South Africa and the Panama Papers

The world was shaken when more than 11.5 million documents, known as the Panama Papers, were reported on by numerous media outlets last week, after the International Consortium of Investigative Journalists (ICIJ) which had been working with Munich based Süddeutsche Zeitung on the papers for more than a year.

The papers reveal the names of individuals and companies, which have invested money offshore to, some cases, evade tax payments by investing their money in tax havens. Among those named of local interest, is the nephew of President Jacob Zuma, Clive Khulubuse Zuma, and asset management company, Fidentia.

(For more on the law firm involved and the background to the Panama Papers, scroll down)

Clive Khulubuse Zuma

According to the Panama Papers, Zuma was an authorised representative of Caprikat Limited, one of two offshore companies that bought oil fields in the Democratic Republic of Congo (DRC). Questions were raised about this acquisition in 2010, which lead to the British Virgin Island authorities ordering Panama based law firm Mossack Fonseca (the law firm where the leaked documents originate) to provide background information on Zuma.

In a report by the International Consortium of Investigative Journalists (ICIJ), it stated: “That same year, Mossack Fonseca decided to end its relationship with the companies. Zuma and representatives of the companies have rejected allegations of wrongdoing and claimed the oil deals are "quite attractive" to the DRC government.”

The ICIJ noted: “A spokesman for Fleurette, the owner of the two companies, told that "the DRC benefits hugely" from "investment and long-term commitment" and noted "extensive benefits to local communities."”

Following the revelation about Zuma by the Panama Papers, South African trade union Solidarity has requested that the liquidators of the Aurora debacle investigate Khulubuse Zuma.

“Khulubuse Zuma’s name was implicated with about 140 people who are under suspicion of having used banks, law firms and foreign front companies to conceal their assets,” said Gideon du Plessis, General Secretary of Solidarity.

“We have approached the liquidators dealing with the Aurora case to investigate Khulubuse Zuma. We would like to know at what stage Zuma transferred money to Panama and whether it was during or shortly after his term as a director of Aurora,” said Du Plessis.

When the ICIJ released its report last week, Zuma had not responded to repeated requests for comment.

Fidentia

Asset management company Fidentia is alleged to have been involved in a scheme to defraud millions from investment funds which amounted to $60 million (R 914.30 million at today’s exchange rate).

According to an ICIJ report, the Mossack Fonseca documents revealed that at least two of the men involved in the fraud used the law firm to create offshore companies. Furthermore, it notes: “Mossack Fonseca was willing to help one of the fraudsters protect his money even after authorities publicly linked him to the scandal.”

The ICIJ report further stated: “In the Fidentia case, Mossack Fonseca’s records show that one of the men later jailed in South Africa for his role in the fraud, Graham Maddock, paid Mossack Fonseca $59,000 in 2005 and 2006 to create two sets of offshore companies, including one called Fidentia North America. The law firm’s records say it gave him “the VIP service.”

“Mossack Fonseca also created offshore structures for Steven Goodwin, a man that prosecutors later claimed had played an “instrumental role” within the Fidentia swindle. As the scandal broke in 2007, Goodwin flew to Australia, then to the U.S., where a Mossack Fonseca lawyer met with him at a luxury hotel in Manhattan to discuss his offshore holdings, the firm’s internal records show.

“The firm official later wrote that he and Goodwin “spoke deeply” about the Fidentia scandal and that he had “convinced Goodwin to better protect” his offshore company’s assets by passing them to a third party.”

Later, the firm official told colleagues at Mossack Fonseca that Goodwin was simply a victim and not involved in the fraud. However, in 2008, Goodwin was arrested, and after pleading guilty to fraud and money laundering, was sentenced to 10 years in prison.

Reportedly, one Mossack Fonseca employee suggested “preparing” audits for Goodwin’s offshore company Hamlyn Property LLP, for 2006 and 2007 to prevent the prosecution from taking legal action against Hamlyn’s entities. According to the ICIJ, it is not clear if this suggestion was adopted.

According to BD Live: an estimated R1.2bn was misappropriated by Fidentia’s bosses and tens of thousands of people, including widows and orphans of mineworkers who were beneficiaries of the Fidentia-controlled trust‚ were affected.

“Mossack Fonseca did not answer questions from ICIJ about its relationship with Goodwin. A representative for Goodwin told ICIJ that Goodwin “had nothing whatsoever” to do Fidentia’s collapse “or anything directly or indirectly to do with the 46,000 widows and orphans,”” added the ICIJ.

Mossack Fonseca

The documents were leaked to the media from Mossack Fonseca to the press over a year ago and have been investigated by the ICIJ, German newspaper Süddeutsche Zeitung and more than 100 other news organizations.

Among the claims circulating are that some of the shell companies set up by the law firm have been involved in funding the war in Syria. According to a video report by the ICIJ, Mossack Fonseca has said that it “never knowingly allowed the use of its companies by individuals with a relationship to Syria.”

Furthermore, Mossack Fonseca reportedly stated that it always cooperates with authorities, and does not “offer solutions whose purpose is to hide unlawful acts such as tax evasion.”

In a report published by the ICIJ it stated: “The firm is one of the world’s top creators of shell companies, corporate structures that can be used to hide ownership of assets. The law firm’s leaked internal files contain information on 214,488 offshore entities connected to people in more than 200 countries and territories.”

The leaked data reveals emails, financial spreadsheets, passports and corporate records pertaining to secret owners of bank accounts and companies in 21 offshore jurisdictions. These include Nevada, Singapore and the British Virgin Islands.

The documents further reveal that among the law firm’s clients are Ponzi schemers, drug kingpins, tax evaders and at least one jailed sex offender.

Others accused

The reach of the Panama Papers leak has been global. There are powerful politicians and public figures from around the globe that have been named in the papers. Among them is soccer player Lionel Messi. According to the records, Messi and his father own Mega Star Enterprises, a Panama based company. This is one of a few shell companies linked to Messi, who is currently being investigated in Spain for tax evasion with regards to his offshore dealings.

Others who have been named in the Panama Papers include Sigmundur Davíð Gunnlaugsson the Prime Minister of Iceland who has resigned following the revelations of the Panama Papers, as well as Ian Cameron (father of British Prime Minister David Cameron), Mounir Majidi (personal secretary to the king of Morocco), and John Addo Kufuor (the eldest son of Ghana’s former president, John Agyekum Kufuor), among numerous others.

More names and information is set to be released by the ICIJ in May.

For more on the Panama Papers, click here.