To See the Submerged Economy of Venezuela you have to Dive in Panama

As part of a global project, Venezuelan journalists participated in the review of millions of files leaked from a Panamanian law firm specialized in registering companies in tax havens. The documents, obtained by the German newspaper 'Süddeutsche Zeitung' and processed by the International Consortium of Investigative Journalists (ICIJ), show patterns for government officials and business groups to hide their identities or money.

2 March 2016
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The information includes e-mails, financial forms, passports and corporate records that reveal the secret owners of bank accounts and companies in 21 offshore jurisdictions. The filtered internal files of MF (Mossack Fonseca law firm) contain information on 214,488 offshore entities connected to people in over 200 countries and territories.

The incredible amount of information led the newspaper to resort to ICIJ, based in Washington DC, and with previous experience in this type of project, which developed an ad hoc team to organize and process the information. The database was shared with a network of more than 370 journalists and 100 media around the world.

In the case of Venezuela, the investigation began in June 2015 and involved 11 journalists from different electronic media. Although a large part of the hundreds of thousands of documents related to Venezuela do not include relevant information, the mere review, analysis and processing of the information entailed months of work.

It is clear that organizing an offshore company itself is not a crime and it is even natural for certain commercial transactions.

Most services provided by the offshore industry are legal if used by those who abide to the law. But the documents show that banks, law firms and other offshore players often did not meet the law requirements to make sure that their clients are not involved in criminal activities, tax evasion or political corruption. In some cases - as evident in the files - offshore intermediaries protected themselves and their clients by concealing suspicious transactions or altering official records.

Sometimes the provider did verify through due diligence that a prospect was a Politically Exposed Person (PEP) or someone suspected of criminal activities, but decided to ignore the finding.

This unusual journalistic access to the internal management of Mossack Fonseca and its relationship with its clients made it possible to verify that provider and client regularly scheme to mislead the regulatory authorities of their countries of origin on the ownership of companies, and subsequently arrange the registration of companies previously registered, among other practices aimed to cover up the circulation of money that is concealed or legitimized.

Influential Names

The information obtained from MF, for the Venezuelan case, offers significant examples of what happened during the last 15 years with the destiny of the vast flows of oil revenues that the State managed in the framework of a policy of massive imports and the maintenance of differential rates. There were traces of former public officials, whose regular income - limited by definition - was no objection to ordering MF to open and manage shell companies in tax havens.

It is also evident that the Panamanian company put together tailored-made corporate structures for some Venezuelan clients who wanted either to dissipate their presence in companies organized with directors of MF itself or generate external debt through transactions with empty shells
that could be presented later on to the administrative entity in a Venezuela under the exchange control regime.

They are part of the financial, legal and fiscal maneuvers that were plotted in MF, sometimes at the suggestion of the provider, sometimes at the request of the client or at the request of an intermediary such as banks or law firms.

The leakage of information sheds light on a corner of submerged finance that journalistic investigations cannot normally reach.

In the texts comprising the special emerge names as those of the former Chief of Escorts of Hugo Chávez, Adrián Velásquez, and the former Head of the program of social assistance Plan Bolívar 2000, Víctor Cruz Weffer, with companies under their control in tax havens. Several authorities of the state oil company PDVSA also did the same.

Entrepreneurs —some linked to the revolutionary government of Venezuela, although they later appeared under asylum in other nations— also used Mossack Fonseca to cover up their financial operations. Their names will come out from today. There are also cases of businesspersons who opened corporate facades in tax havens such as Hong Kong, Panama, the Virgin Islands or Belize to take advantage of the opportunities opened by the eagerness to import of the Government.

Global Findings

Heads of State, social and sports celebrities, organized mafia leaders, swindlers… On a global scale, the massive leak of documents has allowed to reveal the face of different celebrities never known by the people. In fact, it allowed discovering previously unknown characters that people should know.

The files show offshore companies controlled by the prime ministers of Iceland and Pakistan, the king of Saudi Arabia and the sons of the president of Azerbaijan. They also include at least 33 people and companies blacklisted by the US government based on evidence that they have done business with Mexican drug lords, terrorist organizations such as Hezbollah and renegade nations like North Korea.

One of these companies provided fuel for the aircraft that the Syrian government used to bomb and kill thousands of its own citizens, as accused by US authorities. It became clear how associates of Russian President Vladimir Putin surreptitiously moved up to $ 2,000 million through banks and secret companies.

The list of world leaders who used Mossack Fonseca to organized offshore companies includes the current president of Argentina, Mauricio Macri, who was the director and vice president of a company in the Bahamas run by Mossack Fonseca when he was an entrepreneur and the mayor of the Argentine capital. A spokesman for Macri said the president was never personally owned shares in the firm, that it was part of his family's businesses.

The files also highlight the contradictions of some champions in the fight against corruption.

They detected offshore companies linked to the family of Chinese leader Xi Jinping, who has sworn to fight against "armies of corruption", as well as eight other members of the Politburo of the ruling Communist Party of China.

Also companies linked to Ukrainian President Petro Poroshenko, who has positioned himself as a reformer in a country shaken by corruption scandals. The files contain new details of the offshore businesses of the late father of British Prime Minister David Cameron, a leader seeking a reform of tax havens.

The traces of Mossack Fonseca are in the African diamond trade, the international art market and other businesses that benefit from secrecy. The firm has provided service to so many members of the Middle Eastern royalty as to fill a palace. It has helped two kings, Mohammed VI of Morocco and the Salman of Saudi Arabia, to go out to sea in luxurious yachts.

The leaked documents reveal that the law firm of Juan Pedro Damiani, a member of FIFA's ethics committee, had business relationships with three men who have been indicted in the FIFA scandal: former FIFA vice president Eugenio Figueredo and Hugo and Mariano Jinkis, the father and son duo accused of paying bribes to win the rights to broadcast football events for Latin America. The records show that Damiani's legal signature in Uruguay represented an offshore company linked to the Jinkis and seven companies linked to Figueredo. The best soccer player in the world, the Argentine Lionel Messi, also appears in the documents. A company in Panama established for him by Mossack Fonseca in 2012, Mega Star Enterprises Inc., adds a new name to the list of shell companies that are known to be linked to Messi. His offshore businesses are currently the target of a tax evasion case in Spain.

Under Scrutiny

Until recently, Mossack Fonseca operated mainly in the shadows. But it has been under increasing scrutiny as governments have obtained partial leaks from the firm's files, and authorities in Germany and Brazil have begun to investigate their practices.

In February 2015, Süddeutsche Zeitung reported that law enforcement agencies in Germany had launched a series of raids targeting one of the country's major banks, Commerzbank, in a tax evasion investigation that authorities said could lead to criminal charges against employees of Mossack Fonseca.

In Brazil, the firm has become a target in an investigation of bribery and money laundering called "Operation Car Wash" (Lava Jato, in Portuguese), which has led to criminal charges against prominent politicians and an investigation to the popular former president Luiz Inácio Lula da Silva. The scandal threatens to remove current president Dilma Rousseff from office.

In January, Brazilian prosecutors called Mossack Fonseca a "great money launderer" and announced that they would file criminal charges against five employees of the firm's office in Brazil for their roles in the scandal.

Mossack Fonseca denies having broken the law in Brazil. One of its owners, the Panamanian Ramón Fonseca Mora, insisted in recent weeks in his innocence. But at the same time he had to resign office as an Advising Minister of the Government of Panama and as head of the Panameñista party, which led Juan Carlos Varela to the Presidency.

"We are totally innocent of the charges against us," he told the media last month. "I ask for this license to defend my honor, my firm and my country."

(*) The Venezuelan team is made up of Ahiana Figueroa, Alfredo Meza, César Batiz, Ewald Scharfenberg, Fabiola Zerpa, Joseph Poliszuk, Katherine Pennacchio, Laura Weffer, Lisseth Boon, Roberto Deniz, and Ronna Rísquez.

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