In 2016, the Panama Papers scandal revealed how multinational corporations, government officials, politicians, and high net-worth individuals benefited from an array of tax avoidance schemes through shell companies domiciled in Panama.
Hackers stole—and then leaked—over 14-million documents and 1,400 gigabytes of data. The leaked information exposed how global businesses, heads of state, and key figures in politics, entertainment, and sports shielded vast amount of wealth in secretive tax havens in Bermuda, the Cayman Islands, and the British Virgin Islands.
The Paradise Papers
The so-called “Paradise Papers” were leaked to a German newspaper, which then shared the documents with the International Consortium of Investigative Journalists (ICIJ), the same outfit that exposed the Panama Papers caper, along with media outlets such as the Guardian, the BBC, and the New York Times.
Nearly half the documents reportedly came from the Bermuda-based Appelby law firm and Estera, a corporate services provider that was once an operating unit of the firm. Appleby and Estera help individuals and corporations create offshore companies to avoid taxes in their own countries.
The leaked information exposed some potentially damaging information, particularly involving U.S. Commerce Secretary Wilbur Ross. Secretary Ross reportedly has a multi-million dollar stake in Navigator, a shipping company whose customers include Sibur, a Russian energy firm said to be owned in part by oligarchs and relatives of Russian President Vladimir Putin.
Secretary Ross says his holdings are proper because Navigator and Sibur have not been sanctioned by the U.S. Ross also claims that he has recused himself from any decision-making role at Navigator, that the business association had been disclosed to the government ethics office, and that he did not mislead lawmakers about these holdings during Senate confirmation hearings.
These revelations could be troubling for the Trump Administration related to potential collusion with the Russian government. Other revelations from the Paradise Papers include:
- The Queen of England’s private estate invested millions of pounds in a Cayman Islands fund, and some of that money went to a retailer accused of exploiting the poor.
- A Russian tech entrepreneur with business ties to Trump senior adviser/son-in-law Jared Kushner invested hundreds of millions of dollars in Facebook and Twitter that may have originated from the Russian state bank.
- Aggressive tax avoidance by U.S. multinational corporations, including Nike and Apple.
- Leading figures in the film and television industries protect their wealth with an array of offshore tax havens.
Importantly, offshore havens are not illegal if set up in accordance with international rules established by the OECD, such as the Automatic Exchange of Information and Base Erosion and Profit Sharing (BEPS) reporting requirements. Although Appleby contends there has been no wrongdoing and that all the business transactions were lawful, the revelations will put more pressure on world leaders to crack down on global tax-evasion schemes.
Whether the Paradise Papers will reveal any illegal activities, such as money laundering or financial fraud, remains to be seen. In the meantime, individuals and businesses involved in offshore transactions and investments are well advised to seek the advice and counsel of seasoned complex litigation attorneys.