friday, 29 july of 2016

U.S. Prosecutors Probe ‘Panama Papers’ Law Firm’s Employees

U.S. federal prosecutors have launched a criminal investigation into whether individuals at Mossack Fonseca & Co., the law firm at the center of the “Panama Papers” scandal, knowingly helped its clients launder money or evade taxes, according to people familiar with the matter.

Mossack Fonseca has been in the global spotlight since early April, when a consortium of journalists published a trove of leaked documents showing that the Panama-based law firm created hundreds of thousands of shell companies and offshore accounts for rich and powerful people around the world.

U.S. investigators are now probing one of the biggest questions that emerged after the leak: whether employees at Mossack Fonseca did anything illegal.

A spokeswoman for Mossack Fonseca directed all inquiries to the firm’s website, which says the firm “has never been accused or charged in connection with criminal wrongdoing.”

The investigation, led by the Manhattan U.S. attorney’s office and the Justice Department’s main office in Washington, is focused on whether individuals within Mossack Fonseca worked with clients to knowingly facilitate criminal activity, according to people familiar with the matter. Prosecutors are considering charges that could include conspiracies to launder money, evade taxes, and hide bribes to foreign officials, the people said.

On its website, Mossack Fonseca says it doesn’t offer solutions “whose purpose is to hide unlawful acts such as tax evasion.”

The investigation is focused on a handful of lower-level Mossack Fonseca employees, but prosecutors plan to expand their scope, people familiar with the matter said. The investigation is still in early stages.

The Panama Papers appeared to show that Mossack Fonseca had working relationships with at least dozens of Americans. Before the Panama Papers publication, Manhattan federal prosecutors had already been investigating suspects with connections to Mossack Fonseca, including people linked to narcotics trafficking in Latin America, according to sources familiar with the investigation.

Other prosecutors in the U.S. and around the world have launched their own investigations into suspected criminals whose names appear in the Panama Papers. The Brooklyn U.S. attorney’s office, for instance, is probing the law firm’s clients for connections to pending investigations that include the corruption scandal at FIFA, soccer’s governing body, according to people familiar with the matter.

Mossack Fonseca says on its website that it has had “no involvement whatsoever” with any parties connected with the FIFA scandal, “other than incorporating a company following a routine request by one of its professional clients.” The firm said it has since resigned as registered agent for this client.

To bring any charges, U.S. prosecutors would have to prove that Mossack Fonseca’s lawyers knew they were helping clients conduct illegal activities—or were deliberately turning a blind eye.

Law firms have been a weak spot in money-laundering detection, legal experts say, because they don’t have the same requirements as companies like banks to know the source of their clients’ money.

Setting up a shell company or offshore account isn’t illegal and is often used for legitimate tax-reduction purposes by multinational companies. Investors also use them to shield assets from creditors or hostile foreign governments. Many law firms in the Caribbean and elsewhere provide such services for wealthy clients.

But the opaque nature of shell companies means they are also popular among criminals, especially with securities fraudsters, drug traffickers and cyberthieves who need places to park their ill-gotten proceeds.

In an April interview with The Wall Street Journal after the Panama Papers were released, Jürgen Mossack, a co-founder of Mossack Fonseca, said the firm uses intermediaries to help set up shell companies, so it doesn’t typically know what the companies are used for.

“If we detect suspicious activity or misconduct, we are quick to report it to the authorities,” the firm’s website reads. “Similarly, when authorities approach us with evidence of possible misconduct, we always cooperate fully with them.”

Prosecutors also will have to ensure that the evidence they use from the Panama Papers isn’t protected by attorney-client privilege, a process called “untainting.” A team in Washington is reviewing the documents to see what files can be used, said a person familiar with the matter.

Mossack Fonseca has said none of the documents can be used in a court of law because they were leaked as a result of an illegal cyberbreach. The journalists who published the Panama Papers said the documents came from an anonymous source.

In 2015, a federal judge in Nevada ruled that Mossack Fonseca was subject to the U.S. court’s jurisdiction due to the existence of M.F. Corporate Services in Nevada, which the judge said was a Las Vegas-based “alter ego” for the firm. Mossack Fonseca argued that M.F. Corporate Services was merely an “independent contractor” and that Mossack Fonseca didn’t fall under U.S. jurisdiction.

The judge’s ruling was in response to subpoenas sent to M.F. Corporate Services by NML Capital Ltd., a unit of hedge fund Elliott Management Corp., which accused Mossack Fonseca in 2013 of setting up shell companies in Nevada that were used to funnel stolen money from Argentina.

In a May hearing, a lawyer for NML said the hedge fund was served with a grand jury subpoena by the Justice Department seeking the information M.F. Corporate Services produced to NML in the Argentina case.

Mossack Fonseca’s website lists more than 30 global offices, but none in the U.S.

Rebecca Davis O’Brien, Christopher M. Matthews and Aruna Viswanatha contributed to this article.

(Published by The Wall Street Journal - July 28, 2016)

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