This New York Times stories focuses on the lawyers and asks the question: "Has the legal profession lost its moral compass?"
The answer is that the ethical rules governing lawyers do not put much of a barrier in the way of helping clients engage in transactions that would appear questionable but do not violate any specific laws, so it is not clear whether lawyers pushing to the edge of the law are acting improperly.
Model Rule of Professional Conduct 1.2(d), issued by the American Bar Association, says that a lawyer should “not counsel a client to engage, or assist a client in conduct that the lawyer knows is criminal or fraudulent.”
Note how the rule is premised on the lawyer’s knowledge, and many lawyers are expert at keeping themselves ignorant about exactly what is taking place to maintain plausible deniability. Moreover, that same rule says that “a lawyer may discuss the legal consequences of any proposed course of conduct,” so exploring the limits of the law can be permissible.
With all the hoopla about the Panama Papers in recent days, you may have overlooked this April 7 report by Citizens for Tax Justice, a U.S. nongovernmental organization, on how U.S. countries have stashed hundreds of billions of dollars in tax havens in order to avoid paying U.S. taxes.
The U.S. allows its corporations to defer paying U.S. corporate income taxes on profits of their offshore subsidiaries until those profits are officially “repatriated” (officially brought to the U.S.). This creates an incentive for American corporations to engage in accounting gimmicks to make their U.S. profits appear to be earned in countries where they will not be taxed. These data demonstrate that this is happening on a large scale. In fact, American corporations reported that more than half a trillion dollars of their profits were earned, for tax purposes, in the 10 tax haven countries shown in the table.
Amazingly, some lawmakers have, in recent years, called for even greater tax breaks for the offshore profits of American corporations. Some proposals would largely exempt previously accumulated offshore profits from U.S. taxes on an (allegedly) one-time basis (often called a “repatriation holiday”). Others would provide a permanent exemption (often called a “territorial tax system”). Perhaps these lawmakers do not realize that over half of the profits that American corporations claim their subsidiaries earn offshore — over half of the profits that could benefit from such new tax breaks — are reported by the companies to have been earned in 10 obvious tax havens.
Newsweek has this rundown of the African politicians who figure in the Panama Papers stories.
Koji Annan, the son of former United Nations Secretary General Kofi Annan, who allegedly used an offshore company incorporated in the Pacific island of Niue to buy a $500,000 central London apartment. A lawyer for Annan said that his companies “operate in accordance with the laws and regulations of the relevant jurisdictions” and paid whatever taxes they were liable to.
The Daily Beast has found that the Swiss law firm that "played an integral role in the transfer of some $2 billion from a close circle of friends and associates of Vladimir Putin" has long-standing ties with the so-called Klyuev group -- which has been described as a "dangerous transnational criminal organization."
Members of the Klyuev Group have been sanctioned by the U.S. government under a law named for its most high-profile victim: Russian tax lawyer Sergei Magnitsky. In 2007 and 2008, Magnitsky uncovered a $230 million tax fraud allegedly perpetrated by ex-convictDmitry Klyuev and his confederates, which included state tax officials and Interior Ministry investigators. Magnitsky was then framed by the very men he exposed; he was beaten to death in a Moscow prison hospital in 2009.
Documents seen by The Daily Beast show that on April 13, 2011, Altem Invest Ltd., a Cyprus-registered company controlled by Dmitry Klyuev, transferred $4,499 into a Swiss bank account belonging to Dietrich, Baumgartner & Partner. The law firm has also represented Vladlen Stepanov in a money laundering case opened in 2011 by the Swiss attorney general in relation to the Magnitsky affair. Stepanov, said to be a member of the Klyuev Group, is the ex-husband of Olga Stepanova, who formerly headed Moscow Tax Office No. 28, which processed part of the fraudulent $230 million refund.
Oxfam on the link between the Panama Papers revelations and global poverty:
Good morning! RFE/RL resumes its Live Blog of the Panama Papers with this story out of Panama itself. Police there have raided the headquarters of Mossack Fonseca, the law firm that was the source of the leaks. Police say the raid was carried out "without incident or interference."
Police carried out Tuesday's raid along with officials from an organised crime unit. Officers set up a perimeter around the headquarters while prosecutors entered the offices to search for documents.
Afterwards, the attorney general's office said the aim had been "to obtain documentation linked to the information published in news articles that establish the use of the firm in illicit activities".
The statement added that searches would also take place at subsidiaries of the firm.
The Panama Papers revelations have reached Davit Kezerashvili, who was Georgia's defense minister during the 2008 war with Russia.
The Swiss newspaper Tribune De Geneve wrote that in 2006 when Kezerashvili was appointed minister, he owned only one flat. But his assets were soon to grow after he resigned in December 2008, a few months after the war with Russia.
Tribune De Geneve reported that ten days after Kezerashvili’s resignation, ten of his trustees founded three offshore companies. Millions obtained from oil sales was transferred to bank accounts. According to the Panama Papers, an account was opened for one of those companies in Swiss Bank BCGE. 20 million Swiss francs (nearly USD 21 million) was transferred to this account. A further 25 million was transferred the same way to the banks ABN AMRO and BNP Paribas.
The Swiss newspaper also writes that in the beginning of 2013, an investigation was launched against Kezerashvili for corruption. In May-June of the same year, a trustee of Kezerashvili contacted the Panamanian legal services company Mossack Fonseca to register documents and back date them. Later, before the start of the trial, Kezerashvili transferred his assets to the two other offshore companies.
Activists in Australia say their country's laws on money laundering and other financial manipulations are "less stringent" than those in Panama.
Uniting Church director Mark Zirnsak, a member of the secretariat for the Australian arm of the International Tax Justice Network, called on Assistant Treasurer Kelly O'Dwyer to commit to better protection for whistleblowers.
As The Australian Financial Review revealed in February, the Turnbull government is looking at extending whistleblower law to specifically protect – and possibly reward – those who inform on multinationals cheating on their tax bills.
"In light of the Panama papers, the government should be following through on these commitments previously made, not dragging the chain on them," Mr Zirnsak said.
An official in Sri Lanka has become the latest victim of the Panama Papers revelations.
Amarapala was the chairman of the CEB between 2010 and 2011. He also served as an executive at the IWS Holdings Ltd. owned by Arthur Senanayaka between 2003 to 2010.
He has maintained this particular account while serving as a Director of the Sovereign Capital Corporation (SCC) belonging to Senanayaka, and that company had not been charged for wrong-doing up to now after being named in the 2013 list, the statement said.
“Amarapala has decided to keep away from all his responsibilities and functions of this ministry and to tender his resignation papers to Minister Patali Champika Ranawaka with the hope that it will be easier if the Ministry decides to conduct any investigation into the issue.”