The  Panama Hats Have Been Blown  Off The Heads Of The Super-Rich And Powerful

Some Western media organisations, in alliance with some from the developing countries, have been publishing stories from eleven and a half million documents leaked from a law firm in Panama. The documents expose the activities of thousands of companies and individuals who have made use of “shell companies” to hide their wealth.

The company whose records have been leaked is based in Panama (yes, that tiny country mainly noted for three things – the Panama Canal, the Panama Hat and the cocaine-trafficking head of state, General Manuel Noriega, who was removed from office and imprisoned in the USA by the Americans in 1989.)

The company specialises in setting up offshore havens for companies and persons who don't want their financial information to be accessed by anyone. Its name is Mossack Fonseca.

The unprecedented leakage of 11.5 million secret documents, stretching from 1977 to December 2015, exposes the hidden underground of the world economy, a network of banks, law firms and other middlemen that utilize shell companies, sometimes using them to hide illegal wealth. The 2.6 TB files, involving 214,488 entities, also reveal hundreds of details about how former gun-runners, contractors and other members of the covert world use offshore companies for personal and private gain.

The cloak of secrecy provided by Mossack Fonseca revolves around the creation of “offshore companies” some of which are used by con men and women to hide Ponzi schemes, predatory lending scams, and other financial frauds from their victims and from their local tax authorities.

However, in a statement, Mossack Fonseca denies any wrongdoing. The company merely incorporates companies, and before agreeing to work with a client in any way, it conducts a thorough due-diligence process that “every case meets and quite often exceeds all relevant local rules, regulations and standards to which we and others are bound,” Mossack Fonseca maintains.

The documents were stolen and sent to the German newspaperSüddeutsche Zeitung. This paper then shared them with over 100 other media organisations spread across the world. In West Africa, the newspaper chosen was the Premium Times of Nigeria. This co-operation was carried out through the International Consortium of Investigative Journalists (ICIJ), based in Washington, DC.

Already, the Prime Minister of Iceland, Mr David Gunnlaugsson, has become a casualty, following the publication of documents that relate to his wealth and that of his wife. The British Prime Minister, Mr David Cameron, has also come under fire for apparently benefiting from a scheme set up by his late father to manage his wealth.

This is not the first time such revelations have appeared in the media. Leakages have also occurred in Switzerland and Luxembourg which show that wealthy companies and individuals, assisted by very ingenious lawyers, can run rings around the tax authorities of many countries. However, nothing much seems to be done after the hullabaloo in the media has died down.

Company laws in the countries vulnerable to revenue losses through “shell company operations” remain as they were before the leakages occurred. This reinforces the view of those who believe that political donations by companies and other inter-relationships between politicians and “big business” generally make it impossible for the situation to change drastically.

Writing in the London Observer, the former editor of The Guardian, Peter Preston, said the ”hundreds of reporters in 80 countries, writing in 75 languages” involved in the current project, had “pulled off the co-operative scoop of a lifetime”. On Russia for instance, the leakages said: ''Look at Putin’s friends” . On “China: see, with maximum impact, how crooked communists behave..... Saudi Arabia and the client monarch. Gambits – many still emerging – that touch pop stars, Hollywood stars, sports stars; anyone with a fat wad of money to hide or protect. Moreover, on front after front, it’s not over yet. There are terrific terabytes left to bite.”

In the wake of scandals such as Snowden, this form of investigative journalism, crossing borders, summoning expertise and carrying a rare punch, has turned globalised revelations on global corruption. “It’s a new dimension.,” Mr Preston observes.

“Glenn Greenwald, who helped bring the Snowden revelations to the world, discusses the leakages in relation to the unwillingness of the world's governments to punish criminal behaviour on the part of the people exposed. He writes: “From the start of the reporting based on Edward Snowden’s leaked document archive, government defenders insisted that no illegal behaviour was revealed. That was always false: Multiple courts have now found the domestic metadata spying programme in violation of the US Constitution …. numerous articles on [the] NSA and GCHQ documented the targeting of people and groups for blatantly political or legally impermissible purposes.....

“But illegality was never the crux of the scandal triggered by those NSA revelations. Instead, what was most shocking was what had been legalized: the secret construction of the largest system of suspicionless spying in human history. What was scandalous was not that most of this spying was against the law, but rather that the law — at least as applied and interpreted by the [US] Justice Department and secret, one-sided FISA “courts” — now permitted the U.S. government and its partners to engage in mass surveillance of entire populations, including their own. As [one activist] put it after the Washington Post’s publication of documents showing that the NSA analysts engaged in illegal spying: “The ‘non-compliance’ angle is important, but don’t get carried away. The deeper scandal is what’s legal, not what’s not.”

Mr Greenwald goes on: … "Dozens of newspapers around the world [have] reported on what they are calling the Panama Papers: a gargantuan leak of documents from a Panama-based law firm that specializes in creating offshore shell companies. The documents reveal billions of dollars being funnelled to offshore tax havens by leading governmental and corporate officials in numerous countries (the U.S. was oddly missing from the initial reporting, though journalists vow that will change shortly).

"Some of these documents undoubtedly reveal criminality: either monies that were illegally obtained (and are being hidden for that reason) or assets being concealed in order to criminally evade tax debts. But the crux of this activity — placing assets offshore in order to avoid incurring tax liability — has been legalized. That’s because Western democracies, along with overt tyrannies, are typically controlled by societies’ wealthiest, and laws are enacted to serve their interests.

"Even as the world’s wealthiest and most powerful nations have engaged in increasingly complex and intensive efforts at international cooperation to smooth the wheels of global commerce, they have wilfully chosen to allow the wealthiest members of Western society to shield their financial assets from taxation (and in many cases divorce or bankruptcy settlement) by taking advantage of shell companies and tax havens. If Panama or the Cayman Islands were acting to undermine the integrity of the global pharmaceutical patent system, the United States would stop them. But the political elite of powerful Western nations have not acted to stop relatively puny Caribbean nations from undermining the integrity of the global tax system — largely because Western economic elites don’t want them to. …

"Incorporating your hedge fund in a country with no corporate income tax even though all your fund’s employees and investors live in the United States is perfectly legal. So is, in most cases, setting up a Panamanian shell company to own and manage most of your family’s fortune....Proving that certain behaviour is “legal” does not prove that it is ethical or just.That’s because corrupted political systems, by definition, often protect and legalize exactly the behaviour that is most unjust. Vital journalism does not only expose law breaking. It also highlights how corrupted political and legal systems can be co-opted by the most powerful, in order to legally sanction atrocious and destructive behaviour that serves their interests, typically with little or no public awareness that it’s been done.”

The activities of vulture funds – which “buy” the debts of developing countries for ridiculous sums from the original creditors, and then relentlessly pursue the debtor countries for full repayment of the original debts in largely sympathetic Western courts, fall into the category of the“unethical but legal” way of doing things in the West. Gradually, the ridiculous nature of the way the West does business is becoming clearer to the rest of the world. Long may the revelations continue.