Panama Papers: Document leak exposes global corruption, secrets of the rich

The financial secrets of heads of state, athletes, billionaires and drug lords have been exposed in the latest, and biggest ever, leak of records from an offshore tax haven.

11.5 million files from Panama-based law firm shed light on murky offshore money and transactions

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The financial secrets of heads of state, athletes, billionaires and drug lords have been exposed in the latest — and biggest ever — leak of records from an offshore tax haven.

The leak includes 11.5 million confidential documents shedding light on the assets and murky fiscal dealings of everyone from the prime ministers of Iceland and Pakistan to soccer player Leo Messi, movie star Jackie Chan and associates of Russian President Vladimir Putin.

The records, dating as far back as 1977, come from a little-known but highly influential Panama-based law firm called Mossack Fonseca, which has 500 staff working in 40-plus countries. The firm is one of the world's top creators of shell companies — corporate structures that can be used to hide ownership of assets.

German newspaper Süddeutsche Zeitung obtained the files from a source and shared them with global media partners, including CBC News and the Toronto Star, through the Washington-based International Consortium of Investigative Journalists.

CBC News will be exploring more of what's in the documents, including Canadian connections, in a series of stories this week.

"These findings show how deeply ingrained harmful practices and criminality are in the offshore world," said Gabriel Zucman, an economist at the University of California at Berkeley and author of The Hidden Wealth of Nations: The Scourge of Tax Havens.

Zucman, who was briefed on the media partners' investigation, said the release of the leaked documents should prompt governments to seek "concrete sanctions" against jurisdictions and institutions that peddle offshore secrecy.

A huge data leak from a Panama-based law firm has exposed $2 billion US in secret, offshore transactions involving people or companies close to Russian President Vladimir Putin. (Alexei Druzhinin/Associated Press)

While offshore accounts are not in themselves illegal, the leaked records show they are often used to shield illicit dealings. 

In a written response to questions from the media consortium, Mossack Fonseca said it "does not foster or promote illegal acts."

"Your allegations that we provide shareholders with structures supposedly designed to hide the identity of the real owners are completely unsupported and false," the firm said.

  • Read Mossack Fonseca's full response here

Canadians exposed

Among the leaked records is info on the offshore assets of several hundred Canadians, including lawyers, mining and oil executives, business people and even known fraudsters. None of them are prominent personalities, however.

Argentine soccer star Leo Messi's offshore assets include a newly revealed Panama company called Mega Star Enterprises Inc. Messi's offshore dealings are the target of a tax evasion case in Spain. (Denis Doyle/Getty Images)

The big international names include soccer phenom Messi, who according to the leaked files had a Panama company set up for him by Mossack Fonseca in 2012 called Mega Star Enterprises Inc., adding a new name to the list of shell companies known to be linked to him. Messi's offshore dealings are currently the target of a tax evasion case in Spain.

Movie star Chan has at least six companies managed through Mossack Fonseca, files in the leak reveal. As with many of the firm's clients, there is no evidence that Chan used his companies for any improper purpose.

But for other customers, the files expose efforts to hide fortunes and make assets practically untraceable.

One series of leaked records shows $200 million US passing from a British Virgin Islands company to an equally shadowy firm in Cyprus to a Panama corporation within one day.

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There were plenty of reasons why the people behind the transaction might want it disguised, not least of all because the money trail came uncomfortably close to Russia's Putin.

St. Petersburg-based Bank Rossiya, an institution whose majority owner and chairman has been called one of Putin's "cashiers," established the initial Virgin Islands company and directed the money flow.

The assets ended up in a corporation controlled, on paper, by one of Putin's oldest friends, Sergey Roldugin, a classical cellist who is godfather to Putin's eldest daughter.

Mossack Fonseca, whose headquarters are seen here in Panama City, is one of the biggest law firms in the world providing offshore services. (Mathieu Tourliere/Proceso)

The $200-million transaction was one of dozens totalling at least $2 billion US found in the Mossack Fonseca files involving people or companies linked to Putin. They formed part of a Bank Rossiya enterprise that gained indirect influence over a major shareholder in Russia's biggest truckmaker and amassed secret stakes in a key Russian media property.

Suspicious payments made by Putin's cronies may have in some cases been designed as payoffs, possibly in exchange for Russian government aid or contracts.

Last week, a Kremlin spokesperson accused the International Consortium of Investigative Journalists and its media partners of preparing fallacious attacks about the Russian president and people close to him.

Iceland PM caught up

Icelandic Prime Minister Sigmundur David Gunnlaugsson, who with his wife controlled a secret offshore company in the British Virgin Islands when he was first elected to the country's parliament in 2009, is also among the prominent names.

The leaked files show his offshore corporation held bonds originally worth millions of dollars in three giant Icelandic banks that failed during the 2008 global financial crash. Gunnlaugsson's government negotiated a deal with the banks' creditors last year without disclosing his family's financial stake in the outcome (he sold his stake in the offshore company for $1 to his wife shortly after first getting elected).

Gunnlaugsson has denied in recent days that his family's financial interests influenced his stances.

The document leak also shows how the globe's biggest banks played a key role in creating offshore shell companies. The records show those banks used Mossack Fonseca's services to incorporate at least 15,600 entities.

Among the financial institutions that regularly used the Panamanian law firm was Royal Bank of Canada, which with its subsidiaries set up 370 such corporations, the document leak reveals.

RBC spokeswoman Tanis Feasby said the bank has procedures in place to detect tax evasion efforts and undertakes a thorough background check on the identity of its clients before it ever goes ahead with any transaction.

Read the full investigation from the International Consortium of Investigative Journalists here.