(Bloomberg) – For decades now, Jurgen Mossack and Ramon Fonseca have been the go-to guys in Panama for international investors looking to put their money in far-flung places.
But even before the world learned their names Sunday — in reports that alleged their firm played a critical role in helping political leaders around the world move money offshore — the lawyers knew their lucrative partnership had begun to fray.
During a four-hour interview last week, Mossack and Fonseca sounded like two men in retreat: the go-go days of cranking out shell companies en masse for clients was over; the firm’s been considering scaling back its international franchising; and Mossack was expressing frustration about how Fonseca’s political ambitions were earning them unwelcome scrutiny from regulators and the media. Just days earlier, Fonseca had stepped down as a special adviser to President Juan Carlos Varela, saying he wanted to focus his attention instead on the business.
“We are going to make ourselves the right size — smaller,” Fonseca said. For the co-head of a firm that over the past few decades has helped revolutionize the way companies and wealthy individuals structure their investments across the globe — and popularized the British Virgin Islands as a hub — the statement marks a big drop in ambition.
What Your Peers Are Reading
Many of the details of Mossack Fonseca’s operations were revealed in a documents leak that the International Consortium of Investigative Journalists says showed how scores of celebrities and world leaders have been shuffling billions of dollars through banks and shell companies. (Bloomberg News is not part of the ICIJ consortium and was unaware of the leak when the interview was conducted on March 29.)
Among those who the ICIJ says used the firm’s services to help them stash money overseas are Argentine President Mauricio Macri, Ukrainian President Petro Poroshenko and associates of Russian President Vladimir Putin. Officials from those countries denied any wrongdoing, as did the law firm, which said in a statement over the weekend that it “does not foster or promote illegal acts.”
The firm also refused to comment on any of the clients named in the reports. On Monday, Mossack said in a phone interview that the leak stemmed from the hacking of the firm’s computers and that an outside sleuth had been hired to investigate. Fonseca told the Financial Times that he didn’t expect one legal case to arise from the reports.
‘da Vinci man’
Of the two men, it is Mossack, a 68-year-old with German roots, who displays a keen mastery of the nuts and bolts of the business. He did most of the talking during the interview in their Panama City headquarters. The building is sleek, with a distinctive glass-facade, but looks diminutive amid the skyscrapers that dominate the financial district.
Across the street is the iconic F&F Tower, a helix-shaped building that helped give the booming city its nickname “Dubai of the Americas.” As the two men spoke that morning, they were flanked by their legal director and two consultants. In all, the firm employs some 500 people in Panama and across the globe.
If Mossack is the nitty-gritty guy, Fonseca, 63, is the self-proclaimed dreamer. He boasts that his friends have labeled him “a da Vinci man” for his interests in politics, law, business, letters and philanthropy. He’s penned a half-dozen novels over the years, and for a while as a young man had considered becoming a priest.
It was during his time as a bureaucrat at the United Nations in Geneva, where he was surrounded by international lawyers, that Fonseca said he was lured by the mysterious world of offshore businesses. “One day it occurred to me that I could do it too,” he said. “I created my little office and left the UN and started with one secretary to create and sell companies.” He’d join up with Mossack soon thereafter.
Like selling cars
Setting up offshore vehicles has become routine for corporations, investment funds, family offices and billionaires. Low- or no-tax jurisdictions offer places to base a company or to send and park cash, company shares, art and other assets.
Establishing a structure for them typically costs just a few thousand dollars. Once those fees are handed over to shops like Mossack Fonseca, the organizational and operational framework for the entity is drafted and registered in the local jurisdiction. Annual fees are then charged to maintain the company.