How Mossack Fonseca worked with Australian clients linked to tax investigations
Panama Papers reveal that law firm acted as registered agent for a number of key players investigated by Project Wickenby
• Where does Australia fit into the offshore tax scandal?
• BHP-owned companies triggered ‘high risk’ alert at Panama law firm
• Samoan diplomat was used to help create shell companies
• How a Hong Kong corruption scandal sparked strife at Mossack Fonseca
Paul Farrell and Nick Evershed in Sydney
Monday 4 April 2016 11.35 AEST Last modified on Monday 4 April 2016 18.05 AEST
The Panama–based law firm Mossack Fonseca carried on doing business with Australians after they were linked to some of Australia’s most prominent tax avoidance cases, according to secret files.
The Australian Taxation Office has identified more than 800 individual Australian taxpayers in the files, and has launched investigations into some individuals after the disclosure of the data.
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Reporters from the Guardian and other media outlets have been combing through leaked files that show the extensive use of Mossack Fonseca by the world’s wealthiest corporate elites to minimise tax. The files were obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists.
The Panamanian firm offers services to be a “registered agent” for hundreds of thousands of individuals and corporate clients who are seeking to set up shell companies in low-tax jurisdictions. While it is not unlawful for Australians to set up and own offshore companies, it can be an offence to fail to disclose those assets to the Australian Taxation Office.
The documents reveal that Mossack Fonseca acted as registered agent for a number of key players investigated by the ATO-led Project Wickenby taskforce. Project Wickenby is one of the largest tax investigations undertaken in Australia, and was established in 2006 to fight the “abusive use of secrecy jurisdictions” in evading and minimising tax.
Mossack Fonseca acted for the Swiss and Channel Islands-based accounting firm Strachans, whose partner Philip de Figueiredo was jailed in Australia for two years for his role in a massive tax evasion scheme uncovered by Project Wickenby. De Figueiredo, who had been living on the Gold Coast and fought extradition from Jersey after the taskforce swooped, was released in 2015. His former business partner Philip Egglishaw is still under investigation by Australian authorities and an Interpol red notice has been issued for his arrest.
When Mossack Fonseca began doing business with de Figueiredo, he was described in the firm’s internal files as a man who was very confident, very cordial, quite businesslike and, above all, “fwd thinking”.
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Concerns about him were first raised internally at Mossack Fonseca in 2006, after news articles named him in connection with a tax investigation into Strachans. But it wasn’t until 2009 that the firm, which acted as Strachans’ registered agent for a host of their British Virgin Island tax holdings, warned employees in an internal memo to cease doing business with him.
A file note said: “Do not proceed with any work request … Mr Philip de Figueiredo was the result of a successful international crime fighting operation between Australia and Jersey authorities. Also this arrest was a major step forward for Operation Wickenby (US$300 million tax fraud investigation which began in 2004).”
The firm is is obliged by BVI law to undertake “due diligence” checks on its clients to ensure they are not engaging in any wrongdoing.
The Australian Tax Office confirmed on Monday it holds some of the data from Mossack Fonseca and has launched a number of investigations. A deputy commissioner, Michael Cranston, said the files named “a large number of taxpayers who haven’t previously come forward, including high-wealth individuals”.
“The message is clear – taxpayers can’t rely on these secret arrangements being kept secret and we will act on any information that is provided to us,” Cranston said.
The Australian Labor senator Sam Dastyari said on Monday the revelations “need to be a game changer for Australian tax laws”.
The leaked files also reveal that the company acted as a registered agent for Peter Borgas, who was charged with tax fraud in Australia in 2013 along with John Leaver and Vanda Gould. The charges were dropped in 2014.
The ATO then began proceedings in the federal court in relation to companies linked to the three men.
Mossack Fonseca continued to deal directly with Borgas during this time. The documents also disclose it received a freezing order in May 2015 from the federal court in relation to one of the companies named in the court proceedings, Hesley Consultants Limited.
An email sent by a Mossack Fonseca employee in July 2014 discusses a work request from Borgas, at a time when news articles had drawn the firm’s attention to allegations about the companies under investigation.
“We strongly recommend EDD [enhanced due diligence] cases for all the companies under this individual since cases were recently dropped (May 2014) and they were some conflicts between the Cayman and Australia’s tax authorities,” the employee wrote. “We need to be prepared in case we receive a request of information from the authorities.
“Please advise if we may proceed with the work and if you will be taking care of EDD cases.”
The federal court eventually ruled that the companies owed more than $300m to the ATO, and judge Nye Perram said there was strong evidence that what had been disclosed in the proceedings “strongly suggest widespread money laundering, tax fraud of the most serious kind and, possible in some instances, insider trading”.
Perram accused Borgas of being “willing to lie on oath in a most discreditable way” about the case.
An appeal to the full federal court was later dismissed. It is unclear whether the companies have appealed the ruling to the high court.
Sprinkled through the leaked files are links to other serious tax investigations. Mossack Fonseca was at one point questioned by Australian federal police about assets seized as part of an investigation into the theft of US$15.5m from Germany’s Commerzbank.
The files also disclose that in 2012 the AFP attempted to serve a proceeds of crime seizure notice through Mossack Fonseca to one of the companies it registered.
The Guardian, the Australian Broadcasting Corporation and Fairfax Media investigated the files in Australia.
Among the 800 individual taxpayers identified by the ATO, an analysis of the files by Guardian Australia and the ABC reveals that Mossack Fonseca acts for 77 Australian clients. There are also more than 700 Australian entities listed as unique shareholders of the shell companies it set up. Sixty-eight Australians have been identified as the ultimate owners of the shell companies.
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Mossack Fonseca did not respond to a request for comment about its Australian clients.
But in a broader statement to the Guardian it said: “We conduct thorough due diligence on all new and prospective clients that often exceeds in stringency the existing rules and standards to which we and others are bound. Many of our clients come through established and reputable law firms and financial institutions across the world, including the major correspondent banks, which are also bound by international ‘know your client’ (KYC) protocols and their own domestic regulations and laws.”
The release of the leaked files is likely to put pressure on the federal government to step up reforms of Australia’s tax system and information-sharing agreements with other countries, and comes in the leadup to the release of a major report into corporate tax avoidance.