‘This may be just the beginning.’ U.S. unveils first criminal charges over Panama Papers

Nearly three years after the publication of a massive leak of secret offshore shell-company documents known as the Panama Papers, U.S. prosecutors announced criminal charges Tuesday against four people, including a former top lawyer for Mossack Fonseca, the Panamanian firm that helped dictators, drug lords and the ultra-wealthy hide their cash.

Prosecutors in the U.S. District Court for the Southern District of New York late Tuesday accused Ramses Owens, a longtime lawyer for Mossack Fonseca, of wire fraud and conspiracy to commit tax evasion and money laundering.

Owens’ name appears in 96,696 files in the massive database of leaked files maintained by the International Consortium of Investigative Journalists, which pulled together reporters across the globe for the undertaking. He left the firm after the April 2016 publication of the Panama Papers by a journalistic partnership that included the Miami Herald and the Washington bureau of its parent, McClatchy.

Also charged in the alleged conspiracy are German citizen Dirk Brauer, an investment adviser for Mossfon Asset Management, which worked closely with the parent law firm to invest and manage client money; Richard Gaffey, an American accountant based outside Boston; and Harald Joachim von der Goltz, a German citizen who formerly lived in the United States and paid taxes there.

Owens, Brauer and Gaffey are alleged to have helped Mossack Fonseca clients, including von der Goltz, to evade U.S. taxes starting in 2000.

In a news release, the U.S. Department of Justice said the four men “defrauded the U.S. government through a large scale, intercontinental money-laundering and wire-fraud scheme.” The indictment revealed that federal investigators used undercover agents and that one cooperating Mossack Fonseca client wore a wire.

“These defendants went to extraordinary lengths to circumvent U.S. tax laws in order to maintain their wealth and the wealth of their clients,” said U.S. Attorney Geoffrey S. Berman. “For decades, the defendants, employees and a client of global law firm Mossack Fonseca, allegedly shuffled millions of dollars through offshore accounts and created shell companies to hide fortunes.”

Brauer, Gaffey and von der Goltz have all been arrested, authorities said. Owens remains at large. It was not immediately clear if the men had retained attorneys.

The Panama City offices of Mossack Fonseca were closed earlier this year. More than 11.5 million documents from the firm were exposed in the Panama Papers. Arnulfo Franco AP

The action, more than 30 months after the initial publication of the Panama Papers, was viewed as overdue by anti-corruption advocates. Countries across the globe pushed out politicians, jailed tax evaders and changed their laws. The United States had been a laggard.

“This may be just the beginning,” said Shruti Shah, president and CEO of the Coalition for Integrity, a nonprofit that advocates for financial transparency. “Intermediaries who help people engage in illicit activities like setting up shell companies to hide their assets should really think hard about what they are doing. The U.S. is going after the enablers, not just the people who evade taxes.”

Authorities worldwide are continuing to mine the leak for evidence, Shah said.

Last week, for instance, German police raided Deutsche Bank offices in the financial capital of Frankfurt in connection with the Panama Papers.

“People should remember that these major financial investigations take a long time,” she said. “If you have engaged in wrongdoing, you should not feel complacent that nothing is going to happen.”

In the aftermath of the Panama Papers, Wyoming and Nevada tightened their laws to require verifiable contacts associated with secretive limited liability companies. And the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, has ramped up reporting requirements for cash buyers of expensive homes in South Florida, Manhattan and other cities attractive to foreign nationals. The leaked documents are also believed to have been helpful to U.S. authorities prosecuting Venezuelans in South Florida accused of corruption.

Clark Gascoigne, deputy director of the Financial Accountability and Corporate Transparency (FACT) Coalition, said Congress needs to increase disclosures for corporate owners.

“This is a welcome indictment, but we shouldn’t have to rely on leaks like this to enforce our anti-money-laundering laws,” Gascoigne said. “The Panama Papers exposed how anonymous shell companies enable corrupt actors and criminals to launder their proceeds with impunity. It’s time for lawmakers to advance bipartisan legislation to end the incorporation of anonymous companies in the United States.”

Republican Florida Sen. Marco Rubio has pushed a bill that would require corporations to disclose their true owners to law enforcement.

Jürgen Mossack and Ramón Fonseca

In total, the indictment lists five separate Mossack Fonseca clients who were targeted by the Justice Department investigation.

One of them is von der Goltz, described as German-born but raised in Guatemala and residing in the United States since about 1984. Prosecutors allege he skirted paying U.S. taxes by routing money through shell companies in the name of his 102-year-old mother, a non-U.S. taxpayer who lived in Guatemala.

Among the other allegations in the indictment are that the Mossack Fonseca employees helped clients avoid filing to the IRS what’s known as a Foreign Financial and Bank Account reporting form.

The complex indictment also charges that the Mossack Fonseca employees used sham charitable foundations — a product that grew in popularity as offshore locales required more reporting about ownership — to help disguise transfers of money into the United States. In one example, the sham foundation helped disguise the money as proceeds from the sale of a business. Owens worked closely with the Delray Beach-based Sovereign Society in promoting “wealth protection” programs.

The indictment reveals that the Justice Department used undercover agents and that at least one unnamed customer — known as Client 3 — wore a wire when discussing with Brauer ways to evade taxes. Client 3 and his son, Client 4, are described as Florida residents who allegedly worked with Owens to move money through companies abroad designed to mirror U.S. companies. Client 1 is described as a New York-based U.S. citizen. Client 5 is said to be a U.S. citizen residing in London. Client 2 is von der Goltz.

Gaffey is a partner in the Massachusetts-based accounting firm of Elder, Gaffey & Paine. He is charged with helping a Mossack Fonseca client repatriate money from a Hong Kong bank account without disclosing it to the IRS.

Kevin G. Hall: 202-383-6038, @KevinGHall
Nicholas Nehamas: 305-376-3745, @NickNehamas