Panama Papers Expose Kleptocracy in Action
Investigative Journalist James Henry describes how government officials are directly benefiting from the tax havens they are responsible for dismantling
JESSICA DESVARIEUX, TRNN: Welcome to the Real News Network. I’m Jessica Desvarieux in Baltimore.
An unprecedented leak of millions of papers is exposing how the world’s rich and famous hide their money offshore. The leak originates from the world’s 4th biggest offshore law firm, Mossack Fonseca, which operates in Panama, giving this massive leak it’s name, the Panama Papers.
Now joining us to give us the details of this leak is our guest James Henry. He’s a leading economist, attorney, and investigative journalist. Thanks so much for joining us, James.
JAMES HENRY: Good to be here.
DESVARIEUX: So James, you’ve been tracking offshore tax havens for years. Can you just give us some of the biggest revelations to come out of this leak?
HENRY: Well the most important revelations, sort of sensational revelations, have to do with politically important people. For example, Putin in Russia, Macri who’s President of Argentina, the current Prime Minister of Iceland. You know, we have quite a few people on the list who are engaged in various kinds of what I call kleptocracy, or have people around them who have engaged in hiding offshore assets through the facilities provided by this particular Panamanian law firm.
So one of the first things to recognize here is the outrageous behavior on the part of government officials around the planet. People who are suppose to be cleaning this stuff up are actually in many cases conniving with people that are engaged in it. Hiding offshore wealth, manipulating money, not just to evade taxes, which is, these places are usually called tax havens but there’s a whole host of misbehavior that goes on facilitated by the secrecy that you can enjoy by having an offshore company and then an offshore trust then have it managed by people that are in your name, that maintain control over it and protect your private identity. So in this case I think the most revelations, and I think there are a lot more revelations to come, have to do with these officials that are directly involved in this stuff.
DESVARIEUX: You mentioned Iceland. Can you just speak more specifically about the Prime Minister of Iceland? What was going on there?
HENRY: He had undeclared assets and investments that were in Iceland banks and basically used offshore companies to hide those assets didn’t declare them. I understand he’ll be resigning today. So that’s just one small step forward and it’s a good example. This Panamanian law firm did not exist in isolation. This is really the largest leak in history. We’ve more than 2.4 trillion terabytes of data and we have 2.4 terabytes of data, 214 thousand files, companies involved and more than 14 thousand clients. Let me redo that because I want to get the data right.
DESVARIEUX: Sure, sure, sure.
HENRY: Okay, this is really the largest leak in history from this one 42 million dollar revenue per year law firm. But there literally are hundreds of thousands of documents that are available and we’re just beginning to understand them. They’ve been out there for more than a year but Panama and this law firm, is an entity that I first came across in the 1980’s when I was investigating General Noriega. This law firm was already established the reputation in Panama for being very aggressive. Kind of the go to place if you wanted to get things done on the frontiers of good behavior.
It has acquired clients all over the world. Kind of a network of other banks and other law firms and accounting firms that channel them clients. So it’s really a global industry here, we shouldn’t just focus on this one particular firm. In this case they had a little more than 200 thousand companies and thousands of clients, many of whom are politically exposed people. We’re just beginning to understand how far reaching this is.
Take Putin’s case for example, he has close relationships with a number of wealthy people who are involved in this scandal, and it’s hard to explain where their wealth comes from if it doesn’t come from him. The President of Argentina, newly elected, Macri just did a deal with the vulture funds that are based in New York, but have their official operations in the Cayman Islands; he’s been exposed as having a relationship with this law firm. The Brazilian scandal that we’re now seeing with Petrobras, Fonseca was also involved in essentially setting up the ownership documents for the former President Lula in Brazil. That’s being investigated right now, going to be investigated by the Brazilian Congress as they move to impeach the current President.
So this has wide ranging implications. In Australia they’ve turned up more than 800 international tax dodgers that they’re going to be investigating directly as a result of this latest revelation. So I think from my standpoint the real issue is that we’ve known about all this for decades. Literally they’ve been sensational scandals like this one. Not as large but going all the way back to the 1970’s. We had the Castle Bank and Trust case. We had General Noriega in Panama using offshore banks to hide his money. We’ve had [the Marcos] money. We’ve had the BCCI scandal. You know, we’ve had on and on the Russian Mafia. Just recently there was the Swissgate scandal involving leading offshore players in Europe. So the real issue here and the real scandal is the fact that governments have known about this and have done essentially nothing to close down the global haven industry.
DESVARIEUX: Okay, James, I want us to sort of connect the dots for everyday folks, because some people might just be watching this and just kind of saying oh you know these are sort of skeletons in the closet of the rich and powerful but how does this affect me as an everyday person? So can you just do that for us? Connect the dots.
HENRY: I think it’s a threat to democracy. I mean, if you have a wealthy elite and political officials around the planet engaged in tax dodging and kleptocracy with impunity, and using this offshore haven network to hide their behavior, you know, it’s really going to not only cause increased wealth inequality it’s going to shift the tax burden to the rest of us because we don’t have a choice to use these fancy arrangements to dodge taxes. You know it makes government a kind of a shadow play in which wealthy individuals don’t have to be responsible. Wealthy politicians don’t have to be responsible to the people that elected them. They can set up offshore companies and do deals in secret that no one can find out about. This facilitates bribery, facilitates corruption, facilities all kinds of financial chicanery, financial fraud. It’s not just about tax dodging. But you know it should be of great concern to anyone who values democracy because that’s ultimately what we’re talking about here. The ability of these people to have power and to have essentially excess representation without taxation and without responsibility for their behavior.
DESVARIEUX: Okay. James, I also want to go to the response from Mossack Fonseca. They essentially said they’ve always kind of complied with international protocols when they’re incorporating a new company. So how much of what they’re saying is true? Is this more of an issue with the protocols and the laws that we have on the books?
HENRY: No, I think that this is the standard response that anyone who sees this situation is going to make. But as we look at their behavior it’s pretty egregious in many instances. I think we’ll have to be cautious about making specific allegations. But the big picture is that a lot of this behavior is unfortunately legal. You know, beneficial ownership registration so that you know who owns companies and trust havens, and I would include Delaware on the list of havens, where you don’t have to say who owns a company if you start a Delaware company. That is a major flaw in the international regulatory system. We ought to have public transparency about the ownership of these companies and trusts that are manipulating stock markets. That are facilitating tax dodging. That there’s just no reason not to have full disclosure. That is right now a legal activity.
David Cameron, Prime Minister of the U.K. promised to get rid of beneficial ownership secrecy in the U.K. but he didn’t extend that to Commonwealth entities like the BBI and Cayman Islands, and Panama doesn’t have it. Even Delaware doesn’t have it. So a simple test for the response of governments to this outrageous revelation is can we just do that? Can we require companies to be registered when they’re incorporated and show who the beneficial ownerships really belong to? We should also have public officials have to declare their offshore assets. I mean this is outrageous. You can essentially have a public official, prime minister or higher of a major European country, you know with offshore wealth that he’s not declared. That should be absolutely required.
But the big players here in this industry, the enablers, the banks, the law firms, the accounting firms, the corporate registries, they have had decade after decade of profiting from this kind of behavior. And particular crooks, particular scandals, come and go, but this global industry lives on and that is the issue. We need to get a handle on this pervasive misbehavior of the global haven industry.
DESVARIEUX: Alright James Henry. Always a pleasure having you on the program. Thank you so much for being with us.
HENRY: You’re very welcome.
DESVARIEUX: And thank you for joining us on the Real News Network.
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