Editorials

‘Panama Papers’ disclose a colossal financial scandal

People gather to demonstrate against Iceland’s prime minister on Monday. He resigned Tuesday, the first political casualty of an international tax evasion scheme.
People gather to demonstrate against Iceland’s prime minister on Monday. He resigned Tuesday, the first political casualty of an international tax evasion scheme. Associated Press

We all knew the rich and powerful play by different rules than the rest of us. Some are willing to bend or break the law to enrich themselves, and some bankers and lawyers are more than happy to help them.

Yet, the level of venality revealed by what are being called the Panama Papers is mind-boggling – and infuriating. It’s the globalization of corruption, and even more contemptible are political leaders who loot the public treasuries of their poor nations.

We can only hope that the worldwide attention and outrage will lead to real consequences and lasting change. Otherwise, public trust in governments and financial institutions will further erode. It’s not too far-fetched to believe the foundations of capitalism could be weakened.

Tuesday brought a couple of encouraging signs.

Iceland’s prime minister resigned, the first leader being held to account. If laws were broken, those involved should face justice, no matter how prominent they are. So should lawyers and other enablers of wrongdoing.

Citing the Panama Papers, President Barack Obama urged leaders around the world to join him in tightening laws and cracking down on the “huge problem” of global tax avoidance. As he pointed out, some of the schemes slide through legal loopholes, which is why his Treasury Department issued new rules late Monday to discourage tax inversions, when U.S. companies move their headquarters overseas to get a lower tax rate.

All of this is coming to light because of a massive leak of 11.5 million emails, client records and other documents from a Panamanian law firm, Mossack Fonseca & Co. It specializes in offshore shell companies – in notorious tax havens such as the Cayman Islands, but also in places such as Wyoming, Delaware and Nevada.

The Süddeutsche Zeitung newspaper in Munich, Germany, received the documents from an anonymous source and shared them with the Washington-based International Consortium of Investigative Journalists. Several McClatchy journalists were among more than 370 dogged journalists from 78 countries in the largest media collaboration of its kind ever undertaken.

The leak uncovers the shadowy world of international finance just as Edward Snowden’s revelations did the hidden surveillance state.

The documents show that a dozen current and former world leaders, 61 relatives of current national leaders and 128 other current or former politicians and public officials use offshore companies to conceal their money.

They include the prime minister of Pakistan, the monarchs of Morocco and Saudi Arabia, and Iceland’s now former prime minister.

Sigmundur David Gunnlaugsson set up a company in the British Virgin Islands and hid his financial interest. The company held millions of dollars in three major Icelandic banks that failed in the 2008 financial crash, and he negotiated paying off the banks’ creditors. He initially refused to step down Monday, sparking the largest anti-government protests in that country’s modern history.

Those identified in the leak also include close friends of Russian leader Vladimir Putin, a close friend of Mexican President Enrique Peña Nieto and companies linked to the family of Chinese President Xi Jinping. Also named are 29 members of the Forbes list of the world’s richest people, and leaders of FIFA, the embattled governing body for soccer, as well as assorted spies, gun runners and drug kingpins.

The astounding stories based on the documents are being published in The Sacramento Bee and news organizations across the country and around the world. More bombshells are coming.

They are a reminder that even in our digital age of tweets and Instagram photos, time-consuming and sophisticated reporting is still essential to understanding the world.

  Comments