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Panama Papers: reactions, denials

April 5, 2016

Numerous Western nations say they're probing persons implicated in the "Panama Papers" tax avoidance scandal. Germany's "Süddeutsche Zeitung" daily says at least 28 German banks used the Mossack Fonseca consultancy.

Panama Papers Mossack Fonseca
Image: picture-alliance/dpa/J.F.Frey

German daily "Süddeutsche Zeitung" (SZ) on Tuesday itemized shell corporations and suspects implicated by 100 media groups in a global leak of Panama law office documents, saying Germans invested a "hell of a lot of money" in offshore firms.

The Panama-based legal consultancy, Mossack Fonseca (Mossfon), hit back overnight, saying it had set up offshore firms for clients for a "variety of legitimate reasons" and had never been charged for criminal wrongdoing.

Western nations, including Sweden, Australia and France, said they were looking into the allegations stemming from the so-called "Panama Paper" leaks of 11 million documents listing 214,000 offshore firms, including personalities in Russia and China.

Le Monde newspaper claimed Tuesday that aides to French far-right leader Marine Le Pen had put in place a "sophisticated offshore system" to avoid official scrutiny.

In Iceland, Prime Minister David Gunnlaugsson is facing calls to resign.

Detuschland Ministertreffen gegen extremistische Gewalt in Berlin
Transparency register needed, says MaasImage: picture-alliance/dpa/M. Kappeler

Germany itself to blame, say Greens

German Justice Minister Heiko Maas told the SZ that he wanted tighter German laws against money-laundering, including a "transparency register," designed to deter tax evasion and funding of terror groups.

Opposition Greens co-leader Katrin Göring-Eckardt told newspapers owned by the Funke media group based in Essen that it was Germany itself which had "blocked a tougher crackdown in Europe."

Katrin Göring-Eckardt
Germany blocking reform, says Göring-EckhardtImage: Reuters

Holdings legal?

The SZ said most Germans identified in the leak were not especially prominent but ranged from nobility, social ladies, and community service award recipients to senior managers, real estate traders and brothel operators.

When confronted, some had replied that their holdings were legal, said the SZ.

It named one firm, Valper Holdings - perhaps once used by Formula 1 boss Bernie Ecclestone to pay a former Bavarian LB state bank executive. Gerhard Gribkovsky was freed on parole in March after serving a jail term for tax avoidance and fraud for his role in brokering the sale of F1's commercial rights. A separate case involving Ecclestone ended with a payoff to the court to cease proceedings.

Also on the F1 grid, SZ wrote that Mercedes driver Nico Rosberg's use of a shell company called Ambitious Group Limited, arranging his contract with the team through this Panama entity.

Offshore flurry in 2005

Most the 1,200 firms were founded around 2005, said SZ, when the EU adopted a new directive requiring banks to share information on customers' accounts and taxable earnings, between the bloc's tax authorities.

Its weakness: The directive applied to accounts of real persons, but not firms.

That, said the SZ, prompted a flurry of offshore shell company registrations in tax havens. Banks acting for clients used Mossfon's services, allegedly obscuring the real owners' identities and addresses from tax authorities.

Guernsey - Kanalinseln
Guernsey - island idyl and obscurity?Image: picture alliance /Jeremy Lightfoot/Robert Harding

A Mosfon representative based in Luxembourg had written in May 2005 to his bosses in Panama that sales to clients were running "extremely well." He had sold 20 firms on the British Virgin Islands, 10 on the Seychelles and 85 in Panama.

Citing further transactions in 2006 and 2010, SZ said data showed clients via their intermediaries buying fancifully named firms within hours out of catalogues.

Six large German banks

Among the 28 German banks it identified in the papers were six large banks, such as the Deutsche Bank, and Commerzbank, which was rescued with taxpayers' money during the global financial crisis that peaked in 2009.

The SZ said 426 offshore firms were founded or administered by the Deutsche Bank (DB) up until 2007. The data showed that 50 were still active, although the bank had largely ceased acting as administrator.

A Mossfon employee, replying to a DB query from Guernsey in March, 2014 - prompted by a client's concern about data privacy - said the Panama consultancy used "state of the art" encryption.

In a sector dependent on trust and discretion, "German bankers and their intermediaries at Mossack Fonseca met personally," said SZ, "in the bank or in a Panama City restaurant or at dinner in Barcelona."

Discretion applies, says Deutsche Bank

SZ said Deutsche Bank, Germany's largest, had replied: "Please understand that we as a basic principle cannot provide information on possible or real client relations," adding that it had long begun to reform its practices.

In a large graphic, SZ also listed the northern German state bank HSH Nordbank and Hamburg's private Berenberg Bank, with 20 and 13 offshore firms respectively.

Berenberg had replied that it only did business with clients who were "identifiable according to legal requirements" and whose origin of wealth was "plausible."

The disclosures follow warnings of growing gaps between rich and poor, worldwide, from organizations such as Oxfam.

Hiding money is easy

ipj/msh (dpa, AFP, Reuters)