Panama law firm says data hack was external, files complaint

Reuters: The Panamanian lawyer at the centre of a data leak scandal that has embarrassed a clutch of world leaders said on Tuesday his firm was a victim of a hack from outside the company, and has filed a complaint with state prosecutors.

Founding partner Ramon Fonseca said the firm, Mossack Fonseca, which specialises in setting up offshore companies, had broken no laws and that all its operations were legal. Nor had it ever destroyed any documents or helped anyone evade taxes or launder money, he added in an interview with Reuters.

Company emails, extracts of which were published in an investigation by the US-based International Consortium of Investigative Journalists and other media organisations, were ‘taken out of context’ and misinterpreted, he added.

“We rule out an inside job. This is not a leak. This is a hack,” Fonseca, 63, said at the company’s headquarters in Panama City’s business district. “We have a theory and we are following it,” he added, without elaborating.

“We have already made the relevant complaints to the Attorney General’s office, and there is a government institution studying the issue,” he added, flanked by two press advisers.

Governments across the world have begun investigating possible financial wrongdoing by the rich and powerful after the leak of more than 11.5 million documents, dubbed the “Panama Papers,” from the law firm that span four decades.

The papers have revealed financial arrangements of prominent figures, including friends of Russian President Vladimir Putin, relatives of the prime ministers of Britain and Pakistan and Chinese President Xi Jinping, and the president of Ukraine.

On Tuesday, Iceland’s Prime Minister Sigmundur David Gunnlaugsson resigned, becoming the first casualty of the leak.

“The (emails) were taken out of context,” Fonseca said, denouncing what he called a ‘witch-hunt’.

He lamented what he called journalistic activism and sensationalism, extolling his own investigative research credentials as a published novelist in Panama. He said he feared that his rivals could muscle in on their business following the leak.

“The only crime that has been proven is the hack,” Fonseca said. “No one is talking about that. That is the story.”

He said his company had a staff of around 500, 300 of which work in Panama, but declined to comment on his law firm’s structure or franchises in other parts of the world.

Setting up a company might cost between about $ 700 and $ 1,000, he said, with a significant part of that fee going to the government. Mossack Fonseca has set up around 250,000 businesses over the past 40 years.

He added that it is cheaper to do business in Nevada. He said business rules have tightened and that his company has adhered to them.

“15 years ago, due diligence didn’t exist and they are judging us by other standards,” Fonseca said.

France announced on Tuesday it would put the Central American nation back on its blacklist of uncooperative tax jurisdictions.

Alvaro Aleman, chief of staff to Panamanian President Juan Carlos Varela, told a news conference the government could respond with similar measures against France, or any other country that followed France’s lead.

“This is a tropical storm, like the ones we have here in Panama where once it passes the sun will come out,” Fonseca said. “I guarantee you that we will not be found guilty of anything.”

Pakistan PM forms commission to probe ‘Panama Papers’ allegations

Reuters: Pakistan’s Prime Minister Nawaz Sharif addressed the nation by television on Tuesday to defend his family’s business practices, denying any wrongdoing and calling corruption claims “old accusations repeated over and over again”.

Sharif set up a commission on Tuesday to investigate allegations, based on leaked documents from Panama, that offshore companies headed by members of his family were avoiding paying taxes or disguising assets and their origins.

On Monday, leaked documents from the Panama-based Mossack Fonseca law firm showed that Sharif’s daughter Mariam and sons Hussain and Hassan owned at least three offshore holding companies registered in the British Virgin Islands. Mossack Fonseca denied any wrongdoing.

The International Consortium of Investigative Journalists said these companies were involved in the purchase and mortgage of at least $13.8 million in UK properties.

One of the holding companies also purchased another, Liberia-based, holding company for $11.2 million in August 2007, according to the documents.

The documents do not show the source of the assets held by the holding companies. They are part of a tranche of 11.5 million documents leaked by the ICIJ, dubbed the ‘Panama Papers’.

Political opponents in Pakistan, notably Imran Khan, have accused Sharif’s family of having gained the funds illegally through corruption during his two previous stints as prime minister in the 1990s.

Sharif and his family have denied any wrongdoing, saying the assets were gained legally, mainly through the family’s network of businesses and industries in Pakistan and Saudi Arabia.

“I say that those who are repeating tired accusations should go before this commission and prove their accusations,” Sharif said in his televised speech.

Iceland’s leader resigns, first casualty of Panama Papers

Reuters: Iceland’s Prime Minister Sigmundur David Gunnlaugsson resigned on Tuesday, becoming the first casualty of leaked documents from a Panamanian law firm which shone a spotlight on the offshore wealth of politicians and public figures worldwide.

The Panama Papers showed the premier’s wife owned an offshore company with big claims on Iceland’s banks, an undeclared conflict of interest for Gunnlaugsson, infuriating many who hurled eggs and bananas in street protests calling for him to step down.

The banks collapsed as the global financial crisis hit in 2008 and many Icelanders blame politicians for not reining in their debt-fuelled binge and averting a deep recession.

The more than 11.5 million documents, leaked from the Panamanian law firm Mossack Fonseca, have caused public outrage over how the world’s rich and powerful are able to stash their wealth and avoid taxes while many people suffer austerity and hardship. Mossack Fonseca, which specialises in setting up offshore companies, denies any wrongdoing. On Tuesday, the Panamanian government sought to defend the country’s reputation.

Panama President Juan Carlos Varela’s chief of staff told a news conference that the government could retaliate after France announced it would put the Central American country back on its blacklist of uncooperative tax jurisdictions. The official, Alvaro Aleman, said that no Panamanian company had been found to have committed a crime.

He added: “We are not going to allow Panama to be used as a scapegoat by third parties. Each country (implicated) is responsible.” The president had instructed the foreign ministry to contact all of the dozens of countries implicated, Aleman said.

Among those named in the documents are friends of Russian President Vladimir Putin, relatives of the leaders of China, Britain and Pakistan, and the president of Ukraine.

With the fallout from the leaks reverberating across the globe, British Prime Minister David Cameron also came under fire from opponents who accused him of allowing a rich elite to dodge their taxes.

And in China, the Beijing government dismissed as ‘groundless’ reports that the families of President Xi Jinping and other current and former Chinese leaders were linked to offshore accounts.

US President Barack Obama said the Panama Papers showed tax avoidance was a major problem and urged the US Congress to take action to stop US companies from taking advantage of loopholes allowing them to avoid paying taxes.

“We’ve had another reminder in this big dump of data coming out of Panama that tax avoidance is a big, global problem,” he told reporters.

“It’s not unique to other countries because frankly there are folks here in America that are taking advantage of this same stuff. A lot of its legal, but that’s exactly the problem.”

An Iceland government spokesman has said the claims against Iceland’s collapsed banks held by the firm owned by Gunnlaugsson’s wife totalled more than 500 million Icelandic crowns ($ 4.1 million). The prime minister has stressed his wife’s overseas assets were taxed in Iceland.

Icelandic government bonds saw their biggest selloff in five months due to the uncertainty, with yields on 10-year bonds IS10YT=RR jumping 15.6 basis points to 5.891%.