On April 3, 2016, the International Consortium of Investigative Journalists publicized documents from the Panama-based law firm, Mossack Fonseca, which shattered the secrecy of the fourth largest provider of offshore services. 11.5 million documents (2.6 terabytes of data) covering 40 years of legal history were leaked via encrypted emails to the German newspaper Suddeutsche Zeitung from an anonymous source. To put things in perspective, the Panama Papers contain 46 times as much data as WikiLeaks. 

After receiving the documents, Zeitung contacted Gerard Ryle, the investigative journalist in charge of the ICIJ, and an international collaboration on the story was soon prompted. By forming an international front with several prominent journals including The Guardian, Le Monde, and La Nación, the ICIJ ensured that the eventual story was not impeded by any one nation’s censorship. American journals collaborated as well, but were limited to the Miami Herald, the Charlotte Observer, and the Univision network online program Fusion.

The Panama Papers shed light on the secretive offshore fincial services industry. As Mossack Fonseca publically stated, the firm engages in completely legitimate practices such as cross-border mergers and acquisitions, bankruptcies, and estate planning. However, they also help clients create “shell” companies to evade taxes and protect laundered money. The majority of these fake companies appear to operate in recognized tax havens such as the British Virgin Islands, Panama, and the Bahamas.

The leaked emails demonstrate evidence that these under-the-table financial services were only available to people who could afford costly annual payments and other charges, including a “virtual office service” for spooked customers. The evidence of the services provided by the offshore industry exacerbates growing tensions, particularly in the post-2008 financial crisis, regarding global economic inequality. When powerful figures, particularly political ones, appear to be involved in these disreputable practices, faith in political leaders and institutions erodes.

Law Abiding Citizens, Censorship, and Casualties

The documents, both directly and indirectly, reveal paper trails to important political figures: Argentine President Mauricio Macri, Chinese President Xi Jinping, Russian President Vladimir Putin, and former Icelandic Price Minister ­­­­Sigmundur Davio Gunnlaugsson to name a few. A total of 12 heads of state were named amongst the 143 politicians implicated in dealings with Mossack Fonseca. Since the publication of the story, these politicians have responded in different ways to the media but remain steadfast in their positions that they have abided by the law.

In the past week, Macri of Argentina dismissed allegations that he benefitted directly from the Bahamas-based company Fleg Trading. At a press conference nine days after the publication of the Panama Papers, the Argentine president’s spokesperson, Ivlan Pavlovsky, declared that the president had made no capital gains nor was a shareholder from Fleg Trading, thus explaining why Macri did not disclose his activity with the company. On April 7, hundreds of angry Argentines protested in the symbolic Plaza de Mayo, just in front of the Casa Rosada, to demand Macri’s resignation. In addition, Macri’s unpopular economic policies, including price increases of almost 500 percent in important public services, have added fuel to the fire. Although a resignation seems highly unlikely, the day after the protests the Argentine federal attorney opened a case against Macri to investigate if there was “malicious omission” of documents regarding the offshore companies under the President’s name. Macri campaigned under the promise of transparency and will now be held accountable to the standards he promoted; an independent anti-corruption committee will watch over his finances until the end of his term.

Conversely, the Chinese government has reacted to the Panama Papers by censoring online publications and by accusing Western nations of attacking non-Western elites. President Xi Jinping is implicated in holdings with offshore companies as are his relatives and other members of the Communist Party. Unlike democratic nations, the Chinese government is able to highly censor and obstruct the flow of information regarding the Panama Papers, a factor that allows it to manipulate the papers’ repercussions. Xi Jinping pledged to combat corruption in his mandate, however, the Panama Papers will prove a test of this pledge. As long as state censorship keeps China in the dark, the Chinese people will have difficulty in holding the Chinese elite accountable.

Perhaps one of the most significant trails from the Panama Papers is a $2 billion network in offshore companies that connects Sergei Roldugin, Russian cellist and godfather to Putin’s daughter, to the Russian President himself. The documents show that Sergei is in charge of two offshore companies, one of which received suspicious loans of about $6 million dollars. When questioned about the Panama Papers, Putin declared that the release of the offshore documents was merely an attempt to “destabilize the internal situation” of Russia.

On April 5, some protesters gathered in central Moscow denouncing Putin’s involvement in the Panama Papers but were soon dispersed and detained. As in China, the Russian state heavily manipulates the media, minimizing the significance of the Panama Papers. Outside of the protests, reactions from the Russian people were mostly quiet and extended to social media. In a country with rampant corruption but with tight government control, it seems that the possible misconduct demonstrated by the Panama Papers will do little to incite the people to demand more accountability from their political officials.

Although Macri, Xi, and Putin will likely remain in power, not all world leaders have been able to weather the public ordeal. Icelandic Prime Minister ­­­­Sigmundur Davio Gunnlaugsson, whose offshore company was exposed in the Panama Papers, faced mounting protests calling for his resignation. On April 5, Gunnlaugsson resigned his position, handing over the office of Prime Minister to the minister of agriculture and fisheries. While The Guardian stated that there is no clear evidence that Gunnlaugsson was directly implicated in “tax avoidance, evasion or any dishonest financial gain,” it does appear that a conflict of interest was present. Gunnlaugsson and his wife invested millions of dollars in Icelandic bank bonds during the Financial Crisis of 2008, an event that greatly weakened the nation’s economy to the point that it required a bailout from the International Monetary Fund. During the crisis, records indicate that the Prime Minister was the creditor for three large Icelandic Banks while simultaneously engaging in negotiations with foreign creditors and national banks. Such a conflict of interests was unpardonable for the Icelandic people, leading to the demonstrations that eventually forced him out of office.

A More Just World? 

After the publication of the Panama Papers, Mossack Fonseca stated that the ICIJ gained “unauthorized access to proprietary documents and information” and has “presented and interpreted them out of context”. The company added that it would “pursue all available criminal and civil remedies” to evaluate the present situation.

Before the law firm had any chance to act, the Panamanian government struck first. On April 14, police raided the offices of Mossack Fonseca under orders from Panama’s attorney general to “establish the use of the firm for illicit activities”.

On the same day, halfway across the globe in Paris, senior tax officials from the Organization for Economic Co-operation and Development gathered to discuss the methods with which to analyze the data obtained from the Panama Papers. With this type of once obscure information, tax officials will be better informed and able to restrict the global elite from engaging in financial practices that are beyond the means of ordinary citizens. Impunity cannot and will not be tolerated by an international audience that witnessed firsthand the effects of recklessness during the 2008 Financial Crisis. In the wake of the Panama Papers, it appears that the patience of regular citizens is thinning as those in power continue to abide by different rules than the ones they impose on everybody else.


Image Source: Wikimedia/OddurBen

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