The founders of Panamanian law firm Mossack Fonseca, featured in the Fusion investigative documentary “Dirty Little Secrets,” have been arrested on money laundering charges. The charges are connected to Brazil’s largest bribery scandal but also appear to stem in part from last year’s global Panama Papers investigation into the firm and its ties to offshore companies, spearheaded by the International Consortium of Investigative Journalists.
On Thursday, police in Panama arrested firm founders Ramon Fonseca and Jürgen Mossack after the company’s Panama City headquarters were raided. Panama Attorney General Kenia Porcell issued a statement describing the firm as allegedly acting as a criminal organization dedicated to creating corporate and financial structures that hid assets of “suspicious origins.”
In a press conference, Porcell added, “Put simply, the money comes from bribes, circulated via certain corporate entities to return bleached or washed to Panama.” Mossack Fonseca is a well-known name in the offshore world, recognized for its ability to create corporate structures called shell companies, which can obscure the true identity of who controls the money and other assets.
On Saturday, The Guardian reported that Fonseca and Jürgen were refused bail and will remain in jail because they were considered flight risks, according to Mossack’s lawyer Marlene Guerra.
Posts on Twitter Monday appeared to show Mossack Fonseca employees creating a human chain outside the office’s headquarters in Panama City headquarters in a sign of support for the firm’s recent legal troubles, with signs reading “We are honorable people,” and “We are a family.”
There are plenty of legally valid reasons for creating shell and offshore companies: including estate planning, cross-border mergers and acquisitions, and pooling investment capital across countries. But the structures are also good places to hide money for more shady purposes, allowing the rich and powerful to secretly get even more so, and permitting them to exert influence over government officials without the public ever finding out.
Mossack Fonseca issued a statement following the arrests, maintaining that the prosecution’s actions were “an attempt to divert the attention from those who really merit a deep and proactive investigation.” They did not elaborate. The firm also said that Panamanian officials, “have not presented a single piece of evidence that shows us guilty.”
In a tweet, the firm suggested Thursday’s raid was sparked more by the publicity surrounding the Panama Papers than by the Brazilian bribery case, posting a screenshot of the search warrant referencing the international media investigation.
“#LavaJato Case? Here is the search warrant that indicates its for the #PanamaPapers. #MossackFonseca”
Mossack Fonseca’s lawyer Guillermina MacDonald told ICIJ in a phone interview Friday, “It’s really confusing.”
MacDonald said the paperwork Mossack Fonseca received did refer to the Panama Papers but acknowledged that when she requested more detailed documentation from Panama’s attorney general, she was provided information related to Brazil’s high-profile Lava Jato bribery scandal. That scandal centered on engineering firm Odebrecht (whose U.S. subsidiary built Miami’s Arsht Center for the Performing Arts and the city’s American Airlines Arena, among other projects.) In December, the Brazil-based company pleaded guilty to bribery conspiracy charges in a U.S. federal court in Brooklyn, in connection with nearly $800 million in kickbacks to officials across Latin America. Some of that money was allegedly funneled through U.S. banks and funneled through shell corporations and offshore tax havens.
Last April, Fusion participated in a worldwide investigation of Mossack Fonseca as part of the collaborative Panama Papers project, along with the ICIJ, German newspaper Süddeutsche Zeitung and hundreds of journalists, digging through 11.5 million leaked documents from the Panamanian law firm. The investigation revealed the inner workings of a rogue offshore industry that can sometimes be used to enable crime and corruption. The document dump revealed the names of various high-profile names as clients to the firm, including nearly two hundred government officials and their relatives, from around the globe.
Mossack Fonseca has denied any wrongdoing stating it is not at fault in cases in which offshore companies it set up for clients were later used for illegitimate purposes.
After the April 2016 Panama Papers document leak, the firm closed various offices in British tax havens such as Jersey, Isle of Man and Gibraltar. Days before the recent arrests, Mossack Fonseca also closed its Luxembourg offices .