What Is the Pandora Papers Investigation?
The inner workings of a shadow economy that benefits the wealthy and well-connected at the expense of everyone else.
An Unprecedented Leak
Millions of leaked documents and the biggest journalism partnership in history have uncovered financial secrets of 35 current and former world leaders, more than 330 politicians and public officials in 91 countries and territories, and a global lineup of fugitives, con artists and murderers.
The secret documents expose offshore dealings of the King of Jordan, the presidents of Ukraine, Kenya and Ecuador, the prime minister of the Czech Republic and former British Prime Minister Tony Blair. The files also detail financial activities of Russian President Vladimir Putin’s “unofficial minister of propaganda” and more than 130 billionaires from Russia, the United States, Turkey and other nations.
The leaked records reveal that many of the power players who could help bring an end to the offshore system instead benefit from it – stashing assets in covert companies and trusts while their governments do little to slow a global stream of illicit money that enriches criminals and impoverishes nations.
Lawmakers Call for ‘Crackdown’ on Enablers
A bipartisan group of lawmakers will introduce legislation this week that for the first time would require trust companies, lawyers, art dealers and others to investigate foreign clients seeking to move money and assets into the American financial system.
The bill’s sponsors cited the findings of the Pandora Papers, a sweeping international collaboration published this week that exposed how the global elite conceal their wealth in tax havens that increasingly include the United States.
The stories by The Washington Post and the International Consortium of Investigative Journalists (ICIJ) showed that little-known trust companies in Sioux Falls, South Dakota, established nearly 30 trusts in recent years connected to people or companies accused of corruption, human rights abuses or other wrongdoing in some of the world’s poorest communities. The investigation also found that King Abdullah of Jordan secretly used offshore companies to purchase three properties in Malibu and reveal the use of two offshore trusts by an art dealer, now deceased, who was accused by U.S. prosecutors of trafficking in looted Cambodian artifacts.
On a cold December day in 2005, a lab analyst named Pietro Mancini descended into the basement of an aging chemical factory in the northern Italian town of Spinetta Marengo, where he discovered something curious: a coating of yellow dust on the walls and floor, left behind, apparently, by melted snow that had flooded the room.
In a storeroom in a separate building, he found sludge — also yellowish — oozing from a crack in a baseboard. He took a sample. A test revealed that the substance was brimming with hexavalent chromium, a heavy metal known to cause cancer.
When Mancini complained about the health threat to workers, his plant manager and his lab chief downplayed the risks, Mancini later testified. “They told me not to worry … that it wasn’t my business,” he said.
Cambodia’s Looted Heritage Benefits Top Museums
For decades, Douglas Latchford cut a romantic figure: The genial Englishman was an explorer of jungle temples, a scholar and a connoisseur seduced by the exquisite details of ancient sculpture.
Helicoptering into remote Cambodia to visit Khmer Empire cities, he risked land mines to satisfy his curiosity. Beginning in the 1970s, he amassed one of the world’s largest private collections of Khmer treasures, mostly Hindu and Buddhist sculpture, the remains of a civilization that flourished in Southeast Asia a thousand years ago. He co-wrote three glossy books on the subject.
Foreign Money Flows into Booming American Tax Havens
Across from a Holiday Inn, in a red-brick building with a welcome sign that reads “The Heart of America,” a little-known financial firm set up shop seven years ago and extended an invitation to the world’s elite.
Trident Trust promised to protect the fortunes and privacy of its new customers by relying on the laws of a state that had become a global destination for wealth. The company called it: “The South Dakota Advantage.”
Among those who answered the call: A Colombian textile magnate caught in a scheme to launder the proceeds of an international drug ring, an orange juice mogul who settled with authorities in Brazil for allegedly colluding to underpay local farmers and family members of the former president of a sugar producer in the Dominican Republic that has been accused of exploiting laborers and forcibly evicting families from their homes.
The U.S. government has long condemned prominent offshore financial centers, where liberal rules and guarantees of discretion have drawn oligarchs, business tycoons and politicians.
America’s Biggest Law Firm Drives Global Wealth to Tax Havens
An adviser to Malaysia’s prime minister needed help managing companies in the capital city of Kuala Lumpur and in Hong Kong. Prosecutors say he and his associates used the companies to divert hundreds of millions of dollars from a government economic development fund.
A Russian maker of Kalashnikov rifles, under international sanctions for bad behavior, wanted to sell its shares in a large copper mine to a shadowy business in Mongolia. The sale triggered a corruption probe of the then-Mongolian prime minister.
Tech giant Apple Inc. was shopping for a tax haven to stash its mountain of offshore cash.
They all had a friend in America’s biggest law firm.
When billionaires, multinationals and the politically connected seek to hide wealth or avoid taxes, they often turn to Baker McKenzie, the Chicago-based behemoth.
With 4,700 lawyers in 46 countries and revenue of $3.1 billion, Baker McKenzie bills itself as “the original global law firm.’’ It is among about a dozen U.S. and U.K. firms that have established large international networks and transformed the profession of law itself.
Baker McKenzie says it is committed to the rule of law and the highest international standards for ethics, human rights, and anti-corruption policies. “We are truthful and transparent,” the firm says in its code of business conduct. “We don’t do business with disreputable characters.”
Behind the lofty pronouncements is a plain reality: Baker McKenzie is an architect and pillar of a shadow economy, often called “offshore,” that benefits the wealthy at the expense of nations’ treasuries and ordinary citizens’ wallets.
How Celebrities Use the Offshore System
Shakira did it. So did Ringo Starr, Claudia Schiffer, Julio Iglesias and cricket legend Sachin Tendulkar.
They have all set up companies “offshore,” in places like the British Virgin Islands (BVI), where tax rates are low or zero and where their businesses — and their identities — are hidden from the public.
And they’re among the celebrities, politicians and billionaires named in a trove of leaked files obtained by the International Consortium of Investigative Journalists. Those records are part of the Pandora Papers, an investigation of the offshore financial system that the rich and famous use to buy yachts and private jets, invest in real estate and protect their families’ wealth while avoiding scrutiny.
Setting up companies and trusts offshore is easy, relatively cheap and, in many cases, legal. A celebrity who lives in London or Los Angeles, for example, can hire a financial service provider in a “secrecy jurisdiction” to create and register a corporation.
In addition to low or no tax rates, such jurisdictions have laws that shield the owners’ identities, making it difficult to determine whether they are using companies to hide assets from tax collectors, creditors or law enforcement agencies.
Some of those jurisdictions are literally offshore — on islands, such as Anguilla or the Bahamas — while others are in landlocked places like South Dakota and Switzerland.
Most countries allow individuals and businesses to set up companies in tax and secrecy havens. But they may still be required to disclose those companies — and pay taxes on them — in their home countries.