Judge acquits all 28 defendants, including Mossack Fonseca lawyers, in Panama Papers case

Acquitted.

This was the decision of Judge Baloisa Marquínez in the cases centered on the “Panama Papers” scandal and the related “Lava Jato” scandal.

Initially, 31 people were charged with financial crimes, including bribery and corruption, in the Lava Jato case, and 28 were charged in the Panama Papers case. Prosecutors had accused the law firm and others of engaging in illegal activities related to the car wash corruption scandal, and the charges were combined for the purposes of the trial.

In relation to the Lava Jato case, the judge considered that it was not possible to prove that money from illicit sources in Brazil entered Panama with the intention of hiding, concealing, disguising or helping to evade the law. In relation to the Panama Papers, the judge considered that the evidence collected from Mossack Fonseca computers did not comply with the chain of custody and the principles governing digital evidence, and that the rest of the evidence was not sufficient or conclusive to determine guilt.

Background

The case has been in the news for nearly a decade. Eight years ago, the International Consortium of Investigative Journalists (ICIJ) and its media partners made public millions of files exposing the financial secrets of the super-rich. The files, which became known as the Panama Papers, included assets that were allegedly hidden in offshore companies to avoid paying taxes.

The Panama Papers were leaked by Mossack Fonseca, a Panama-based law firm that, according to its website at the time, offered “comprehensive legal and trust services” (the firm closed in 2018 and its website is currently down).

Among those charged were Mossack Fonseca founders Jürgen Mossack and Ramon Fonseca. Fonseca died earlier this year before the judge had issued a verdict (the charges against him were dismissed).

The files date back to 1977, when Mossack Fonseca was formed. In 2015, an anonymous source contacted the South German newspapera well-known German newspaper, with an offer to hand over emails, photographs and other documents taken from an internal Mossack Fonseca database. The reason, the source said, was simply: “I want to make these crimes public.”

South German newspaperThe ICIJ then shared the records with the ICIJ, which along with hundreds of journalists from various media outlets investigated the documents and exposed the offshore financial secrets of world leaders and public figures.

Offshore assets

It’s important to remember that owning an offshore company or creating an offshore trust is not illegal. It’s perfectly acceptable in most countries, including the United States. What is illegal, however, is using offshore trusts to hide assets from known creditors or to evade taxes: failing to disclose offshore assets or declare offshore income can get you into serious trouble.

The IRS noted that “unscrupulous promoters continue to lure U.S. citizens to place their assets in offshore accounts and structures, claiming they are beyond the reach of the IRS,” while warning taxpayers that those who “promise tax savings that are ‘too good to be true’ … will likely cause legal harm to taxpayers who use them.” Those schemes were included (again) on this year’s IRS Dirty Dozen list. (The “Dirty Dozen” is an annual list of common scams that taxpayers may encounter.)

When advisors such as lawyers (like me), accountants, and financial advisors work to set up offshore accounts, there is a lot of due diligence that must be done to ensure that the money is not being transferred for illegal purposes, such as tax evasion, money laundering, or to avoid existing creditors (including future ex-spouses or successful plaintiffs). But even moving money out of a jurisdiction legitimately does not eliminate compliance obligations. In the U.S., for example, the existence of the accounts must still be reported on tax returns (and in other circumstances, including child support and other court proceedings).

Failure to do so can cause problems not only for the account holders, but also for the lawyers, accountants and financial advisors who facilitated the opening of the accounts.

Arguments and trial

That is what authorities claim happened here. Mossack Fonseca immediately denied any wrongdoing and claimed that the publication of the documents misrepresented the work done. In 2016, they posted a statement on their website that read, in part: Recent media reports have portrayed an inaccurate view of the services we provide and, despite our efforts to correct the record, have misrepresented the nature of our work and its role in global financial markets.

The firm also said it had no control over how its clients could use the offshore entities created for them. Despite those denials, the Panama Papers ultimately led to the firm’s closure. They also led to a money laundering trial in a Panamanian court.

The trial began in April. The judge initially had 30 days to deliver a verdict, but that date was extended due to the volume of evidence. The initial leak had involved 11.5 million confidential documents, including financial and legal records. The documents take up 2.6 terabytes of computer storage (for context, a terabyte of data could be stored on about 1,400 CD-ROMs or 220 DVDs). Wikileaks’ 2010 data, for comparison, included just 1.7 gigabytes.

The sentence was handed down at the end of June.

In 2022, both founders of Mossack Fonseca, Ramón Fonseca Mora and Jürgen Mossack, were acquitted in another money laundering case in Panama. Both repeatedly denied any involvement in illegal activities.

Database

You can search the database, which includes more than 810,000 offshore companies, foundations and trusts from the Pandora Papers, Paradise Papers, Bahamas Leaks, Panama Papers and Offshore Leaks investigations here.

You may see names you recognize, but as the database’s website notes, “The inclusion of a person or entity in the ICIJ Offshore Leaks Database is not intended to suggest or imply that they have engaged in illegal or inappropriate conduct.”

Fall

As noted, Mossack Fonseca closed in 2018 and its website is currently down.

Panama received a lot of negative press immediately after the publication of the documents. Panama had been fighting for inclusion in the Financial Action Task Force (FATF) for years, and this did not help. In 2023, the country was finally removed from the FATF grey list. Furthermore, in 2024, the European Union Commission announced the removal of Panama from the European Union’s list of high-risk countries due to strategic deficiencies in preventing money laundering and terrorist financing. However, the country remains on the European Union’s blacklist of tax havens along with American Samoa, Fiji, Trinidad and Tobago, Anguilla, Guam, Russia, the US Virgin Islands, Antigua and Barbuda, Palau, Samoa, and Vanuatu.

In 2019, the star-studded film, The laundromatstarring Meryl Streep, Gary Oldman and Antonio Banderas, hit theaters. The film, directed by Steven Soderbergh, was inspired by a book centered on the Panama Papers. Mossack and Fonseca sued Netflix to try to block the film’s release, alleging defamation, among other things, but were unsuccessful.

ICIJ issued a statement following the verdict.

“While the court did not hold these defendants accountable, the lasting impact of our investigation remains,” Gerard Ryle, executive director of ICIJ, said in a statement. “By revealing hidden truths, as we did in the Panama Papers case, we give the public the information they need to demand accountability and push for reform.”

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