The conflict dated to 2001, when Argentina, in the midst of an economic depression, defaulted on its sovereign debt. Singer’s hedge fund, Elliott Management, had been buying Argentinean government bonds at a significant discount. Reasoning that something was better than nothing, most bondholders accepted steep reductions on their investments, absorbing losses of up to 70 percent. Elliott’s business model was different. Singer held as much as $1.7 billion in Argentinean bonds; he wanted them repaid in full. The billionaire took his case all the way to the U.S. Supreme Court and won.
Elliott Management scoured the globe for Argentinean assets to repossess to satisfy the judgment and drive the Argentines to the bargaining table. The hedge fund froze $3 million’s worth of equipment and warehouses in Maryland, temporarily grabbed a naval vessel in Ghana, and forced Fernández de Kirchner to ditch her official plane for fear it would be seized on a trip to the United States. The Argentinean president responded with intransigent nationalism. The vultures can take our boats, she declared haughtily, but they will never take our “freedom, sovereignty, or dignity.”
While tossing around ideas for what to target next, Elliott personnel alighted upon a growing scandal in Argentina involving Fernández de Kirchner and her late husband, former president Néstor Kirchner, over allegations of money laundering. Jorge Lanata, an Argentinean television journalist known for mixing comedy with investigative reporting, broadcast a series of reports in April 2013 called “the K [for Kirchner] Money Trail” that centered around Lázaro Báez, a former bank teller turned millionaire businessman. In the early 1990s, Báez ingratiated himself with Néstor Kirchner, then a rising politician, by allegedly leaking confidential bank information about the couple’s enemies.
A few weeks before Néstor Kirchner was elected to the Argentinean presidency in 2003, Báez created a construction firm that then won extensive public works contracts in Patagonia, in the south of the country. In exchange for these contracts, Báez allegedly funneled money back to the Kirchners through multiple channels, including a series of offshore companies. Lanata’s broadcasts included video testimony of alleged associates of Báez explaining how they boarded his corporate jets with sacks full of cash. The illicit loot was destined for foreign bank accounts controlled by anonymous companies scattered throughout the world.
Exposés by Lanata and other Argentinean journalists led to a criminal investigation. Prosecutor José María Campagnoli issued his own report in December 2013, suggesting that Báez had laundered $65 million in embezzled state funds through 150 companies based either in Panama or Nevada. Campagnoli based his assumption in part on the companies’ connection to Helvetic Services Group, a Swiss fund that served as a shareholder of some of the companies and was believed to be controlled by Báez. After washing the money through offshore companies, Báez allegedly sent it back to the Kirchners disguised as payments on permanently empty rooms in hotels the couple secretly owned. Reporters had a field day showing and describing empty hotel parking lots and quiet hallways. In response to the unproven allegations, Kirchner’s general prosecutor attempted to fire Campagnoli, and ultimately succeeded in removing him from the investigation.
Nonetheless, the Campagnoli report provided enough evidence for Elliott Management, in its hunt for Argentinean government money, to file a subpoena on 123 companies based in Nevada allegedly belonging to Báez. The added value of embarrassing Kirchner compensated for what was admittedly, in this particular case, a near-impossible asset recovery mission. Even if the companies belonged to Báez and were used for illegal payoffs, the hedge fund could not prove anything until it broke through multiple layers of offshore secrecy. And if Elliott somehow managed to vault those hurdles, the money would likely have already moved elsewhere.
The alleged Báez companies all showed the same registered agent, M. F. Corporate Services (Nevada), Limited. When Elliott didn’t get anywhere with the companies themselves, it turned to Mossfon’s Nevada subsidiary, in what quickly became a frontal assault on the secrecy world.
Mossfon had opened its Nevada office in 2000. Nancy Broadhurst, who had discovered Niue as a tax haven for the firm, supervised the office’s creation. The firm marketed the jurisdiction aggressively, particularly in South America. The degree of secrecy Nevada allowed put many tax havens to shame. As long as a foreigner made his money outside the United States, there was no requirement to report any financial activity. Nevada had no information-sharing agreement with the Internal Revenue Service. An economic boom in the state guaranteed first-world infrastructure. Most important, the firm told potential customers, Nevada did not have a reputation as an offshore center. Clients who located their companies there gained an extra degree of discretion because of this public misperception. By 2013, Mossfon was charging about $2,000 to register a Nevada company, and $1,775 each year afterward; it had almost 350 active companies.
In response to Elliott Management’s subpoena for information on the activities of the supposed Báez-connected companies, Mossfon provided an affidavit signed by Leticia Montoya, who served as a director for all the companies. In fact, Montoya, who earned about $900 a month, was one of Mossfon’s most prolific nominees, acting as a director for almost eleven thousand of its companies. Montoya’s affidavit stated that none of the companies had responsive documents, nor did they do any business within one hundred miles of Las Vegas. Mossfon further claimed that M. F. Corporate Services was an independent contractor—a stand-alone entity—not controlled by the Panamanians. Paul Singer’s team then sought to depose Patricia Amunategui, a Chilean-born former casino worker who had run Mossfon’s Nevada office for more than a decade. The Singer/Elliott lawyers wanted to investigate how the Báez money moved and the exact relationship between Mossfon and M. F. Corporate Services. After a protracted court battle, the deposition was granted.
On September 11, 2014, Amunategui sat down with Dennis Hranitzky, a lawyer for Singer, for a seven-hour deposition. As the day progressed, it became increasingly clear that Amunategui was being evasive. Hranitzky deftly used her employment contract, obtained with the original subpoena, to highlight the absurdity of her claims. But it would take Hranitzky years to discover the true depth of her mendacity.
Amunategui insisted that she did not work for Mossack Fonseca. The Panamanians were simply clients of M. F. Corporate Services and did not direct her activities. She had never met the partners and could not say who handled the finances of her independent subsidiary. As Mossfon’s internal communications show, this was not true.
Within a week of the deposition, Luis Martínez, Mossfon’s IT manager, was on the phone with Amunategui discussing ways to build more distance between the two offices. The firm decided to separate the telephone and computer systems that linked the Nevada office to Mossfon Panama. The idea was to retroactively turn Amunategui’s office into what she had claimed it to be in her deposition, a simple provider. They also tried to remotely clean the logs of her office computer so it would further hide the connections to Panama.
Still, Martínez came away from the call somewhat alarmed. He questioned whether Amunategui could pass a basic audit without leaving evidence. “I’m worried about Miss Patricia,” he wrote to his colleagues. “She is forgetting things and she is very nervous. I think in this situation it could easily become clear that we are hiding something.”
Mossfon then discussed moving the main responsibilities of the office to Panama, but it was too late. Even without any insight into the behind-the-scenes maneuvering of the Panamanians, Hranitzky’s deposition of Amunategui had done its damage. A judge would rule that the Nevada operation was an “alter ego” of Mossfon and thus subject to the jurisdiction of American courts and, more dangerously, information subpoenas. Paul Singer and Elliott Management had demonstrated how to blow a hole through American offshore secrecy, yet few litigants followed their lead.
* * *
THE JUNE 2014 meeting in Brussels to discuss the Luxembourg leak was sufficiently productive that Gerard Ryl
e and Marina Walker replicated it for the HSBC investigation. This time, forty journalists attended, representing more than a dozen countries—about double the number of reporters as had gathered in Brussels for Lux Leaks. Television producers from 60 Minutes rubbed elbows with journalists from NDR, Northern Germany’s public television broadcaster. Japanese investigative reporters mixed with their counterparts from Peru, Argentina, and elsewhere.
Most of those present had signed an agreement with ICIJ, in which their news organizations committed to the collaboration. They promised to abide by the publishing embargo and not to share the data with others outside the project. Everyone would publish at a time determined by ICIJ. They also committed to share their findings with other participants in the project and to credit the source of the leak, in this case, Le Monde and ICIJ. The agreement carried no legal weight. It was more of a moral document, a symbolic code of conduct.
Walker had developed a profile of the kind of journalistic collaborator she sought. She wanted the antithesis of the macho, lone-wolf stereotype of the investigative reporter, the hard-bitten newsman jealously guarding his scoop. Usually before accepting someone into the project, she quietly researched the person to determine if the reporter met certain standards. She looked for the obvious professional abilities, people who were well regarded as top investigative reporters in their field and in their countries. Just as important, Walker wanted people with a high degree of emotional acuity. She was determined not to commit the same errors ICIJ had made in Offshore Leaks. Would the partner collaborate? Could he take direction? Did he eschew drama?
Ryle was interested in getting big names like 60 Minutes or the New York Times. The bigger the platform, the greater the impact. Unfortunately, the larger news organizations did not always make the most congenial collaborators.
The HSBC meeting was held in early September in Paris, in Le Monde’s lofty executive conference room. The excitement was palpable, particularly among the Europeans. Everybody knew of the Falciani files. Many reporters had tried and failed to get hold of them. Corruption cases involving Swiss private banks filled their countries’ newspapers on a seemingly daily basis. The foreign treasures stored in Swiss banks, licit and illicit, had captivated the literary fancies of writers from Ian Fleming to Robert Ludlum. Now, for the first time, reporters would have an actual look inside.
Rigoberto Carvajal code-named the project “Voyager.”
Mar Cabra and ICIJ’s data team had worked tirelessly throughout the summer to transform Falciani’s files into something understandable and searchable. It was no easy task. Falciani had extracted the data from HSBC in segments. Then French tax authorities had broken the information into Excel spreadsheets by country to share with friendly governments. (By early 2015, approximately $1.36 billion in unpaid taxes had been recovered around the world as a result of the data.) ICIJ now tried to reconstitute the original database, putting the puzzle back together. The data spanned twenty years. It came in multiple pieces. Each name might be connected to one or several pieces. Each piece covered a different moment in history. There was client data that stretched from 1987 to 2007, which included names, addresses, and bank accounts. Then there were notes that HSBC’s bankers had manually added to the files as part of the bank’s client relationship management system. These covered only the year 2005. The data also featured bank account balances, but only for the maximum amount held from 2006 to 2007. The customers hailed from more than two hundred countries, collectively holding more than $100 billion, many through offshore companies located in tax havens.
In a normal data project, where the information came from a public source like a government agency, journalists could ask the provider questions to make sense of it all. In this case, the ICIJ reporters obviously could not go to HSBC and request help. Cabra likened it to reconstructing a deconstructed salad.
The group fell back on a software program that exposed relationships, automatically illustrating connections between names, companies, and addresses. The software came from a four-person start-up tech firm in France called Linkurious. The idea for Linkurious had originated years earlier as an aid for journalists to help them understand the interdependencies between banks to make sense of the 2008 financial crisis. Unfortunately, there was no money in journalism, so the team turned to business applications. After ICIJ released the Offshore Leaks database, Linkurious downloaded it to create a product demonstration for the company’s blog. Linkurious then contacted ICIJ to see if it could help in future reporting projects. In this way, ICIJ became the firm’s only pro bono customer. Oddly enough, Linkurious’s cofounder Sébastien Heymann had recently met with Hervé Falciani, whom he had found elusive but enthusiastic. Heymann did not realize that the conversation, one of several, was actually an interview to see if Linkurious was an appropriate vendor for the French tax authorities, which then became a client.
In Paris, Cabra demonstrated how the data worked via Linkurious using as an example Emilio Botín, the executive chairman of one of the wealthiest European banks, Banco Santander. The Spanish government had already dunned the Botín family for €200 million in back taxes based on the Falciani list. Botín’s company, North Star Overseas Enterprises Inc., created its first HSBC account in 2003 and was connected to five others. In the Linkurious graph, North Star sat in the middle of the screen with spokes fanning out to bank accounts, attorneys, and trusts. Clicking on each would potentially allow a reporter to explore the relationships in the data. Cabra knew her presentation had made an impression when, in the airport on the way home to Madrid, her phone lit up with messages from participants informing her that Botín had just died.
Among the journalists present in Paris were two friends, Titus Plattner and François Pilet, employed by competing Swiss newspapers. The two reporters had originally worked together on Offshore Leaks when they were with the Swiss media company Tamedia, but then Pilet left to join its rival Ringier. Since both journalists wanted to be part of the project, the competitors agreed to form an alliance and even share bylines on stories. Tamedia would publish in German, Ringier in French. It would be as if the Washington Post and the New York Times not only collaborated but allowed staffers to appear on the bylines of each other’s respective newspapers—all for the greater good of the story.
Commentators and government officials in Switzerland had publicly castigated the Tamedia reporters after the publication of Offshore Leaks. Tax evasion formed part of the foundation of the Swiss financial system, and the creation of offshore companies was a key component of that system. Taking money from the rich and powerful, even from foreign government officials, was not seen as particularly scandalous in Switzerland. Other countries, deprived of the tax revenue, saw the matter differently. There were almost three thousand French citizens who banked with HSBC’s Swiss private bank listed in Falciani’s files. A French government investigation determined that only six of those three thousand had paid taxes on their Swiss bank accounts.
Oliver Zihlmann, Tamedia’s head of investigations, saw an opportunity in the HSBC data. In addition to tax evaders, there were outright criminals named in the files, including drug traffickers, arms dealers, and others who profited from human misery. He hoped that if the team detailed the crimes and revealed the victims, it would be impossible for their fellow citizens to ignore Swiss complicity in a corrupt system.
Tamedia focused on HSBC customers like the Belgian diamond dealer Emmanuel Shallop, whose HSBC bankers observed in 2005 that he “is under pressure from the Belgian tax authorities who are investigating his activities in the area of diamond tax fraud.” Five years later, Shallop was found guilty in the Belgian Court of Appeals for facilitating the trade in conflict diamonds for the leaders of the Revolutionary United Front in Sierra Leone, which had tortured, mutilated, and murdered its way through the country for more than a decade. A UN-sponsored court convicted what was left of its leadership of crimes against humanity in 2009.
Tamedia’s reporting also featured Artu
ro del Tiempo Marqués, a Spanish property developer in the Dominican Republic who at one point had nineteen HSBC accounts containing more than $3 million. In the space of a couple of years, del Tiempo had insinuated himself into the upper echelons of the Dominican Republic. He golfed with the chief of police, who made him an honorary colonel. He received a $12 million loan from the state bank to build a luxury condominium tower and had his photo taken with the president. The facade came crashing down when del Tiempo was arrested for smuggling 1.2 tons of cocaine into Spain hidden in a shipment of leftover marble from his construction site.
Del Tiempo also had multiple companies with Mossfon, including several that overlapped with his HSBC accounts. But a criminal conviction and a six-year prison sentence did not bring del Tiempo’s travails to Mossfon’s attention. It would take the publication of the HSBC files to stir the Panamanians to drop him as a customer.
* * *
WORKING ON TWO leak investigations simultaneously did not come without consequences. In September, ICIJ pushed back the publication date for what it was calling “Lux Leaks” until early November. The team was overworked and behind schedule. In the interim, as expected, Jean-Claude Juncker won the presidency of the EU. The ICIJ investigation had leaked out as partners approached the companies involved for comment. Several of ICIJ’s collaborators tried to speak with “Monsieur Ruling” himself, Marius Kohl, but he turned down all their requests.
Then on October 21, a story appeared in the Wall Street Journal featuring an interview with Kohl, conducted in the now retired bureaucrat’s kitchen in Luxembourg. The motive behind the interview was not clear. Did Kohl simply want to justify what he had done or was he telegraphing to Juncker and others that he would not take the fall for the tax avoidance shop he ran from Sociétés 6 all those years? Kohl told the Journal that none of his superiors in the finance ministry, including Juncker, who was its minister for two decades, ever disapproved of his activities.
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