Josh Meyer, Panama Papers: Federal Prosecutor Looking for Crimes By U.S. Citizens (NBCNews 4/10/16), here.
The Justice Department has opened a formal criminal investigation into potentially widespread illegalities exposed by the Panama Papers, the massive leak of financial details about secret offshore accounts, federal law enforcement officials told NBC News Wednesday -- and its first priority will be finding wrongdoing by U.S. firms and individuals.
The U.S. Attorney for the Southern District of New York, Preet Bharara, confirmed the investigation in a letter written to the International Consortium of Investigative Journalists (ICIJ), which has led a worldwide effort to report on suspected money laundering, tax evasion and other criminal activity exposed in the documents.
Many financial transactions related to global money laundering, drug trafficking and other illegal activity involve New York-based banks. A senior federal law enforcement official said the initial focus will be identifying illicit activity by American citizens and corporations.
Bharara's efforts are the first evidence that criminal prosecutors from the Justice Department have become involved in the Panama Papers and will be looking for wrongdoing by U.S. companies and citizens. NBC News reported Sunday that IRS and U.S. Treasury officials have met with their counterparts from around the world in an effort to analyze and use the data about more than 214,000 offshore companies listed by Panamanian law firm Mossack Fonseca.
In his brief letter, Bharara simply said that his office -- which has jurisdiction over many of the world's largest banks and financial firms -- has "opened a criminal investigation regarding matters to which the Panama Papers are relevant."
Federal law enforcement officials are eagerly waiting for access to the documents, saying they will be enormously helpful in bolstering existing cases and also in launching new ones, especially as the names of people hiding behind thousands offshore companies are revealed.
So far, though, U.S. authorities can only go on what has been reported by the media. More than 300 reporters from around the world have been working on the joint Panama Papers effort, and they have disclosed a wealth of information about corrupt officials, criminals, celebrities and others who have set up offshore firms with the help of Mossack Fonseca.Rupert Neate, Panama Papers: US launches criminal inquiry into tax avoidance claims (Guardian 4/19/16), here. This article has a copy of the USAO SDNY letter to ICIJ.
Bharara, who as US attorney general for the southern district of New York has led several crusades against criminal wrongdoing in the financial sector, is already investigating several of the more than 200 US citizens named in the papers.
Among them is Wall Street financier Benjamin Wey, who has been charged with securities fraud, wire fraud, conspiracy and money laundering for using family members to help him amass ownership of large blocks of stock in companies through so-called “reverse merger” transactions between Chinese companies and US shell companies. He made tens of millions of dollars of illegal profit by manipulating the companies’ stock prices, according to the indictment.
The Panama Papers leak shows that Mossack Fonseca helped set up the offshore companies used in the stock manipulation.
“Ben Wey fashioned himself a master of industry, but as alleged, he was merely a master of manipulation,” Bharara said when he announced the indictment against Wey in September. Wey, the chief executive of New York Global Group, denies the charge.James Alm & Jay A. Soled, Did you cheat on your taxes? Here’s why your days may be numbered (The Conversation 4/17/16), here.
One of the results of the [Panama Papers] release is greater transparency. And this trend – along with the move toward a cashless society and other economic changes – explains why the U.S. could one day soon close its “tax gap,” or the difference between what taxpayers are legally supposed to pay and what they actually pay. The U.S. Internal Revenue Service (IRS) estimated the tax gap at US$450 billion for 2006.
Just for comparison, the tax gap is roughly equal to the current U.S. budget deficit. If the tax gap were eliminated, then the federal government would be able to balance its books. Everything else constant, the government could borrow less, spend more, cut taxes or some combination of each.
A politician’s dream come true? Believe it or not, over the course of the coming decades, this dream may blossom into reality.