Panama Papers

The leak of the Panama Papers from Mossack Fonseca has dominated the headlines over the past week. As name after name was connected to the scandal – from Iceland’s Prime Minister Sigmundur Davíð Gunnlaugsson who stepped down in response to the controversy to the UK’s Prime Minister David Cameron, who admitted a stake in his father’s offshore company – questions continue to spill. The biggest question: where are the Americans?

(For a quick explanation on the Panama Papers, click here.)

With 11.5 million confidential documents at stake, including financial and legal records for over 14,000 Mossack Fonseca clients, the lack of well-known American names have caused conspiracy theories to fly. Despite the suggestions of payoffs, government influence and more, the reality is that American names have surfaced in the Panama Papers. Preliminary reports indicate that there are more than 200 people with U.S. addresses named in the Panama Papers. That doesn’t mean that there are more than 200 U.S. citizens involved – an address certainly doesn’t equal citizenship – but it is indicative that Americans are involved.

Why aren’t we hearing about more Americans? There could be a number of reasons. One very simple answer is that the reporting isn’t yet finished. With millions of documents involved, it may simply be that American names are in the Papers but those have not yet made public because there’s more digging to be done.

It may also be the case that Mossack Fonseca just wasn’t a favorite law firm among Americans looking to create offshore entities. Many law firms, including those located in the United States, are involved in offshore asset management. The accounts and funds are certainly out there, perhaps just not at Mossack.

And don’t forget that the United States is considered something of a tax haven. Flexible entity structures, corporate tax breaks and tax-favored capital gains can result in a relatively low tax burden, making it an attractive place to do business (just ask Mascherano). In addition, Delaware and Nevada have tax structures and corporate laws considered favorable in many parts of the world. Both states offer attractive legal protections to corporations, including strong liability protection, as well as a degree of anonymity for corporate owners. The court system is favorable, too: Delaware even has its own “Chancery Court,” an equity court that focuses largely on corporate matters.

As for the rumor making the rounds over the internet that the Internal Revenue Service (IRS) has somehow suppressed the release of information related to Americans? IRS Commissioner John Koskinen says that isn’t true, saying that IRS has “no control” over the release of that information by the International Consortium of Investigative Journalists (ICIJ). He says that the IRS has “interest in information” that comes from all sources but dismisses the notion that the IRS would stand in the way when it comes to tax transparency. It is, he says, just the opposite, noting that as part of the OECD’s Forum on Tax Administration he’ll join the heads of tax agencies from 46 countries in the Joint International Tax Shelter Information & Collaboration (JITSIC) to review information related to the Panama Papers and discuss ways that they can be more cooperative when it comes to the exchange of information. The IRS, in addition to the tax agencies in other countries, has a “great interest” in matters involving tax evasion. As to whether there might be ongoing investigations related to the Panama Papers, Koskinen wouldn’t say, reminding me that the IRS does not talk about individual cases.

All of that said, there are some names that have been made public. Here’s a glimpse of some you might recognize:

→ Liesel Pritzker Simmons. She wasn’t just royalty on the big screen (yes, that was her as the lead in the 1995 retelling of Frances Hodgson Burnett’s The Little Princess), Simmons was practically an American princess. Born into a wealthy family (10 Pritzkers appear on the most recent Forbes 400 list), Simmons inherited a tidy $500 million which has since grown to $600 million. Simmons, however, hasn’t joined the ranks of celebutantes on the party scene: instead, she’s been investing her funds in charitable foundations and working on social initiatives. She told Forbes, in 2013, “I didn’t earn this money. And I’ll be damned if I’m going to screw it up!”

While the Pritzker family is no stranger to controversial offshore trusts, Simmons’ squeaky clean image might cause some to wonder how she, together with husband, Ian, ended up in the Panama Papers. The couple is listed as shareholders of a company called Blue Valley Agroinvestment. Simmons has confirmed her ownership to McClatchy, saying, “My husband, Ian Simmons, and I are minority investors in Blue Valley Agroinvestment, a sustainable agriculture project in Colombia. Any income we earn is fully taxed. We are proud of the job creation and community development this project brings to an underserved part of Colombia.”

→ Igor Olenicoff is also no stranger to offshore assets. The billionaire real estate developer was sentenced to two years probation in 2008 for lying on his federal income tax return about $200 million in offshore accounts. Olenicoff sued UBS in 2008, alleging, among other things that the bank helped him break the law and then turned him in; that lawsuit was dismissed. In return, UBS sued Olenicoff in 2012, charging that his earlier lawsuit against was merely intended to “deflect blame” from his own actions; last July, citing the “unclean hands” doctrine, a judge ruled against UBS.

As part of his deal to avoid jail time for failing to report those offshore accounts, Olenicoff agreed not to move assets offshore. His name, however, appears in the Panama Papers, naming him as a shareholder in Olen Oil Management Limited. Olenicoff has denied any involvement in any Panama companies, including Olen Oil Management. (For more specifics on Olenicoff’s denial, read Janet Novack’s interview.)

→ John Michael “Red” Crim was convicted of conspiracy to defraud the United States, in violation of 18 U.S.C. §371, and interference with the administration of internal revenue laws, in violation of 26 U.S.C. §7212(a). Crim was a co-founder of the Commonwealth Trust Company (CTC) based in Conroe, Texas (not the same as the Commonwealth Trust Company in Wilmington, DE). According to the Justice Department (downloads as a pdf), CTC marketed two domestic trust packages and one offshore trust package to its clients and “persuaded investors to place income and assets into trusts for the purpose of avoiding payment of federal income tax.” Crim was initially sentenced to the maximum term of eight years in prison (downloads as a pdf). In addition to prison, Crim was ordered to pay $17.2 million in restitution, a $175,000 fine, a $200 special assessment, and serve three years supervised release. The investigation into CTC eventually led to charges against actor Wesley Snipes. Crim’s name is found in the Panama Papers as an intermediary who registered a company with Mossack Fonseca.

→ While Crim and Olenicoff are associated with financial crimes, Andrew Mogilyansky has a different reputation: sex offender. The Bucks County millionaire pleaded guilty in 2009 to traveling for the purpose of engaging in illicit sexual conduct and three counts of engaging in illicit sexual conduct in foreign places. He had been charged with traveling to Russia to have sex with 13- and 14-year-old girls he procured from an orphanage. According to the indictment, Mogilyansky also took his victims to Moscow where he made them work as prostitutes (Mogilyansky has since denied the latter, claiming he was framed by Putin’s spy agencies). After the plea, Mogilyansky was sentenced to eight years in prison and ordered to pay restitution.

Mogilyansky incorporated three companies with Mossack Fonseca and, according to prosecutors, expenses for the Moscow trips were run through one of those companies, IFEX Global Ltd. Cossack found out about the charges in 2014 and despite concerns about Mogilyansky’s criminal history, continued working with him.

→ American film and music producer David Geffen is synonymous with success. His record labels have included Asylum Records (now part of Elektra/Asylum Records) and Geffen Records (now Interscope-Geffen-A&M division of Universal Music Group) and in 1994, he co-founded the movie studio, DreamWorks SKG with Steven Spielberg and Jeffrey Katzenberg (Geffen left DreamWorks in 2008). Geffen is now a billionaire with an estimated net worth of $6.8 billion, landing him at #176 on the Forbes billionaires list and #70 on the Forbes 400. Geffen’s name appears in the documents as the director of a Delaware company called Barham Maritime LLC, which sold shares of a Cayman Islands company created to hold title to Pelorus, a yacht Geffen purchased from Roman Abramovich’s ex-wife, Irina, in 2011 for an estimated $300 million. Geffen subsequently sold Pelorus to a Panama offshore company called Marfleet Limited S.A.; the Papers indicate that the actual owner is Royal Group Companies Management, a company with ties to the United Arab Emirates focusing on real estate, tourism and international trade and development. For his part, Geffen’s lawyer says Geffen has “never used an offshore account for business or commercial purposes or has any kind of tax haven.”

Marianna Olszewski, the author of Live it, Love it, Earn it (A Woman’s Guide to Financial Freedom) built her fortune as a life coach and money expert. Hailing from a family of modest means, she worked her way through Wall Street to become the founder and CEO of Madison Financial Management LLC, a broker-dealer and hedge fund marketing company. Olszewski didn’t shy away from the spotlight but she did want to keep her identity secret when allegedly parking approximately $1.8 million offshore. How far would she go? According to the BBC, she worked with Mossack Fonseca to hire an intermediary (a 90-year old British man) to keep her identity and the account secret.

Sanford Weill made $150 per week in his first job as a runner for Bear Stearns. Today, Forbes estimates the value of the former Citigroup CEO at $1.05 billion, landing him at #1694 on the 2016 Billionaires List (#509 in the U.S.). According to McClatchy, Weill holds a stake in two companies: April Fool Ltd. (British Virgin Islands, no longer active) and Brightao Corp (British Virgin Islands) named in the Papers.

Before you jump to any conclusions, remember: just having your name on the list doesn’t mean that you’ve done anything wrong. Owning an offshore company or creating an offshore trust isn’t illegal. In fact, it’s perfectly legal in most countries, including in the United States. What is illegal, however, is using offshore trusts to hide assets from known creditors or for evading taxation: failure to disclose offshore assets and report offshore income once again made the Internal Revenue Service’s Infamous Dirty Dozen this year.

And despite the handful of individual Americans (comparatively speaking), no U.S. banks are included in the list of banks that requested the most offshore companies for clients. That list includes such European-based banks as HSBC Private Bank (Monaco); HSBC Private Bank (Suisse); Credit Suisse Channel Islands Limited and UBS AG (Succ. Rue du Rhone).

There are certainly more names to come: in early May ICIJ will release the names of the more than 214,000 offshore entities and names revealed in the leaks.