Wednesday 26 October 2016

The rich buy secrecy and sainthood

The 'Panama Papers' are laudable journalism, but the underlying issue is one of ideology, says Gene Kerrigan

Published 10/04/2016 | 02:30

Mossack Fonseca, law firm at the centre of the leaked so-called 'Panama papers'. Photo: AP Photo/Arnulfo Franco
Mossack Fonseca, law firm at the centre of the leaked so-called 'Panama papers'. Photo: AP Photo/Arnulfo Franco

The first thing that has to be said about the Panama Papers is that this is a wonderful example of thorough journalism. It took a year to bring it to print and it cost a fortune, with about 400 journalists involved, in 76 countries. Well done to all involved and may we see a lot more of this kind of thing.

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The second thing that has to be said is that the Irish and British stuff is kind of boring. People have been named as having offshore accounts, but with little detail as to what they did with them. It is entirely legal to own an offshore account.

The third thing that has to be said is that, to quote F Scott Fitzgerald, the rich are different. No, it's not just that they have more money - they have more lawyers.

And with that in mind, let us emphasise that there is no suggestion, in this newspaper or anywhere else, that anyone at all, anywhere, ever, has even thought about doing anything they wouldn't be proud to tell their mother about.

The Panama Papers consist of over eleven million documents that were supposed to stay confidential, but which were leaked to a German newspaper. They provide details on over 200,000 offshore accounts.

The documents are from Mossack Fonseca, a law firm in Panama. (Mossack Fonseca is Spanish for: "Did anyone see that USB stick I left on my desk?")

This firm specialises in providing facilities for rich people to do things with money in a confidential manner.

Panama is what's known as a 'secrecy jurisdiction'. It is well equipped with lawyers and 'nominee directors'.

These will, for a suitable fee, enable you to conceal your ownership of a bank account, a company or a collection of snaps of Kim Kardashian's backside.

Among the Irish names in the Panama Papers are Dermot Desmond and JP McManus, who are said to have used Mossack Fonseca's services.

Nothing illegal or unethical is alleged.

And that applies on the double in connection with Ms Kardashian's posterior.

Fine Gael's most prominent ever backroom boy - Frank Flannery - is named on a document that says £250,000 from an offshore account helped buy his house in London some years ago.

Flannery denies this.

On the international scene, a whole rake of politicians, sheiks, government officials and assorted relatives thereof have been named.

Someone has gone to great lengths to conceal a complicated connection between Vladimir Putin and a mountain of dirty money and some journalists have gone to even greater lengths to uncover that connection.

David Cameron inherited money from his late father, who was a tax evader, which is causing the British prime minister some problems.

Inevitably, the chap running Fifa has been connected to an allegedly dodgy transaction.

There seems to be a clause in some international treaty that decrees that no financially questionable behaviour is allowed take place anywhere on the face of the Earth unless someone from Fifa is involved.

It is, of course, embarrassing for a lot of lawyers and their clients that eleven million confidential documents have come into the public domain. It is worth pointing out, though, that to a large extent the secrecy protocols worked.

While the identities of some people have been scattered across the media, and while this has been accurate and of public interest, mostly, it does nothing more than establish that someone had an offshore account.

And it is proper - and not just for legal reasons - that we assume innocence.

Take, for instance, Simon Cowell.

The Guardian published a large photo of him on its front page. Inside, there was a headline on a double-page spread that connected Cowell with the "offshore stars" and "£325m", which turns out not to have anything to do with offshore money, but refers to his placing on the Sunday Times Rich List.

Now, Cowell has cultivated a television image as a sneering, insulting pantomime villain and has made millions from it. A whole lot of us would cheer if he was caught while conspiring to do something he shouldn't.

Some of us, in fact, made a pot of tea before sitting down to enjoy that one.

On the evidence within the Guardian story, however, Cowell is spotless.

He opened an account in his own name, intending to buy property; it didn't go ahead and the account is now dormant.

He pays his taxes and doesn't make a fuss about it.

That he has an offshore account is a piece of news, albeit boring news. That doesn't justify a front-page photo and a 'gotcha!' headline. If the Guardian story is true, Cowell is an exemplary citizen.

Why would anyone want an offshore account, particularly one arranged by secrecy specialists in Panama, a 'secrecy jurisdiction'?

It gives you extra privacy for your financial affairs.

If you're doing business in a country where the economy or the government is unstable and your money may be grabbed, or for some reason might be made inaccessible, an offshore account can make business easier and safer.

There may be advantages in creating an account for specific purchases of property.

There may be legal tax advantages for some kinds of companies.

Those are the legal reasons.

Offshore accounts have also been known to be used for dodging tax; for breaking United Nations sanctions; for concealing money from specific individuals who might have some claim on that money; for hiding the proceeds of crime, including robbery and drug peddling; for financing illegal activities, including terrorism.

There is curiosity about celebrities and the rich - but the true value of the Panama Papers revelations is in demonstrating the existence of a shadow banking system.

It is now widely perceived that there are dangers in the current imbalances within society. This includes the existence of a layer of grossly wealthy individuals, who are vastly over-rewarded for socially valueless or even harmful activities.

The revelation that so many operate outside the normal rules of accountability, or even the normal rules of banking, puts pressure on politicians to do something about it.

It will, though, take a lot more than even this phenomenal piece of reporting to get the politicians to risk the disapproval of that one per cent.

Having said that, it's only fair to point out that no one you've ever heard of, or not heard of, has been or could be implicated in any breach of the law, any breach of ethics or any behaviour that might be likely to exclude them from nomination for sainthood.

Sunday Independent

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