search warrant indicating that it is #PanamaPapers.”
“It’s really confusing,” Guillermina MacDonald, Mossack Fonseca’s lawyer, told ICIJ in a telephone interview Friday afternoon.
MacDonald said she waited for four hours at the attorney general’s office and was then denied access to complete documentation involving charges relating to the firm.
“The attorney general’s office doesn’t show its face,” she said.
A spokeswoman for Panama’s attorney general told ICIJ the arrests related to Lava Jato only.
Separately, Mossack Fonseca is in court fighting Panama’s anti-corruption prosecutor, who was recently granted the power to indefinitely extend his investigation of the firm in relation to the Panama Papers.