The Panama Papers

breaking the story of how the rich and powerful hide their money

By Bastian Obermayer and Frederik Obermaier

The synopsis of the Panama papers reads a bit like the plot of a thriller movie. Two journalists from the German newspaper the Süddeutsche Zeitung get access to terabytes of data – 11.5 million documents and 214,000 records of offshore companies - revealing how some of world’s richest and most nefarious people move their money. How Mossack Fonseca, a Panamanian law firm, helps very rich people to avoid tax by creating often hundreds of shell companies in offshore tax havens.

But this is no thriller - although it often reads like one. It is a true story, and the authors of this book – the brothers Bastian Obermayer and Frederik Obermaier - really accessed this data from an understandably anonymous contact named John Doe. This contact had access to terabytes of emails from Mossack Fonseca and shared it all with the two journalists. The company had made pains to hide their activity – often using pseudonyms for clients and themselves over email. They had it set up exactly as an ex-CIA investigator stated is often the method used: the creation of hundreds of shell companies to obscure where and what the money was, thus being able to hide the names of any involved and what the money was for. If the worst case scenario occurred and someone was on their trail, they were able to deny any involvement with the companies. This plausible deniability came to the fore when, as the journalists started asking questions to try and probe further, Jürgen Mossack denied any involvement to the journalists over email for years despite being listed as one of those involved with the company…

The flow of the book is as follows then. We tend to find out about some detail, that then unravels – often into what the evidence is, what their relationship to Mossack Fonseca was and what exactly the implications are. Often, the evidence suggests that those named were doing highly illegal things, and that Mossack Fonseca was working with serious criminals. When the book gets good is where it illustrates and dissects how Mossack Fonseca say one thing, and are clearly doing the opposite – for example, in having no relationship to clients, and then clearly the data showing otherwise. Although it isn’t necessarily advanced in terms of analysis, it is clear and concise enough.

Institutionalized Corruption?

Fifa, German Banks, an ex-prime minister of Iceland, friends of Vladimir Putin are all identified in the documents. Perhaps that rich individuals are gaming the system for saving money on tax is unsurprising. But when the German Banks are identified as helping people dodge tax, it becomes more nefarious due to its institutionalized and structural implications. Fifa saw Sepp Blatter’s resignation, and the revealing of scandals, but when huge national banks are willing to move money from drug smugglers, cartels and even armed terrorists, it becomes rather more terrifying. As the book quotes, that Stefan Willeke wrote in Die Zeit – should Deutschebank be regarded as a criminal organisation?

I’ve seen some commenters mention jargon being a problem, which is strange to me in the context of how this book is written. When talking about financial corruption, tax havens and bonds there are bound to be some terms which are difficult to understand for the lay person. The book does a good job of explaining what it means and not getting derailed, and that’s all a reader could ask for really – not that they don’t get mentioned at all. It would be impossible to explain how exactly the corruption operates if this were the case. So, to conclude, I don’t think there is much jargon, and where it is present, it is deconstructed well for the lay person.

Where criticism is valid is that some of the colour to the book or even the stories are tedious. The authors included some parts about dealing with the sheer volume of data, having to buy a $17,000 computer to simply process and organise the vast amounts of data John Doe was sharing with them. The subject matter is going to be slightly dry, since it is important to understand how exactly these people are manipulating the system and avoiding tax and/or obscuring their illegal activities. The journalists’ difficulties with handling the data or their fear when they reveal it to a select group of journalists to help work on the papers will perhaps be of little interest to readers, although personally I did not mind all that much.

Causes for optimism?

The exciting thing about the Panama Papers is that the system has evidently been working well that perhaps there is a level of complacency from those benefitting from it – they clearly do not expect quantity and quality of data such as this to get leaked despite their precautions. As a result we even see some of the dilemma’s Mossack Fonseca faces in managing their clients and maintaining secrecy. One client claims to have lost all access to their bearer bonds – with which the money was being held – and so wants to receive the money. The problem with this is that if Mossack Fonseca pays out, and then miraculously the bearer bonds reappear or are suddenly found – they could be asked to pay up double as the bonds are effective proof they owe the money. Do they trust the client or hold their ground?

Similarly, one client causes quite a fuss about the secrecy. Predictably, the kind of people wanting to hide their money so carefully have reason to hide it, and so Mossack Fonseca are forced to assuage the client with the merits of their encryption and secrecy.

The Panama Papers is effective as a discussion and expose of what the Panama Papers are and their implications. However, any analysis of the inequality, the issues with resolving the problem and the rich vs poor never develop from being anything but shallow. The book sometimes delves into these issues but never really very effectively or going past simple acknowledgement of ‘rich people cheating governments out of more money equals bad’. Similarly, towards the end of the book it devolves into a strange deviation, arguing that capitalism is effectively enslaving people. Although this is a topic that always divides people and without giving my opinion, I’d say the book didn’t really need to interject an opinion at all and was probably better off just illustrating how the wealthy and immoral are gaming the system.

The Aftermath

The Panama papers led to Mossack Fonseca having to close 9 offices, 6,500 taxpayers and companies were investigated (source: https://www.bbc.co.uk/news/world-38319026) and “Countries have recouped more than $1.36 billion in unpaid taxes, fines and penalties as a result of inquiries sparked by the Panama Papers, according to ICIJ’s latest tally.” (https://www.icij.org/investigations/panama-papers/five-years-later-panama-papers-still-having-a-big-impact/) The practice of tax havens and offshore companies remain, however, but as the authors note, so long as people are willing to break the silence, there’s always the chance that events like the Panama Papers shed light on criminals engaging in these kinds of activities.

Final score

The details of this book surely point to wider problems – institutionalised, permissible ways the wealthy are able to avoid what the lay person has to pay, contributing to the inequality gap since there are loopholes that, if you have the money, can help your wealth spiral even further. This book is not a criticism of capitalism or any other competing methods, although at occasional points it tries to be, but it is a story of injustice that is important and riveting to the curious. This book won’t be for everyone, but everyone should know what it is and why the Panama Papers are important.

6/10