4_Obermayer20160501PanamaPapers (2).pdf - \u2018The biggest leak in the history of data journalism\u2019 Edward Snowden The inside story from the journalists

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Unformatted text preview: ‘The biggest leak in the history of data journalism’ Edward Snowden The inside story from the journalists who set the investigation in motion. Late one evening, investigative journalist Bastian Obermayer receives an anonymous message offering him access to secret data. Through encrypted channels, he then receives documents showing a mysterious bank transfer for $500 million in gold. This is just the beginning. Obermayer and fellow Süddeutsche Zeitung journalist Frederik Obermaier find themselves immersed in a secret world where complex networks of shell companies help to hide those who don’t want to be found. Faced with the largest data leak in history, they activate an international network of journalists to follow every possible line of enquiry. Operating for over a year in the strictest secrecy, they uncover a global elite living by a different set of rules: prime ministers, dictators, oligarchs, princelings, sports officials, big banks, arms smugglers, mafiosi, diamond miners, art dealers and celebrities. The real-life thriller behind the story of the century, The Panama Papers is an intense, unputdownable account that blows their secret world wide open. CONTENTS Foreword Prologue 1 Start 2 Vladimir Putin’s mysterious friend 3 The shadow of the past 4 Commerzbank and its lies 5 Mossack Fonseca’s role in the Syrian war 6 From the Waffen-SS to the CIA and Panama 7 The football factory 8 On fishing, finding and fine art 9 A view of the White House 10 Sparks fly 11 Fear and trepidation 12 The Siemens millions 13 ‘Regarding my meeting with Harry Potter. . .’ 14 A secret meeting with Alpine views 15 Mossfon Holdings 16 Spirit of Panama 17 The world is not enough 18 The looting machine 19 Secret meetings in the Komitèrom 20 At the mercy of monsters 21 The red nobility 22 The Gas Princess and the Chocolate King 23 Those German banks 24 A raid by the Vikings of finance 25 Dead-end trails 26 United by marriage, united by money 27 Star, star, Mega Star 28 The fourth man and FIFA 29 The 99 per cent and the future of tax havens 30 The cold heart of the offshore world Epilogue The revolution will be digitized Acknowledgements Glossary Notes FOREWORD There are moments in history when a big truth is suddenly revealed. In 2010 leaked US diplomatic cables showed the White House’s private thinking about its friends and enemies. Three years later a contractor working for the National Security Agency exposed how the US and the UK are secretly spying on their own citizens. His name was Edward Snowden. We learned that spooks from Britain’s listening station GCHQ could – if they wanted – bug your iPhone. Or remotely activate your laptop web camera. Snowden’s revelations caused outrage and started a global conversation about the boundaries of privacy in a digital age. Except in Britain, land of James Bond, where many met his revelations with a complacent shrug. In April 2016 something else hidden in plain sight was exposed. Namely that the secret offshore industry – centred in tax havens like the British Virgin Islands – was not, as had been previously thought, a minor part of our economic system. Rather it was the system. Those who dutifully paid their taxes were, in fact, dupes. The rich, it turned out, had exited from the messy business of tax long ago. The journalists who unearthed this bitter truth were Bastian Obermayer and Frederik Obermaier of Germany’s Süddeutsche Zeitung. (They are not related but their German and international colleagues fondly nickname them the ‘Brothers Obermay/ier’.) The paper, based in Munich, has an excellent track record of working on difficult and important investigations. Reporters often get offered information, stuff. Generally, it turns out to be disappointing. As Obermayer recounts, in early 2015, late one evening, he received an anonymous message. It said: ‘Hello. This is John doe. Interested in data?’ Obermayer replied: ‘We’re very interested, of course.’ The data turned out to be bigger than anyone might have imagined. The source – his or her identity remains unknown – had got hold of the entire internal database of a major Panamanian law firm. The firm’s name was Mossack Fonseca. It specialized in setting up anonymous offshore shell companies. The motivation here was simple. Like Snowden, the source wanted to expose criminal wrongdoing among the firm’s shadowy clients. The leak was an act of bravery. It eventually amounted to 11.5 million documents, delivered in real-time instalments. It was the biggest leak ever, and far larger than the top-secret Snowden Files or US State Department cables. It included the records of 214,000 offshore companies, names of real or ‘beneficial’ owners, and passport scans. There were bank statements. And email chains. Often these were between Mossack Fonseca’s head office in Panama and ‘intermediaries’, typically other lawyers, accountants and banks. And from the firm’s branches in UK crown dependencies like Jersey or the Isle of Man. What followed was a thrilling and secret year-long journalistic collaboration across more than eighty countries. The Süddeutsche Zeitung shared its material with the International Consortium of Investigative Journalists, the ICIJ, which is based in Washington DC. The ICIJ in turn gave access to the data to 100 media organizations across the planet. In Britain that was my newspaper, the Guardian, and the BBC. The journalists gave the leaked files a name. They were the Panama Papers. The name was a conscious echo of the Pentagon Papers: volumes of secret documents leaked in 1971 by Daniel Ellsberg that lifted the lid on the US war in Vietnam. I found myself back in the Guardian’s investigations ‘bunker’. Actually, it had a bucolic view of Regent’s Canal in London: houseboats, joggers, coots. In 2013 I’d been part of a small group that had studied the Snowden Files here. This project was different. Via a secure platform, called the iHub, journalists were encouraged not to compete with each other but to share information actively and to swap leads and tips. We did, in a flurry of encrypted emails. For some time the global media industry has been in a state of gloom. Newsrooms are downsizing; the ad market has collapsed. Suddenly, though, this counter-intuitive model of cooperation looked like the way to go at a time when media organizations were broke. Paradoxically, it felt to us like a golden age for investigative journalism. The leaks kept coming. And grew bigger: in this case, an astonishing 2.6 terabytes. But would anyone care? By 2016 almost 400 journalists were working secretly on the story, with an agreed publication date of 3 April. Clandestine group meetings had taken place in Washington, Munich and London. There were two concerns. One, that the leak might itself leak – that someone would accidentally bust the embargo. The other was that the public would respond to the Panama Papers with an indifferent yawn. We needn’t have worried. In Iceland the prime minister resigned. In Argentina there were demonstrations. In Azerbaijan a small war was initiated – so some believed – to distract from revelations featuring the president and his daughters. In China censors blocked the words ‘Panama Papers’ and jammed the website of the Guardian. In Russia aides to Vladimir Putin fumed about a Western ‘spy’ conspiracy. In Britain, meanwhile, David Cameron experienced the worst week of his premiership. The Panama Papers revealed that the offshore fund run by Cameron’s late father Ian had paid no British tax. For three decades. The fund, Blairmore Holdings Inc, had gone to absurd lengths to pretend it was based in the Bahamas. It hired a small army of Bahamas residents to sign paperwork, including a part-time bishop. Downing Street refused to answer questions about Cameron’s tax affairs, saying they were a ‘private matter’. Eventually Cameron came clean: he’d owned shares in Dad’s tax haven fund. He sold them for £31,500 just before becoming prime minister in 2010. Cameron was reluctant to acknowledge what was obvious: that his family’s fortune legally of course – came from privileged offshore wealth. It’s too early to say whether the Panama Papers will usher in a new era of transparency. The G20 has promised to act. Cameron, George Osborne and Jeremy Corbyn all published their tax returns – a start. But as US president Barack Obama noted, tax avoidance is a huge global problem. It’s made worse, Obama said correctly, by the fact that using offshore structures is perfectly legal. Still, the past few months have seen a victory of sorts for those of us, the little people, who do pay our taxes. From now on, the super-rich and other characters who use exotic offshore structures will be a nervous bunch. How long, they must be wondering, before the next leak? Luke Harding London, May 2016 PROLOGUE Bastian Obermayer ‘Ping.’ My wife, our children and I have been at my parents’ for three days, and for the past two days everyone’s been ill. Everyone except me. It’s ten o’clock in the evening, and having stroked the last patient and handed out the last cup of tea, I sit down at the dining table, open my laptop and put down my smartphone next to it. Then there’s a ‘ping’. A new message. [john doe]:Hello. This is John doe. Interested in data? I’m happy to share.* * In order to protect our source, parts of the indented, sans serif exchanges that would endanger our informant have been abbreviated in this book or else reproduced with minor alterations that do not distort their meaning. ‘John Doe’ has been in use in Great Britain for centuries and is also common in Canada and the United States. People whose true identity must be protected in court are called ‘John Doe’, as are unidentified corpses. ‘John Doe’ has also long been used as a name for bands, TV series and various products. So ‘John Doe’ is a cover, another term for ‘Joe Bloggs’. But this ‘Joe Bloggs’ is obviously offering secret data. Investigative journalists are genetically programmed to prick up their ears at this kind of offer. Secret data is always good news. At the Süddeutsche Zeitung we’ve published lots of articles based on leaked data in the past three years. Offshore Secrets was about tax secrecy in the Caribbean, the HSBC Files tackled secret Swiss bank accounts and the Luxembourg Tax Files revealed Luxembourg’s dodgy tax schemes. The mechanism is always the same – a large volume of secret data flows out and ends up in the hands of journalists. If the volume of secrets is large enough, it is, statistically speaking, almost bound to contain some good stories. Also, journalists often spend weeks, sometimes even months, chasing a specific source. So if a potential source comes to you, you need to react fast. Or at the very least you need to react: there’s almost nothing more annoying than finding a story in the Spiegel or the Zeit that you were offered first. [Obermayer]: Hello. We’re very interested, of course. You can immediately tell the worst sources – bad sources, or at any rate crazy or confused ones – from their emails. Crazy people do sometimes have good stories, but it’s the exception rather than the rule. The advantage with data is that it’s not self-important or verbose. It doesn’t have a mission and it isn’t looking to deceive you. It’s simply there, and you can check it. Every good dataset can be collated with reality and that’s exactly what you must do as a journalist before you start to write. At some stage you also have to consider very carefully which part of the data you’re going to exploit. WikiLeaks was different. The coordinators of that whistle-blowing website simply posted data on the Internet without any journalists filtering the information. That was the basic idea – and not a bad one at that. [Obermayer]: How would we get the data? [john doe]: I would like to assist but there are a couple of conditions. You need to understand how dangerous and sensitive some of this information is. My life is in danger, if my identity is revealed. I’ve spent the past several weeks considering how to handle this. We will only chat over encrypted channels. No meeting, ever. The choice of stories is obviously up to you. I can live with those conditions. Journalists obviously prefer to get to know their source to be able to gauge what they’re like and understand their motives, but for the informants it’s often better to remain in the shadows. Whistleblowers aren’t particularly well protected, even in Germany, and each person who knows an informant’s identity is a potential risk – even, or perhaps especially, if that person is a journalist. However, the source communicates clearly and concisely, and I can do the same. This someone has obviously got something they want to get rid of, and they want to give it to me. [Obermayer]: So how to proceed? I send the person my contact details for further encrypted communications. In the subsequent exchanges we agree on how the transfer will take place, and I’m told that I can expect to receive a first sample soon via an encrypted channel. The source doesn’t ask for money – a good sign. A few months earlier someone had got in touch with me claiming to have records of secret foreign bank accounts belonging to a German political party and supposedly containing $26 million. Our conversation went back and forth for a week, poor-quality photos of bank documents were sent, absurd telephone calls ensued and then, over the phone, the person suddenly demanded cash. The fact is that the Süddeutsche Zeitung never pays for information, not only because we don’t have the money, but primarily on principle. This also reduces people’s temptation to fob us off with fake documents. We just have to be able to stomach reading stories we were forced to pass up in other newspapers. However, the story of the secret party account appeared neither in the Spiegel nor in Stern: if they were ever offered the documents, our colleagues must also have judged them to be fakes. ‘Ping.’ The sample has arrived: a big bunch of documents, most of them PDFs. I open the files on my computer and analyse them, one by one. There are companies’ articles of incorporation, contracts and extracts from databases. It takes me a while to grasp the links between them, but after a quick Internet search I understand the context. The location is Argentina. A public prosecutor, José María Campagnoli, suspects that shady business people have helped the Kirchners – i.e. the then president Cristina Kirchner and her late husband Néstor – to smuggle around $65 million out of the country. This theft was allegedly conducted via a labyrinthine system of 123 shell companies, all of them set up, predominantly in the US tax haven of Nevada, by a Panamanian law firm called Mossack Fonseca. Nevertheless, none of the accusations have as yet been proved and Cristina Kirchner disputes the accuracy of the allegations. What makes the case topical is that there is a litigation case pending in the United States. Directed by its founder Paul Singer, the investment fund NML had bought millions of dollars’ worth of Argentinian government debt – and then the country went bankrupt. Most creditors agreed to debt relief, but not NML. The fund is filing lawsuits around the world for the seizure of Argentinian state assets. It has even had an Argentinian warship impounded off the coast of Africa. Warships are valuable and can be sold off. The goal of the current lawsuit in Nevada, USA, is to force the disclosure of this network of shell companies. NML wants Mossack Fonseca to surrender all documents pertaining to the 123 shell companies. I have some of those files in front of me on my screen right now, documents that NML has been chasing in vain for years. One thing jumps out at me: the payments run into millions of dollars. The papers show the transfer of $6 million into a Deutsche Bank account in Hamburg. The accompanying contract raises further questions: it’s a commission on a gambling deal. Two other files name the real owners of two of the firms whose documents NML is seeking to obtain. Access to these two files would constitute a huge leap forward in their case. The interesting thing is that all the documents appear to originate from the same law firm. I’m familiar with Mossack Fonseca, but only ever as an impenetrable wall, a black hole. Every time our research has led us to this law firm, it has spelled the end of the investigation. Mossack Fonseca is one of the largest providers of anonymous shell companies and is not exactly famed for being fussy about its clientele; quite the opposite, in fact. In plain English: while many of its clients are doing nothing illegal, some of the world’s biggest scumbags have used Mossack Fonseca’s anonymous offshore companies to disguise their business dealings. During the Offshore Secrets and HSBC Files investigations we came across convicted drug kingpins and suspected traders of blood diamonds who had used companies established by Mossack Fonseca for camouflage purposes. Search the Internet for Mossack Fonseca’s clients and you will also find accomplices of Gaddafi, Assad and Mugabe allegedly working hand in glove with the Panamanian law firm. Please note that I say allegedly, as Mossack Fonseca denies any association with these people and its client list is confidential. So far, at least. [Obermayer]: The material seems to be good. Can I see more? But ‘John Doe’ doesn’t answer. Has he or she had second thoughts? Or are they merely considering their next move? [Obermayer]: Is all about the argentine case? When I still haven’t received an answer twenty minutes later, I close my laptop, put my smartphone away and go to bed. The next morning (with the sickbay still as full as ever) there’s an answer. And a lot more besides. [john doe]: I am sending a few more documents. Some have to do with Russia. Another part of a PDF is specially intended for you Germans. Look for Hans Joachim. . . There’s a lot more from where that came from. I’m desperate to look through the documents straight away, but – and this is very tough – I first have to go to the pharmacy and shop for bread, fruit and tea. I’m the only one in a fit state to leave the house. The positive effect of this epidemic is that no one wants me to take them to the woods, play football or go for a walk. By late afternoon every bed in the house has a sleeping patient in it and I can return to my computer. The new documents also seem to come exclusively from the files of the Panamanian law firm Mossack Fonseca. The company clearly has a serious problem. A leak. First I study a document many hundreds of pages long that whoever-it-is has named ‘Records’. Several hundred pages of bank transfers, but one sticks out: on 19 November 2013 a sum of almost $500 million in gold was paid into the account of a man called Hans-Joachim K. at Société Générale Bahamas.1 $500 million. Half a billion. A vast sum of money. I’ve never heard of Hans-Joachim K., but a Google search reveals him to be a little-known Siemens manager in Germany who used to be CEO in Colombia and Mexico. This might be a lead. For many years Siemens ran slush funds in South America to reward people who helped its business to flourish. I find dozens of articles, including some in the international press. One thing baffles me, though. This jaw-dropping sum was transferred into the Siemens man’s account in autumn 2013, yet the company’s Latin American slush funds had been uncovered way back in 2007/8. There were lawsuits, some of which continue to this day. This is strange, to put it mildly. You don’t just suddenly come by $500 million, so where’s this money from? A bookkeeping error? Before I can become absorbed in further details, I hear the kids calling me. They want more salted snacks and toast. I give in and snap the laptop shut. That $500 million isn’t going anywhere. I spend the afternoon reading stories, making tea and filling hot water bottles. It’s late in the evening befo...
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  • Spring '15
  • Tax haven, Offshore company, Offshore financial centre, Offshore bank, Investigative journalism, Mossack Fonseca

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