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Will discoveries in Panama Papers finally spur the DOJ to take action?

Our blog spent some time a few months back discussing the release of the Panama Papers, meaning the massive leak of files from the Panamanian-based law firm Mossack Fonseca to the International Consortium of Investigative Journalists.

These files, which are still being painstakingly scrutinized by media outlets around the globe, have shed light on strategies employed by Mossack Fonseca on behalf of the world's rich and powerful. Indeed, The New York Times recently completed its own analysis of the number of U.S.-based clients utilizing these services and its findings were truly fascinating.

According to the Times piece, Mossack Fonseca had at least 2,400 clients based here in the U.S. over the last ten years and, more significantly, the global firm established a minimum of 2,800 offshore companies on their behalf in countries long-recognized as tax havens for their favorable laws and limited oversight, including the Seychelles and the British Virgin Islands, to name only two.

While numbers like these seem suspicious on their face, there are perfectly legal and legitimate reasons for establishing these sorts of offshore accounts, such as when purchasing foreign-based real estate or establishing a business abroad.

However, after examining the documents and conferring with experts, it has been discovered that many of these U.S.-based clients also received asset protection services that appear to be designed for the sole purpose of evading federal disclosure laws and tax regulations.

While federal law does permit U.S. citizens to transfer their money abroad, it also requires these foreign-held assets to be declared to the Treasury Department and for them to be afforded the same tax treatment as domestic investments (i.e., taxes paid on interest, dividends, capital gains, etc.).

As for some of these questionable asset protection tactics, the Times piece found documentation urging one U.S. client to use their foreign passport to open offshore accounts as a means to escape government scrutiny and another to consider using a resident from a tax haven to serve as a sort of straw man owner for an offshore account.

Experts interviewed by the researchers indicated that it is this brazenness exhibited by Mossack Fonseca that may result in the DOJ and IRS commencing criminal investigations which may lead to arrest and conviction.

"The more correspondence that you have between a U.S. person and a bank or law firm discussing tax issues and efforts at concealment, the stronger the government will see it as a potential case worth prosecuting," said a former prosecutor with the Justice Department.

For its part, Mossack Fonseca has denied any allegations of wrongdoing, and reiterated its commitment to honoring international tax and banking laws.

It's imperative to speak with an experienced and accomplished legal professional as soon as possible if you are under investigation or have been formally charged with any sort of white-collar crime. At the Law Offices of Horwitz & Citro, P.A., we have more than three decades of experience in this complex area of the law, and stand ready to protect all that you have worked so hard to build.