News reports are emerging of the massive leak of documents (2.6 terabytes in size) from the Panamanian law firm Mossack Fonseca that provided off shore tax havens for wealthy people. The leak was originally given to a German newspaper Süddeutsche Zeitung. An anonymous person approached the newspaper and said that he would provide them this massive trove of documents. The source did not want anything in return, financial or otherwise, but demanded that it all be done over encrypted channels because of the danger to his/her life, and that s/he would leave it up to them to decide what should be published. The manner of the leak is remarkably similar to that of Edward Snowden and it seems clear that the new leaker had followed his example.
The background of how the arrangement was made and the data transferred can be read here. [Warning music comes on for the first minute or so.]
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.
Like with the Snowden files, the data trove was so massive that the initial recipient sought the assistance of around 400 journalists from more than 100 media organizations to do the analysis.
The Guardian has published a whole set of stories on the papers. Names have already been mentioned in the documents such as Russia’s president Vladimir Putin, Iceland’s prime minister Sigmundur Davíð Gunnlaugsson and his wife, Ukraine’s president Petro Poroshenko, Pakistani prime minister Nawaz Sharif, and the former prime minister of Iraq Ayad Allawi. In days to come you can expect to hear more names being revealed. Many of them will be family and friends of political figures, like the late father of British prime minister David Cameron.
One thing I have noted so far is the relative paucity of US and Western European politicians among the names revealed so far. I am not sure if such names will be forthcoming later. The ICIJ (International Consortium of Investigative Journalists) that is analyzing the documents has created a website for dissemination of the information that list all the names revealed so far. One thing that you can be sure is that this is just the tip of the iceberg because it involves just one offshore tax shelter company, however large it may be. The people exposed will be those who were unlucky enough to use that company. But if this starts a snowball effect and other companies also have their information revealed, you can be sure that more familiar names will become known.
Generally speaking, owning an offshore company is not illegal in itself. In fact, establishing an offshore company can be seen as a logical step for a broad range of business transactions. However, a look through the Panama Papers very quickly reveals that concealing the identities of the true company owners was the primary aim in the vast majority of cases. From the outset, the journalists had their work cut out for them. The providers of offshore companies – among them banks, lawyers, and investment advisors – often keep their clients’ names secret and use proxies. In turn, the proxies’ tracks then lead to heads of state, important officials, and millionaires. Over the course of the international project, journalists cooperated with one another to investigate thousands of leads: they examined evidence, studied contracts, and spoke with experts.
This information released so far shows how the world’s wealthy use all the tricks in the book to avoid paying taxes that ordinary people must pay. And since the wealthy set the rules, they can makes ones that benefit themselves. In other words, ordinary people effectively subsidize the lives of the wealthy. It illustrates the truism that what is scandalous nowadays is not what is illegal but what is legal.
UPDATE: Glenn Greenwald comments on the revelations and also picks up on the similarity between the Panama Papers and the Snowden documents and how they reveal how the oligarchy works.
But illegality was never the crux of the scandal triggered by those NSA revelations. Instead, what was most shocking was what had been legalized: the secret construction of the largest system of suspicionless spying in human history. What was scandalous was not that most of this spying was against the law, but rather that the law — at least as applied and interpreted by the Justice Department and secret, one-sided FISA “courts” — now permitted the U.S. government and its partners to engage in mass surveillance of entire populations, including their own. As the ACLU’s Jameel Jaffer put it after the Washington Post’s publication of documents showing NSA analysts engaged in illegal spying: “The ‘non-compliance’ angle is important, but don’t get carried away. The deeper scandal is what’s legal, not what’s not.”
Proving that certain behavior is “legal” does not prove that it is ethical or just. That’s because corrupted political systems, by definition, often protect and legalize exactly the behavior that is most unjust. Vital journalism does not only expose law-breaking. It also highlights how corrupted political and legal systems can be co-opted by the most powerful in order to legally sanction atrocious and destructive behavior that serves their interests, typically with little or no public awareness that it’s been done.
In such cases, as Jaffer put it, “The deeper scandal is what’s legal, not what’s not.” The key revelation is not the illegality of the specific behavior in question but rather the light shined on how our political systems function and for whose benefit they work. That was true of the Snowden leak, and it’s true of the Panama Papers as well.