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US brings first prosecution based on Mossack Fonseca data breach

Thursday, 6 December, 2018

New York prosecutors have charged four people with tax evasion offences, in the first US criminal case brought in connection with the theft of documents from Panamanian law firm Mossack Fonseca in 2016.

The four are: Ramses Owens, a former lawyer at now-defunct Mossack Fonseca; Dirk Brauer, who worked for Mossfon Asset Management; Richard Gaffey, a US accountant; and Johan von der Goltz, a German client of Mossack Fonseca. All except Owens were arrested in an international operation across London, Paris and Massachusetts. Owens, a Panamanian national, is still at large.

The indictments allege that Owens, Brauer and Gaffey helped Goltz and other clients conceal assets from the US tax authorities between 2000 and 2017, using offshore foundations, trusts and companies in Panama, Hong Kong and the British Virgin Islands.

The structures, allegedly created by Mossack Fonseca, typically included a sham foundation that owned the shell companies, which in turn held the undeclared assets on behalf of the US taxpayer. The clients' names did not appear anywhere on the incorporation paperwork. In the scheme set up for Goltz, it was falsely claimed that his elderly mother, a Guatemalan citizen and resident, was the sole beneficial owner of the shell companies and bank accounts at issue.

The bank accounts were set up in jurisdictions with strict bank secrecy laws, and the cash in them was typically repatriated to the US using debit cards and fictitious sales.

The penalties being sought by the US Department of Justice for tax offences range from five to ten years in prison. However, charges of money laundering and 'wire fraud' are also being pressed, which could take the maximum sentences to 20 years.

The Department of Justice press release reveals it also investigated two more Mossack clients, referred to as Client-1 and Client-5. However, they entered the Internal Revenue Service's offshore voluntary disclosure programme in 2013, before the Panama Papers disclosures. It is not clear whether they too will be charged.

Sources