|THE PANAMA PAPERS How Mossack Fonseca Helps The Rich Stay Rich 10 Apr. 2016||| Print ||
THE PANAMA PAPERS
10 Apr. 2016
Dear Friends and Patriots,
What follows is written to explain a bit about so-called “dark finance.” It’s a descriptive used to describe how the wealthy of the world manage their businesses in ways to avoid taxes and to conduct nefarious activities in ways that protect them from legal peril.
Most of you have heard a bit about The Panama Papers. You may know that it involves 11.5 million records of the law firm Mossack Fonseca, a firm headquartered in Panama. You may also know the 11.5 million records describes Mossack Fonseca’s business dealings with clients over a period from 1977 through the end of last year. Evidently the client list is quite extensive and includes billionaires, politicians and despots, families of politicians and despots, royal families, drug lords and some who do business with drug lords, international ponzi scheme operators, terrorist organizations, and even some nice famous people.
One important fact worth noting is that many, perhaps most of the business goings on documented in the 11.5 million records are perfectly legal. Even so, many are clearly not, and many more show evidence of collusion, chicanery, and aiding and abetting those whose intent is to defraud other individuals as well as governments.
To understand what was going on you need to know what an offshore shell corporation is. In case you don’t, I’ll just tell you. It’s a corporation chartered in a tax haven nation, not the one the owner or owners reside in, generally for use as a means to gain business or financial advantage or to avoid taxes in the home country. It may also be part of a chain of similar shell corporations and used in money laundering schemes. In other words one shell corporation may be registered as owned by another shell corporation, which itself may be registered as owned by a third shell corporation. Sound confusing? It’s simple really.
The corporations are required to name their boards of directors, but not their actual owners. Most of the boards are made up of “nominee” directors, who have no actual say in the operation of the company. It’s a sweet deal, since directors receive a stipend for the use of their name, yet have no real responsibilities. It’s the owners who call the shots, but because the incorporation papers don’t require registration of the actual owners, most of the time they are anonymous.
You might wonder, “If setting up offshore shell corporations is legal, then what’s the scandal really about?” It’s about two things, really. It’s about certain practices by Mossack Fonseca that are highly dubious, like back-dating official documents and leaving out required information that might hint at the true owners’ identities. It’s also about who the clients are or are tied to.
Just a brief list of clients tells a lot. Included are the sitting Saudi king and the king of Morocco, the children of the current prime minister of Pakistan, a son of former Egyptian president Hosni Mubarak, the family of current president of Azerbaijan, the father of Britain’s current prime minister, several close associates of Russia’s president, several members of the families of several members of China’s ruling elite, a former president of Brazil, the reigning world’s best soccer player and his father, the current prime minister of Iceland and his wife, the current president of The Ukraine, film star Jackie Chan, etc. The list goes on and on. Again, not all shell companies are used for nefarious reasons. Most are used to aid the owners in conducting international business, and break no laws at all. The scandal is about those involved in nefarious dealings as well as business practices of Mossack Fonseca that aid and abet those dealings and also shield the identities of the law firm’s actual clients.
What are we, the hoi polloi supposed to make of all this? Should we pay attention, or should we just leave the rich and the empowered to duke it out while we turn the channel and watch another episode of Vikings or The Walking Dead? I suppose the answer may lie in whether or not you have money invested in the stock markets and whether any of the companies involved in the scandal are going to affect one of your holdings. Otherwise, no, you’re perfectly safe in ignoring the goings on of the rich and empowered once again. Enjoy your Vikings and The Walking Dead. Don’t give this international scandal another thought. After all, it won’t affect your family, your town, your state, or even our country. It’ll be “them” who will bear most of the brunt of this affair. Small fry like most of us, who hardly do business across state lines, much less across international boundaries, don’t have much to worry about in this.
Well, we don’t have to worry unless the scandal leads to the fall of regimes, unrest, and chaos in the world. Then . . . maybe.
Isn’t it nice to know, though, that if you were ever rich you’d have no problem finding firms like Mossack Fonseca to help you stay rich by side-stepping national laws and taxing authorities? Yes, it’s a nice thought. I’ll be pondering that one as I sip a Budweiser while floating around in my above ground pool. I’ll be doing that, too, just after I wash the dishes and hang out a load of laundry. It’s tough, not being rich. But, I can handle it.