Uncovering the Secret Offshore Accounts of the Global Elite – The New Yorker

Another case involved Czech President Andrej Babi, a right-wing populist media billionaire (and allegedly a former Cold War spy) who, during his tenure as finance minister, had participated in discussions with other E.U. ministers on how to reform offshoring rules. In the Aladdin files, Alecci discovered his name in a report that the Panamanian law firm working on Babis offshore accounts had sent to regulatory authorities in the British Virgin Islands. Babi had used a series of secret shell companies to transfer money from the British Virgin Islands to Washington, D.C., to Monaco, in order to buy an estate in the South of France. Its a very complicated route just to buy luxury property, Alecci said. It was particularly striking to her that the trail of offshore shells had run through the city that was supposed to be policing much of this activity. Alecci said, He wasnt the only one. There were a few people who used a Washington, D.C., L.L.C.

It took more than two years to prepare the stories, now collectively called the Pandora Papers, for publication. Youre kind of, like, living with a secret, Ryle told me. The initial leak of five million files grew to nearly twelve million, from the same source, and the work of sorting through it was laborious. Russian names were notoriously difficult, since the spelling was so variable; Chinese, Korean, and Arabic names were tricky to track, too. Shiel recalled to me that the King of Jordan, a major target, was referred to in some of the documents as the Jordanian and in others merely as you-know-who.

The global political situation has changed in the decade or so since Ryle first began working on the files that became Offshore Leaks. The global populist shock of the mid-twenty-tens has neither entirely upended the existing political order nor been smothered to extinction; instead, you can now find overtly populist traits in most major political parties. For journalists, the risk is mundanity. In 2016, when the Panama Papers revealed that the Prime Minister of Iceland secretly owned an offshore company with multimillion-dollar claims on the countrys failed banks, there were mass demonstrations and he almost immediately stepped down. But, by this most recent I.C.I.J. investigation, the fourth batch of leaks, the offshoring scandal was familiar, and populist politicians have learned to blame the stories on a hostile or partisan press, or simply ignore them. I think maybe a lot of them have become more sophisticated in the reaction, Alecci told me.

At the same time, many of these politicians were more vulnerable to charges of hypocrisy, since they had often come to office decrying corruption or the global lite. Wopke Hoekstra, the Dutch finance minister, for instance, had campaigned against tax havens. And yet, in 2009, he had used a shell company in the British Virgin Islands to invest in a friends safari company. (He sold the shares a week before becoming finance minister, in 2017). Paulo Guedes, the Brazilian finance minister and another anti-offshoring campaigner, had more than nine million dollars in secret family accounts. (In a statement, Guedess lawyers said the minister had recused himself from the offshore investment before joining the government, in 2019.) These arent rogue outliers, Ryle said. This is mainstream. The geography of the offshore world now took in Washington, D.C., and the City of London. Its principals ran the finance ministries of major Western countries, and campaigned against offshore corruption. If, during the Trump years, the leaks had detailed a system of global oligarchy that seemed to form an opposing force to liberal democracy, then the Pandora Papers emphasized the oligarchy that had taken root within liberal democracies themselves.

Will Fitzgibbon focussed on much of the U.S. file. For years, tax-advocacy groups had identified South Dakota, where disclosure laws are particularly loose, as one of the most problematic tax havens in the world: one report had suggested that the amount of money held in trusts in South Dakota had grown from two billion dollars in 2007 to three hundred and sixty billion dollars today. Its excruciating work, where at first Im just like a monkey typing in South Dakota and Sioux Falls to search these documents, and then going through the thousands of files that come up, Fitzgibbon said. He noticed that many of the people hiding money in South Dakota came from Latin AmericaBrazil, Colombia, Ecuador, Mexico, El Salvador. I dont speak Spanish; I dont speak Portuguese, Fitzgibbon said. But the first Google result for two of them was quite literally involved in a money laundering ring and involved in a settlement with the U.S. government.

Fitzgibbon travelled to Sioux Falls, where he met with a whistle-blower, researched the lawyers who had pushed legislation limiting scrutiny of trusts to the state legislature, and checked out the office building that housed a group called Trident Trust. The scene in South Dakota was phenomenally mundane. Hundreds of billions of unreported dollars were being hidden in the same place that processed receipts for grain. The problems, the inequalities, and the wrongdoing enabled by the offshore system isnt just because theres a few Mr. Burns-like figures sitting at their desks wrapping their fingers together, Fitzgibbon said. There is no evidence that theres some evil mastermind in Sioux Falls unscrupulously soliciting foreign wealth. He noted that, in addition to South Dakota, Alaska, New Hampshire, and Nevada have become U.S. hot spots for tax evasion. Its often specifically because they are small jurisdictions with part-time legislators, small populations and failing economies, and, therefore, in the eyes of trust lawyers, ripe for persuasion. It turned out that Latin American billionaires moved their offshore wealth from the Caribbean to South Dakota, as the British Virgin Islands and others tightened some regulations in the aftermath of the Panama Papers. Fitzgibbon said, Same wine, different bottle.

The Pandora Papers went public on October 3rd. The release was extraordinary in its scale: stories from media outlets in a hundred and seventeen countries appeared simultaneously, naming twenty-nine thousand offshore accounts held by, among others, more than a hundred billionaires and thirty-five current or former heads of state, containing hidden assets totalling somewhere between five trillion and thirty-two trillion dollars. But, by the standards set by the Panama Papers, the response was muted. There were no mass demonstrations. In Kenya, where the I.C.I.J. and its partners had identified thirty million dollars that President Kenyattas family had hidden in offshore accounts, Kenyatta eventually issued a statement welcoming the scrutiny and calling for greater transparency. In Pakistan, where the I.C.I.J. had linked millions in offshore accounts to key associates of Prime Minister Imran Khan, the Prime Minister issued a similar statement. This was in keeping with Aleccis observation that politicians increasingly pretended that they werent implicated in the I.C.I.J.s revelations.

Still, there were detectable ripples. Together with her Czech and French colleagues, Alecci had identified the twenty-two-million-dollar chteau near Cannes that Babi, the Czech President, had bought through a shell company. The Czech parliamentary elections were held the same week as the release of the Pandora Papers, and Babi, who had denounced the report and denied any wrongdoing, was still expected to win. Until the very end, I thought he was winning, Alecci said. And then all of a sudden the results changed by a tiny fraction. A poll would eventually suggest that eight per cent of voters in Babis party had turned against him because of the offshore revelations. Babi failed to win enough seats to form a government. It was a quieter effect than the mass demonstrations that had brought down the Prime Minister of Iceland. But Babi soon conceded that his party would not share in the next Czech government. The man who had been compared to the Hungarian autocrat Viktor Orbn was out.

Slowly, Ryle began to see the investigations impacts elsewhere. In Chile, where the Pandora Papers had suggested that President Sebastin Piera might have used an offshore company to conceal the proceeds from the sale of a mine, the opposition began impeachment proceedings. In Ecuador, the legislature opened hearings into the President, an ex-banker named Guillermo Lasso. Were now being inundated by governments looking for the documentsEuropol, police forces, tax offices, Ryle told me, when I visited. Its a slow burn.

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Uncovering the Secret Offshore Accounts of the Global Elite - The New Yorker