What if I told you that, over the past several decades, global elites — including heads of state, celebrities and even sports stars — all were using offshore "shell" companies to house assets overseas?
You probably wouldn’t be too surprised.
I mean, I think that many Uncommon Wisdom Daily readers are rightly suspicious about the power of global elites. Especially how they use financial and other tools to game the system in ways both legal — and illegal.
Well, over the weekend we discovered the extent of the global money hideaway with the release of what’s being called the "Panama Papers."
On Sunday, German newspaper Süddeutsche Zeitung released a treasure trove of data amounting to 2.6 terabytes of information, or some 11.5 million files.
Data in the files came from Panama-based law firm Mossack Fonseca, the world’s fourth-biggest offshore law firm. It specializes in managing money and creating financial accounts in offshore jurisdictions such as the British Virgin Islands.
Thanks to an anonymous whistleblower, the leaked documents give us new insight into the extent and sordid affiliations of many of the people and companies named in what is being called the "WikiLeaks of the mega-rich."
According to Süddeutsche Zeitung:
The data provides rare insights into a world that can only exist in the shadows. It proves how a global industry led by major banks, legal firms, and asset management companies secretly manages the estates of the world’s rich and famous: from politicians, Fifa officials, fraudsters and drug smugglers, to celebrities and professional athletes.
That’s a big charge. But with 11.5 million files, there’s a lot of dirt on a whole lot of people.
Perhaps the biggest fish in this corrupt pond actually isn’t directly named in any of the documents, but he sure has plenty of close associates who are.
That big fish is Russian President Vladimir Putin.
According to British newspaper The Guardian:
A network of secret offshore deals and vast loans worth $2bn has laid a trail to Russia’s president, Vladimir Putin. An unprecedented leak of documents shows how this money has made members of Putin’s close circle fabulously wealthy.
Though the president’s name does not appear in any of the records, the data reveals a pattern — his friends have earned millions from deals that seemingly could not have been secured without his patronage. The documents suggest Putin’s family has benefited from this money — his friends’ fortunes appear his to spend.
The report in The Guardian is well worth reading, as is the report on Süddeutsche Zeitung. Both go into much more detail on the elaborate scheme to funnel funds by known Putin associates and friends out of Russia … then into Switzerland, and Cyprus in ways that generated so-called "consultancy" charges and other payments worth millions of dollars.
According to a money-laundering expert quoted at the website Newser:
"This is not business, this is creating the appearance of business in order to continually move and hide assets."
Some of Putin’s alleged deals involve his best friend, cellist Sergei Roldugin, who reportedly controls some $100 million in assets.
Other high-profile world leaders named in the Panama Papers as having been linked to offshore accounts handled by Mossack Fonseca include former Iraqi Vice President Ayad Allawi, Pakistani Prime Minister Nawaz Sharif, Ukrainian President Petro Poroshenko, Alaa Mubarak, the son of former Egyptian President Hosni Mubarak, and Icelandic Prime Minister Sigmundur Davíð Gunnlaugsson.
News of the scandal has Gunnlaugsson in the hot seat already. He is expected to face calls in Parliament for a snap election following the news.
Other culprits named in the Panama Papers as having offshore accounts managed by Mossack Fonseca include Uruguayan lawyer Juan Pedro Damiani, a member of the FIFA ethics committee (World Cup soccer’s professional organization).
Damiani had apparently given legal assistance for multiple offshore companies linked to former FIFA official Eugenio Figueredo. Figueredo currently is under investigation for fraud and money laundering.
Now, what we do have to keep in mind here is that just having an offshore account managed by Mossack Fonseca is not a crime.
Moreover, Mossack Fonseca is vigilant in its own defense, issuing a statement on the leaks saying:
"For 40 years Mossack Fonseca has operated beyond reproach in our home country and in other jurisdictions where we have operations … Our firm has never been accused or charged in connection with criminal wrongdoing."
While this is true — and while just having an offshore account isn’t unlawful — it would be naïve to think that these accounts cannot be abused, and easily used to help conceal criminal and/or otherwise scandalous criminal activity.
I am sure there will continue to be a lot of fallout from this Panama Papers leak … especially with the benefit of time and scores of investigative journalists sifting through the mass of data.
One thing we can say for certain here …
Global elites are using offshore accounts to move money around the world. And that means the chances of corruption are rife.
Do the revelations in the Panama Papers surprise you? Do they disturb you? Do you think there is a lot more corruption using offshore accounts than has been reported in the leak so far?
Stocks traded just below the flat line for most of the day as oil continued to skid lower. West Texas Intermediate crude gave up 3% in today’s session. Materials and industrial stocks were the biggest losers on the day.
Elsewhere in the news …
• Boston Fed President Eric Rosengren said they should raise rates sooner than the market expects. Rosengren is typically considered an interest rate "dove." So this hawkish view was a rather surprising statement from him, and the markets reacted accordingly.
• Another day, another merger. Foxconn, which makes hardware for Sony and Apple, is said to be looking to get more business from the Cupertino company, which also uses screens from Sharp. And as of today’s news, Foxconn now has a controlling interest in Sharp, after the companies inked a $3.5 billion deal.
• Alaska Air (ALK) is looking to buy Virgin America (VA) for $57 a share (about $4 billion). VA shares, well, soared on the news — rising almost 42% even after Sir Richard Branson said he felt "sadness" about the consolidation.
• Disney (DIS) shares are down in after-market trading on news that a top executive, Chief Operating Officer Thomas Staggs, is stepping down on May 6. The New York Times wrote that Staggs was the "heir apparent" to the company. No replacement is reportedly in place at this time.
• Tesla (TSLA) may have gotten nearly 300,000 pre-orders for the Model 3, but it’s fallen behind on its planned Q1 deliveries of the Model X. Shares gained 4% during the day but are down some 3% in after-market trading on the news.
Good Luck and Happy Investing,
Uncommon Wisdom Daily