Mossack Fonseca

Mossack Fonseca & Co. (Spanish pronunciation: [moˈsak fonˈseka]) was a Panamanian law firm and corporate service provider.[2][4] It was, at one time, the world's fourth-largest provider of offshore financial services. From its 1977 foundation until the April 2016 publication of the Panama Papers, it remained mostly obscure even though it sat at the heart of the global offshore industry, and acted for about 300,000 companies. More than half were registered in British tax havens – as well as in the UK.[5]

Mossack Fonseca & Co.
HeadquartersPanama City, Panama
No. of offices44[1]
No. of employees500+[2]
Key peopleRubén Hernández, CEO[3]
Date founded1977 (1977)
FounderJürgen Mossack and Ramón Fonseca
DissolvedMarch 2018
Websitemossackfonseca.com
Former Mossack Fonseca headquarters

The firm received worldwide media attention in April 2016, when the International Consortium of Investigative Journalists published information about its clients' financial dealings in the Panama Papers articles, following the release of an enormous cache of documents of the firm, dated between 1970 and 2015, leaked to the news media,[6] which "implicated at least 140 politicians from more than 50 countries" in tax evasion schemes.[7]

On March 14, 2018, the law firm announced that it was shuttering due to the economic and reputational damage inflicted by the disclosure of its role in global tax evasion by the Panama Papers.[8]

History and practice areas

The firm was founded by German lawyer Jürgen Mossack in 1977 and joined by Panamanian novelist and lawyer Ramón Fonseca in 1986.[9] It later added a third director, Swiss lawyer Christoph Zollinger.[10]

The firm specialized in commercial law, trust services, investor advisory, and international business structures.[11] It also offered intellectual property protection and maritime law services.[2][12] An internal memorandum revealed in the 2016 Panama papers leak noted that 95% of the company's work consisted of "selling vehicles to avoid taxes".[13]

Jürgen Mossack
Ramón Fonseca

In 2013, the firm was described as one of seven that collectively represented more than half of the offshore companies incorporated in Panama.[14] The firm also housed several Panama-incorporated companies within its offices.[15] It was one of the largest firms in the corporate services industry.[16] However, the founder claimed that its volume represented only around 5% of the global financial services legal industry.[17] According to The Economist, the firm had 5 to 10% of the global shell company market,[18] and it was described as "tight-lipped".[16]

Offices and international practice

The firm had nine offices in China,[16] several in Latin America,[19] others in the United States[11] and Europe, with two in Switzerland.[20] Lawyers from the firm were sent to foreign countries to promote business in Panama and Panamanian financial products.[21]

Mossack established operations in the British Virgin Islands in 1987, where it incorporated more than 100,000 companies.[22]

The firm was consulted by the country of Niue when it sought to become an offshore financial center, and managed that business exclusively for the country through their Panama headquarters.[23][24] However, American banks imposed embargoes on bank transfers to Niue in 2001, leading to a shutdown of the business in 2005.[22] Accounts of the firm's clients were moved from Niue to American Samoa.[10]

Controversies

The firm had allegedly helped foreign citizens circumvent their local tax laws[10][25][26] and sometimes even international sanctions.[10][27] The firm's founder argued that it simply helps its clients achieve privacy, and that it complied with "know your customer" regulations.[17]On 20th October 2020, Germany issued international arrest warrants for the two founders of the firm.

Argentine money laundering
Main article: The Route of the K-Money

In 2014, MF Corporate Services was subpoenaed by a hedge fund seeking to recover money from the Argentinian government. The fund alleged that MF had created shell companies to pass money from the government to Lázaro Báez, an ally of the Kirchner family.[10][22] Jürgen Mossack testified under oath that M.F. Corporate Services (Nevada) Ltd. had no affiliation with the Panamanian Mossack Fonseca, but the Panama Papers show that it was in fact a wholly owned subsidiary and Mossack Fonseca tried to hide the relationship, ordering emails and other computer footprints deleted.[28][29] Despite Mossack Fonseca's claim that it did not own MF Corporate Services, a Nevada judge ruled that the subpoena against Mossack Fonseca was valid.[22][30][31] The firm was fighting an order that it turn over the details of 123 shell companies created by an associate of a former President of Argentina.[28][32]

Commerzbank

In February 2015, the firm was implicated in the German government's investigation of money laundering and tax evasion schemes at Commerzbank.[26][33]

Petrobras
Main article: Operation Car Wash

In January 2016, employees of the firm's Brazilian office were charged in relation to the ongoing Petrobras corruption scandal. In that case, a judge alleged that "Mossack Fonseca provided services for the opening of offshore societies, and at least four agents were involved in a scheme to launder money."[34] The firm has responded that the Brazilian office is a "franchise" and not controlled by the main office in Panama.[22] The firm's founder resigned from his advisory position to the Panamanian government to focus on the Brazilian allegations, and says the firm has been cleared.[17]

"Panama Papers" leak
Main article: Panama Papers

On 3 April 2016, the German newspaper Süddeutsche Zeitung (SZ) announced that 11.5 million confidential documents from the firm had been leaked to them. These documents, dubbed the "Panama Papers", reveal how clients hid billions of dollars in tax havens.[35] Comprising documents dating from the 1970s to the present, the 2.6 terabytes of data was given to SZ in 2015 by an anonymous source. Because of the amount of data, SZ enlisted the help of the Washington-based International Consortium of Investigative Journalists (ICIJ).[36][37][38]

The firm says that this coverage has "misrepresented" their work.[39] In its full statement[40] the company asserts that it conducts due diligence on potential clients, "routinely denying services" to those who are "compromised", and "routinely resigns from client engagements" when ongoing due diligence and/or updates to sanctions lists reveal problems. In addition, however, the company has said that responsibility for potential legal violations may lie with failures or lapses by other institutions given that:

approximately 90% of our clientele is comprised of professional clients, such as international financial institutions as well as trust companies and prominent law and accounting firms, who act as intermediaries and are regulated in the jurisdiction of their business. These clients are obliged to perform due diligence on their clients in accordance with the KYC and AML [ Know Your Customer and Anti-Money Laundering respectively ] regulations to which they are subject.

The company informed clients on 3 April 2016, that files had been obtained through a hack of the company's email server.[41] Forbes has suggested that the firm's information security was poor, running old versions of key tools,[42] and still other vulnerabilities have since been discovered.[43]

Shortly after the leak, Panamanian, Peruvian, and Salvadorian police raided the local offices of Mossack Fonseca.[44]

On 14 March 2018, the firm announced that it would be shutting down as a result of the economic and reputational damage inflicted as a result of the Panama Papers leak, together with what it described as 'unusual actions by certain Panamanian authorities'.[8]

On 20 October 2020, prosecutors in Cologne, Germany issued international arrest warrants for firm partners, Panamanian Ramón Fonseca and German-born Jürgen Mossack. With the firm noted as central to the investigation, charges against the two founders include accessory to tax evasion and forming a criminal organization.[45]

Main article: The Laundromat (film)

Steven Soderbergh directed a film, The Laundromat, from a screenplay by Scott Z. Burns that was based on the 2017 book written by journalist Jake Bernstein about the Panama Papers investigation, Secrecy World: Inside the Panama Papers Investigation of Illicit Money Networks and the Global Elite (Macmillan), in which actors Gary Oldman and Antonio Banderas portray firm founders Mossack and Fonseca, respectively.[46] The Laundromat premiered at the Venice Film Festival on September 1, 2019,[47] followed by a screening at the Toronto International Film Festival.[48]

After its theatrical release, on September 27, 2019, Netflix began digital streaming of The Laundromat internationally on October 18, 2019,[49] following a failed attempt by the firm's founders to halt its release.[50] In December 2019, in MOSSACK FONSECA & CO., S.A., et al., Plaintiffs, v. NETFLIX INC.,[51] a U.S. District Court Judge ruled that the film was understood by audiences to be "fictionalized for dramatization"; did not defame Mossack and Fonseca; and that it was protected under the First Amendment to the United States Constitution as free speech.[52]

See also

References
  1. "Mossack Fonseca closes Luxembourg office days before bosses arrested" Luxembourg Times 2017-02-13
  2. The Legal 500 > Mossack Fonseca Archived 2016-04-07 at the Wayback Machine The Legal 500
  3. Mossack Fonseca se une al Programa “Mi Escuela Primero” Archived 2016-04-07 at the Wayback Machine, SumaRSE, 15 December 2015.
  4. "Panama Papers law firm Mossack Fonseca to shut down after tax scandal". March 14, 2018 – via www.reuters.com.
  5. "Mossack Fonseca: inside the firm that helps the super-rich hide their money". The Guardian. 2016-04-08. ISSN 0261-3077. Retrieved 2017-01-19.
  6. "Panama Papers: Why should we care? The Panama Papers leak shows that it is not just the global tax system that is broken, but global governance itself". Al Jazeera. 6 April 2016. Retrieved 11 April 2016.
  7. "Trumpworld’s Corruption Is as Globalized as the Ultra-Rich the President Mingles With" Foreignpolicy.com - The Slate Group 2010-10-12
  8. "Mossack Fonseca law firm to shut down after Panama Papers tax scandal". The Guardian. 14 March 2018. Archived from the original on 14 March 2018.
  9. Graham, David A. (4 April 2015). "What is Mossack Fonesca, the Law Firm in the Panama Papers?". The Atlantic. Atlantic Media. Archived from the original on 9 October 2019. Retrieved 5 April 2016.
  10. Silverstein, Ken (3 December 2014). "The Law Firm That Works with Oligarchs, Money Launderers, and Dictators". Vice. Vice Media. Retrieved 16 December 2014.
  11. "Mossack Fonseca:About the Group". MossFon.com. Mossack Fonseca & Co. Archived from the original on 2016-04-07. Retrieved 2016-04-04. Our ... professionals specialize in trust services, wealth management, international business structures, and commercial law, among other areas.
  12. Raquel Arauz (November 26, 2014). "The Importance of Registering Your Brand". Mossack Fonseca. Archived from the original on April 7, 2016. Retrieved March 8, 2013.
  13. Juliette Garside; Holly Watt; David Pegg (3 April 2016). "The Panama Papers: how the world's rich and famous hide their money offshore". The Guardian. Retrieved 14 April 2016.
  14. Alma Solís (March 8, 2013). "Acciones al portador provocan divisiones" (in Spanish). La Estrella de Panamá. Archived from the original on 2013-03-13. Retrieved March 8, 2013.
  15. José María Olmo (February 15, 2013). "González pasa al ataque contra el SUP por las acusaciones sobre su ático". El Confidencial. Retrieved March 8, 2013.
  16. "Shells and shelves". The Economist. April 7, 2012. Retrieved March 8, 2013.
  17. Webber, Jude (2016-04-05). "Mossack Fonseca founder dismisses Panama Papers as 'witch hunt'". Financial Times. ISSN 0307-1766. Retrieved 2016-04-05.
  18. "The Panama papers: A torrential leak". The Economist. 9 April 2016. Retrieved 9 April 2016.
  19. "Panama Papers: Secret offshores trace back to Brickell condo featured on 'Miami Vice'". miamiherald. Retrieved 2016-04-05.
  20. Samuel Gerber (February 24, 2010). "O wie schön ist Panama – für Steuerflüchtlinge". Handelszeitung. Retrieved March 8, 2013.
  21. "Panama's the Place to be". Isle of Man Examiner. November 1, 2001. Archived from the original on April 13, 2013. Retrieved March 8, 2013.
  22. Hamilton, Martha (2016-04-03). "Panamanian Law Firm Is Gatekeeper To Vast Flow of Murky Offshore Secrets". International Consortium of Investigative Journalists. Retrieved 2016-04-04.
  23. Findley, Michael G.; Nielson, Daniel L.; Sharman, J. C. (2014-01-23). Global Shell Games: Experiments in Transnational Relations, Crime, and Terrorism. Cambridge University Press. ISBN 9781107729681.
  24. Fossen, Anthony Van (2012-01-01). Tax Havens. Univ. of Queensland Press. ISBN 9781921902239.
  25. Trevor Cole (January 27, 2011). "How I learned to avoid the taxman in the British Virgin Islands". The Globe and Mail. Retrieved March 8, 2013.
  26. Leyendecker, Hans. "Steueraffäre erschüttert Commerzbank" (in German). Retrieved 26 February 2015.
  27. Cox, Simon (4 April 2016). "Panama Papers: Mossack Fonseca 'helped firms subject to sanctions'". BBC News. Retrieved 5 April 2016.
  28. Hamilton, Martha M. (April 3, 2016). "Panamanian Law Firm Is Gatekeeper To Vast Flow of Murky Offshore Secrets: Files show client roster that includes drug dealers, Mafia members, corrupt politicians and tax evaders — and wrongdoing galore". ICIJ. Retrieved April 23, 2016.
  29. "Unlocking Mossack Fonseca: The key's in Sin City". The Economist. April 16, 2016. Retrieved April 23, 2016.
  30. Heuer, Mike (2015-03-18). "Judge OKs hunt for Argentine millions". Courthouse News Service. Retrieved 2016-04-04.
  31. Pearson, Sophia (2014-08-13). "Singer Gets OK to Chase Argentina Money Trail to Nevada". Bloomberg.com. Retrieved 2016-04-05.
  32. Romig, Shane; Pḗrez, Santiago (April 7, 2014). "Hedge Fund Seeks Assets in Nevada in Battle Over Argentine Debt: NML Takes Aim at Associate of Cristina Kirchner and Her Late Husband". Wall Street Journal. Retrieved April 23, 2016.
  33. Braecher, Michael (2015-03-09). "In Panama, a German King of Shell Companies". Handelsblatt Global Edition. Archived from the original on 2016-04-07. Retrieved 2016-04-04.
  34. "Mossack Fonseca employees face charges in Brazil". La Prensa. 2016-01-28. Retrieved 2016-04-04.
  35. Harding, Luke (3 April 2016). "Revealed: the $2bn offshore trail that leads to Vladimir Putin". The Guardian. Retrieved 3 April 2016.
  36. "Data trove offers glimpse of how the rich hide their money". Associated Press. April 4, 2016. Retrieved April 4, 2016.
  37. Bilton, Richard (April 4, 2016). "Panama Papers: Mossack Fonseca leak reveals elite's tax havens". BBC News.
  38. "The Panama Papers". International Consortium of Investigative Journalists.
  39. "Statement Regarding Recent Media Coverage". Mossack Fonseca. 2016-04-04. Archived from the original on 2016-04-05. Retrieved 2016-04-05.
  40. "Statement Regarding Recent Media Coverage" (PDF). Mossack Fonseca. Archived from the original (PDF) on 2016-04-06. Retrieved 2016-04-08.
  41. Urreiztieta, Esteban (2016-04-03). "Los papeles de Panamá: Pilar de Borbón, Messi y Almodóvar, entre los investigados". El Español. Retrieved 2016-04-05.
  42. Fox-Brewster, Thomas (2016-04-05). "From Encrypted Drives To Amazon's Cloud – The Amazing Flight Of The Panama Papers". Forbes. Retrieved 2016-04-05.
  43. "SQL injection vuln found at Panama Papers firm Mossack Fonseca". The Register. 2016-04-11. Retrieved 2016-04-15.
  44. Goodman, Leah McGrath (2016-04-14). "Panama Papers: Is the U.S. Giving Mossack Fonseca a Pass?". Newsweek. Retrieved 2016-04-15.
  45. "German arrest order for Panama Papers lawyers faces hurdle" Associated Press 2020-10-21
  46. "Panama Papers FAQ: All You Need to Know About The 2016 Investigation" International Consortium of Investigative Journalists August 21, 2019.
  47. "Venice Film Festival Unveils Lineup The Hollywood Reporter 2019-07-25
  48. "Toronto Film Festival: 'Joker,' 'Ford v Ferrari,' 'Hustlers' Among Big Premieres" Variety 2019-07-23
  49. "Netflix Dates 'Marriage Story,' 'Laundromat' and Other Fall Award Films" The Hollywood Reporter 2019-08-27
  50. "Firm at Center of Panama Papers Sues Netflix Over 'The Laundromat'" New York Times 2019-10-16
  51. "Case 2:19-cv-09330-CBM-AS Document 75", UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA. Filed 12/23/20 p. 1 (ID #:990)
  52. "Judge rejects Panama Papers law firm’s libel case against Netflix over 'The Laundromat'" International Consortium of Investigative Journalists 2021-04-01.
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