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Inside the Pandora Papers

A massive data leak includes explosive revelations about the hidden wealth system, including the U.S. role as a magnet for kleptocratic funds.

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, Daily Sabah Photo

The Pandora Papers, a massive expose about the secret shell games and tax avoidance schemes of the world’s ultra-wealthy, has just hit headlines around the globe. See initial coverage here in The Washington Post and The Guardian.

This colossal undertaking involved 600 journalists from 117 countries and was coordinated by the International Consortium of Investigative Journalists (ICIJ) in what they describe as the “largest-ever journalistic collaborative.”

Five and a half years ago, the ICIJ released the Panama Papers, which focused on a leak from a single law firm, Mossack Fonseca. According to ICIJ Director Gerald Ryle, the Pandora Papers are the “Panama Papers on steroids.” See a summary prepared by the ICIJ here.

The Pandora Papers draws on leaks from confidential records at 14 different offshore wealth service firms in Switzerland, Singapore, Cyprus, Samoa, Vietnam, Hong Kong, as well as firms in well-known tax havens such as Belize, Seychelles, Bahamas, and the British Virgin Islands. These firms help wealthy individuals and corporations form trusts, foundations, incorporate companies, and establish other entities in low- or no-tax jurisdictions.

The Pandora Papers draw from almost 12 million files from these firms including leaked emails, memos, tax declarations, bank statements, passport scans, diagrams of corporate structures, secret spreadsheets, and clandestine real estate contracts. Some reveal the real owners of opaque shell companies for the first time.

Over the last three months, I’ve spoken confidentially with ICIJ journalists from Mexico, Argentina, Spain, Sweden, Germany, and the United Kingdom, providing background about how wealth hiding systems work in the United States. Drawing from my new book, The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions, I explained the role of the United States and the global wealth defense industry in sequestering wealth. (See this June interview about the book at the ICIJ website).

The Pandora Papers are truly a global story, with major implications in many countries. Some of the largest revelations involve Russian nationals with connections to Vladimir Putin and elites from Latin America.

For example, journalists from the Spanish daily El Pais exposed the “Secret Vault of Mexican Billionaires.” In Mexico they found over 3,000 wealthy and powerful Mexicans in the 11.9 million leaked files, with connections to current and previous presidents. They discovered a common pattern of wealthy Mexican elites using a single Panamanian law firm, Alcogal (Aleman, Cordero, Galindo & Lee), along with trusts in the British Virgin Islands and real estate purchases in Miami and around the United States.

The Pandora Papers will hopefully turn up the heat on the politicians that maintain the wealth-hiding status quo. The files list over 330 current and former politicians and world leaders from 91 countries that are implicated in transactions. This is twice the number implicated in the 2016 Panama Papers.

Political leaders include King Abdullah II from Jordan and former British Prime Minister Tony Blair (according to The Guardian, Jordan blocked the ICIJ web site hours before the Pandora papers release). This explains why existing political bodies seem incapable of closing down systems that enable wealth hiding and tax dodging.

“It demonstrates that the people that could end the secrecy of offshore systems… are themselves benefiting from it,” said Ryle of the ICIJ. “So there’s no incentive for them to end it.”

In the coming week, we will learn more from the Pandora Papers. For example, there are 130 global billionaires with ownership entities in secrecy jurisdictions. In 2021, 100 of them had total assets worth more than $600 billion.

U.S. citizens are under-represented in these leaks, largely due to where the service providers were located. No U.S. wealth-advisory firms were part of the leaks. Nonetheless, over 700 companies revealed in the Pandora papers have ties to beneficial owners connected to the United States.

We will also learn more about how the United States has become a global destination for global wealth, some of it ill-gotten. The Panama Papers, the Paradise Papers (Bermuda and Singapore), and Luanda Leaks (Angola) all reinforced the misperception that most of these financial shell games take place “off shore,” in secrecy jurisdictions and tax havens in small countries with weak banking laws.

But the Pandora Papers show that the United States and states like South Dakota now rival notoriously opaque jurisdictions in Europe and the Caribbean in financial secrecy. The states with the most active trusts were South Dakota (81), Florida (37), Delaware (35), Texas (24), and Nevada (14).

Findings suggest that South Dakota has sheltered billions in wealth linked to wealthy individuals previously accused of serious financial crimes and labor violations. Two examples: Brazilian orange juice baron, Horst Happel, was fined $88 million in 2016 for underpaying his workers. In 2017, he moved substantial wealth to a trust in South Dakota. Carlos Morales Troncoso was the former vice-president of the Dominican Republic. He ran a sugar company called Central Romana sugar company that was accused of human rights violations. He set up trusts for his daughters in the Bahamas that were moved, after his death, to South Dakota. The reason global money is flowing to the “Mount Rushmore State” is because of their low taxes and advantageous dynasty trusts.

The Pandora Papers will hopefully boost momentum in the U.S. Congress behind a progressive tax plan to fund the Build Back Better program — including money for IRS enforcement to ensure the wealthy pay their fair share.

As The Guardian notes, “in a development likely to prove embarrassing for U.S. President, Joe Biden, who has pledged to lead efforts internationally to bring transparency to the global finance system, the United States emerges from the leak as a leading tax haven. The files suggest the state of South Dakota, in particular, is sheltering billions of dollars in wealth linked to individuals previously accused of serious financial crimes.”

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