Legal — But Deeply Troubling

The Panama Papers constitute the biggest documentary leak in history — 11 million emails, images of contracts and passports. Or, if you prefer, 2.6 terabytes of data. The infamous Wikileaks, the biggest up to that time (2010) boasted about 1.3 million state secrets docs on its database. The Pentagon Papers (1969) comprised 4,000 pages of documents detailing the inside story of U.S. government planning and misleading of the public during the Vietnam War.

But the bigness of the Panama Papers is not just the sheer mass of information. It is the global reach — implicating 12 current or former heads of state and more than 60 of their relatives and associates. While Prime Minister Sigmundur Gunnlaugsson of Iceland has been the only casualty so far, resigning after it emerged that his wife owned an offshore company with links to some of the country’s collapsed banks, more may fall as journalists and tax experts sift through the data. The tax authorities of Britain, France, Italy, Austria, Sweden, the Netherlands, Australia, New Zealand and Israel have announced they are just getting started.

It is likely, though, that almost all of those named in the Papers will manage to ride out the political storm and avoid legal prosecution. As McGeorge Bundy, then special assistant to the president for national security, said dismissively of the uproar over the 1961 Bay of Pigs fiasco, “a brick through the window, nothing more.”

(In fact, Bundy was right. Although the CIA-sponsored invasion of Cuba failed miserably, amidst hundreds of executions and the capture and brutal treatment of 1,200 members of Cuban exile Brigade 2506, most of the captives were eventually released and President John F. Kennedy’s popularity registered only a temporary drop.)

For some, like Russian President Vladimir Putin, it’s not even a brick through the window. Putin’s spokesman Dmitry Peskov was ready with a conspiracy theory to explain away the charges:

“Putin, Russia, our country, our stability and the upcoming elections are the main target, specifically to destabilize the situation,” he said, and claimed that many of the journalists involved in the revelations were former officers from the U.S. State Department, the CIA and other security services.

China, not generally known for its sense of humor in international relations, contributed a touch of levity, albeit unintentional. In Beijing, there was no official reaction to allegations that eight current or former members of the ruling party’s most powerful body hid their fortunes in offshore havens, including relatives of Xi Jinping, who has overseen a much-publicized anti-corruption drive.

Foreign Ministry spokesman Hong Lei sniffed: “For such groundless accusations, I have no comment.” Meanwhile, government censors were reportedly “working overtime to scrub references to prominent Chinese named in the papers.”

Most of these people have little to worry about. They can go on hoarding their piles of cash undisturbed. For the salient fact is that in most cases nothing can be done about it, as laws now stand.

Mossack Fonseca, the firm whose files were leaked, correctly pointed out on Tuesday: “While we may have been the victim of a data breach, nothing in this illegally obtained cache of documents suggests we’ve done anything wrong or illegal…” They pledged to “continue to serve our clients” and “stand behind our people,” while piously expressing hope that the real criminals, who violated their privacy, will be brought to justice.

What Mossack Fonseca says is right. It’s all (or most of it) legal. What they don’t say is that it’s also all rotten, all the time. The papers show how members of the world’s elite are constantly exploiting tax havens and other legal loopholes to conceal untold billions of dollars and avoid accountability, while their countrymen, ordinary people with ordinary incomes, are left to shoulder the burden of taxation.

American names have been conspicuous for their absence in the Panama Papers, and some are asking why.

First, it will take time for the experts to go through such a massive trove, and it could be the American names just haven’t surfaced yet. Secondly, it’s possible that Americans who do this sort of thing simply worked with law firms other than Mossack Fonseca. “This firm is one of thousands in the world and there are hundreds or thousands just like it in the U.S.,” said Ana Owens, a tax and budget advocate at U.S. Public Interest Research Group (PIRG).

Thirdly, with the depositor-friendly policies of the states of Delaware and Nevada, and the U.S. Virgin Islands, the rich don’t have to go abroad to hide their activities and assets.

However, President Obama let reporters know that these revelations are not just for the entertainment of Americans otherwise vexed by the 2016 presidential campaign. “It’s not unique to other countries because, frankly, there are folks here in America who are taking advantage of the same stuff.”

Accordingly, Obama urged Congress to close “insidious tax loopholes” that allow big corporations to avoid billions of dollars in tax payments by ostensibly relocating offshore.

The Panama Papers could have some impact on the laws that make these havens possible. A bill pending in Congress right now, called the Incorporation Transparency and Law Enforcement Assistance Act, would require states to collect data on the “beneficial ownership” of shell companies. That information could be made available to investigators.

U.S. PIRG is sending dozens of activists to Washington next week to lobby for its passage, Owens said. Now that would be entertaining!