MANHATTAN (CN) – Three years after the leak of the Panama Papers exposed a worldwide network of tax-avoiding shell companies, federal prosecutors brought charges Tuesday against four men tied to the law firm Mossack Fonseca.
Obtained by the German newspaper Suddeutsche Zeitung from an anonymous source, the 2015 data dump is considered history’s biggest leak, laying bare in 11.5 million files how people around the world, including world leaders of the U.K., Iceland and Russia, shuffled their assets into tax havens.
The nonprofit International Consortium of Investigative Journalists partnered with media companies in more than 70 countries to pick apart the once confidential documents, embarrassing among others the inner circles of Russian President Vladimir Putin and former British Prime Minister David Cameron.
In a tangled 67-page indictment, U.S. prosecutors charged four men tied to the firm. The ones captured by authorities are Dirk Brauer, a 54-year-old German investment advisor for Mossfon Asset Management; Richard Gaffey, a 74-year-old U.S. accountant; and Harald Joachim von der Goltz, an 81-year-old German-born client.
Mossack Fonseca attorney Ramses Owens, a 50-year-old from Panama, remains at large.
U.S. Attorney Geoffrey Berman said Tuesday that all are under indictment in New York.
“For decades, the defendants, employees and a client of global law firm Mossack Fonseca, allegedly shuffled millions of dollars through off-shore accounts and created shell companies to hide fortunes,” Berman said in a statement. “In fact, as alleged, they had a playbook to repatriate un-taxed money into the U.S. banking system. Now, their international tax scheme is over, and these defendants face years in prison for their crimes.”
Untangling the cases of five Mossack Fonseca clients – one named and four unnamed – court papers show how the firm created labyrinthine networks of shell companies to keep their clients’ assets from the tax authorities.
“Owens and Brauer created, marketed, sold, and serviced sham foundations and shell companies formed under the laws of countries such as Panama, Hong Kong, and the British Virgin Islands to conceal, from the IRS and others, the ownership by U.S. taxpayers of accounts established at overseas banks, as well as the income generated in those accounts,” the 67-page indictment states.
In multiple cases, prosecutors say, Mossack Fonseca scrambled to pick up the pieces after the Panama Papers hit the public sphere.
One example from the indictment is the case of von der Goltz, a German national who grew up in Guatemala who has lived in the United States since 1984.
Prosecutors claim he dodged U.S. taxes with a series of shell companies to mask more than $30 million in assets placed in Revack Holdings Foundation via a shell company EMJO Investments Limited. Von Der Goltz is the founder and manager of the foundation, but prosecutors said he hid that fact through a complex corporate structure of other Revack entities listing his 102-year-old mother as the beneficial owner.
“She is a Guatemalan citizen and resident, and – unlike von der Goltz – she is not a U.S. taxpayer,” the indictment states, referring to the elderly mother.
After the exposure of the Panama Papers in May 2016, prosecutors said, a law firm contacted the Department of Justice on von der Goltz’s behalf to “correct” statements made about him to the press.
“The statement of facts further falsely represented, in substance and in part, that von der Goltz was not the beneficial owner of EMJO, that he had ‘signature only’ authority over the Swiss Bank EMJO Account, and that he had not used EMJO ‘to hide funds from the U.S. or other tax authorities,’” the indictment states.
Prosecutors say that a U.S.-businessman identified as Mossack Fonseca’s “Client-3” hid $8 million in offshore entities, including a condo at the Grand Bay Towers in Panama City, before he died in September 2017
After the Panama Papers story broke a year earlier, prosecutors said, “Client-3” scrambled with Brauer to hide the $7.3 million in those assets still in Mossack Fonseca’s accounts that had been unmasked.
“Brauer suggested the creation of a new sham foundation that would hold new shell companies, which in turn would hold new bank accounts,” according to the indictment.
In January 2017, “Client-3” started cooperating with the Department of Justice, and prosecutors said that they wiretapped a call between that client and Brauer about creating a new foundation to make sure “everything can go to my children tax-free.”
“We are basically closing to have such account at [a bank in the Bahamas] and we are also and [a bank in Andorra] we’re actually telling her so I think that at least the two,” Brauer is quoted as saying. “And when I have, once it gets ready I also am thinking about these guys in Antigua.”
In June 2017, prosecutors said that they “Client-3” and an undercover agent for a meeting with Bauer in Bermuda to talk about tax evasion – and a side project.
“The undercover also pitched to Brauer the idea of laundering money for U.S. clients who had been involved in a pump and dump securities fraud scheme,” the indictment states. “Brauer stated, in substance and in part, that he would be able to assist the undercover’s U.S. clients in setting up offshore companies and bank accounts to accomplish these goals.”
Prosecutors say Brauer and the undercover communicated about the arrangement over the next several weeks and that Brauer requested conversations over Skype and the encrypted platform WhatsApp, as being a “little more discrete (sic)” than the telephone.
Collectively, the men face 11 counts of wire fraud, tax evasion, money laundering and false statements – charges that carry the possibility of decades imprisonment.