The Panamanian law firm at the front of a worldwide firestorm surrounding 11.5 million hacked documents did what any normal American would do. They filed a lawsuit! Against who? And why? And what can they hope to accomplish? All great questions with no good answers.
Mossack Fonseca, a 600 lawyer firm with offices throughout the world, was hacked. Last weekend the International Consortium of Investigative Journalists (ICIJ) announced that it possessed the hacked documents and would be publishing 2.6 terabytes of data, some 11.5 million documents next month. The leak and subsequent disclosure is known as the Panama papers.
As a teaser, ICIJ published select documents that suggest Vladimir Putin and a number of other world leaders may have evaded taxes in their own home countries by using unreported offshore accounts, accounts held in nominee name.
Mossack Fonseca helps individuals world wide create Panamanian corporations. They have offices in most of the reputed tax haven cities and countries worldwide (including the United States).
Since the Panama papers story broke, the law firm continues to say that it has done nothing wrong. Unfortunately, one lawyer from the firm allegedly admitted that 95% of the shell corporations they form are used for tax evasion purposes.
Already, plaintiffs’ lawyers representing the clients of these banks are gearing up law suits against Mossack Fonseca. They say the firm failed to safeguard their information. (That somehow reminds us of a bank robber trying to sue his crime partner for turning him in.)
Today things became even weirder. Law360 broke a story today saying that Mossack Fonseca has now sued someone in return. But who? The hackers? Good luck collecting or even finding them. The media? This story has been carried worldwide. It’s too late.
Already, the fall out from the leak has caused one leader to resign. Earlier this week Sigmundur David Gunnlaugsson, prime minister of Iceland, announced he was stepping down, apparently because of documents found in the Panama papers.
What should folks be doing? It probably isn’t trying to sue someone.
Noncompliant taxpayers in the United States or with U.S. citizenship should be racing to get in compliance with IRS FATCA regulations. Offshore accounts aren’t illegal but tax evasion is. It’s probably not too late to come into compliance and avoid prosecution but time is certainly running out.
We and our colleagues have heard from several folks with unreported accounts. Those are the smart ones. Many others will bury their heads and hope the nightmare ends. It won’t.
The IRS whistleblower program pays awards to those with information about unreported taxes. That is how former UBS banker Bradley Birkenfeld received a $102 million whistleblower award. There are more Birkenfelds out there. Herve Falciani and Rudolf Elmer also became big bank whistleblowers and disclosed folks with unreported accounts.
The media believes the Panama papers are all about hackers, big politicians and offshore accounts. They are wrong. The real story is about the thousands of business people, doctors, lawyers and retirees who thought they could beat Uncle Sam and save a few bucks. It’s also about whistleblowers who are coming forward in record numbers (and getting paid for their information).
As whistleblower lawyers, we expect the Panama papers will cause more individual bankers to come forward and seek an award. Already our whistleblower clients have received over $100,000,000.00 in awards.
For such a big planet, technology has made the banking system quite transparent. Our world gets smaller and smaller each day. The actions of hackers and whistleblowers make avoiding Uncle Sam by using an offshore account or nominee entity (shell company) a no win proposition.
Our take from the Panama papers? If you are a taxpayer, make sure your affairs are in order. A person with information about tax evasion? Become a whistleblower.
If you are a banker, IT professional or other person with inside information about unreported offshore accounts, call us. All inquiries are protected by the attorney – client privilege and kept strictly confidential. Before going to the authorities or press, talk to us first. We can help you figure out if your information is eligible for an award and advise you of any risks you may face as a whistleblower.
MahanyLaw – America’s Whistleblower Lawyers