People who lived through the 1980s will understand the title:
The big story for the past couple of days has been the massive leak of the so-called “Panama Papers,” a trove of records exposing sketchy financial dealings by people who have more money and political stroke than you or me. You can find any number of explainers out there on the internets that go into more detail, but the focus is on a Panama-based law firm, Mossack Fonseca, that specializes in helping clients establish offshore shell corporations in a variety of tax havens around the world. Shell corporations (the term just signifies corporations that have no assets of their own and exist to facilitate business deals), which wealthy individuals and other corporations establish for any number of reasons ranging from the perfectly justifiable to the completely, dangerously illegal (and let’s not forget the hypothetically meritorious), have a bad rap, mostly because everybody associates them with tax evasion, corruption, and fraud. This is because, well, they often are associated with tax evasion, corruption, and fraud.
There were 11.5 million documents in the entire leak, so it’s going to take a good, long time for reporters to go through them and we can expect the fallout to reverberate for months, if not years, to come. One high-profile politician has already suffered the consequences, however–Iceland’s prime minister, Sigmundur Davíð Gunnlaugsson, resigned today after it turned out that he (well, technically his wife) owned a nifty little company in the British Virgin Islands that owned bonds issued by three of Iceland’s biggest banks. This meant that Gunnlaugsson, at a time when he was supposed to be “getting tough” on the foreign creditors of Iceland’s struggling banks, was himself (er, I mean, his wife was) one of those foreign creditors. Gunnlaugsson, already unpopular, had to resign in order for his governing coalition to have any shot at remaining in power.
The big story so far isn’t Gunnlaugsson, though–it’s Vladimir Putin. The papers put a Russian musician (!) named Sergei Roldugin, reportedly Putin’s “best friend,” at the epicenter of a $2 billion financial net that has benefited Putin’s inner circle and his family, though there’s nothing in the documents directly connecting it to Putin himself. Putin’s critics have often suggested, without much evidence, that Putin has made himself extraordinarily wealthy by essentially diverting money out of the Russian treasury. They claim that he doesn’t directly own any of his assets, but instead spreads them around among his pals, with the understanding that it’s all really his money and they’ll find themselves floating face down in the Volga if they screw with him (the mafia parallels are both part of the anti-Putin narrative and yet still entirely believable). This leak may be the first strand of real thread that could be pulled on to get at Putin’s actual wealth (and, if you’re into that sort of thing, to design sanctions that might really hurt him).
In the interest of fairness, I should note that Ukrainian President Petro Poroshenko is also fingered in the leak, and he may very well have been using his offshore corporations to dodge taxes and/or hang on to assets he promised to sell when he was running for president. This is not the kind of news Poroshenko wanted at a time when he’s trying to convince his own citizens and the international community that he’s actually serious about fighting the rampant corruption that continues to plague his country.
There are a few names on the list that are of interest for people who pay attention to the Middle East and thereabouts. The biggest are easily Saudi King Salman and the Saudi Crown Prince, Muhammad b. Nayef. Salman seems to have used his shell companies to manage his yacht and buy real estate, but it’s not clear yet what Muhammad was doing with his. The former Emir of Qatar, Sheikh Hamad b. Khalifa Al Thani, and his cousin (Qatar’s former prime minister), Hamad b. Jassim Al Thani, both owned (and co-owned) a number of shell corps, at least one of which seems to have been used to manage Hamad b. Jassim’s $300 million yacht. Khalifa b. Zayed Al Nahyan, the Emir of Abu Dhabi and President of the UAE, owned “at least 30 companies” in the British Virgin Islands, which he used to facilitate his purchase of billions of dollars in real estate around the world. Former Iraqi Prime Minister Ayad Allawi owned a shell corp to manage his “private savings,” though considering his ties to Western intel agencies and the fact that he was PM of Iraq, where those “savings” came from is certainly up for speculation. Ali Abu al-Ragheb, former Jordanian PM, is in the leak, as are the children of current Pakistani PM Nawaz Sharif. Actually, if we’re including family then a couple of Bashar al-Assad’s cousins were in there, along with Hosni Mubarak’s son Alaa.
So far, at least, there haven’t been any Americans of any particularly high public profile mentioned in the Panama Papers. There are a bunch of theories about why that might be, but two seem most salient: first, reporters are still just scratching the surface of the full document dump, so there may be some American surprises yet to come; and second, wealthy Americans looking to dodge their taxes don’t really need to bother setting up offshore shell companies via shady Panamanian law firms, because U.S. tax and corporate law makes it pretty easy to dodge taxes here at home, and to set up shell companies domestically. Any Americans mentioned in these documents are probably going to be there because they were doing something worse than merely avoiding taxes (arms sales, drug trafficking, financing terrorism, and so on).
It should be stressed that there’s nothing obviously untoward about owning a shell corporation. But owning a shell corporation is a sign that something untoward might possibly be going on. At this point there’s hard evidence connecting only a few of these accounts to any specific wrongdoing (Alaa Mubarak’s shell corps were almost certainly related to the embezzlement charges on which he was convicted last May, for example, and the Assad cousins are/were crooked as hell), but as I said, this story is going to keep developing for a long time to come.